top of page
Writer's pictureVan Pham LLC

LAUNCHING A FOOD AND BEVERAGE VENTURE IN VIETNAM - YOUR ULTIMATE HANDBOOK

1. Business Insights of Vietnam's Food and Beverage Industry

1.1 Market Outlook

According to VietnamPlus (2023), Vietnam's F&B market is forecast to grow by over 18% in 2023 to a whopping 720 trillion VND (30.7 billion USD)! After an impressive rebound in 2022, the industry is poised for sustainable growth, with the market predicted to top 938 trillion VND (40 billion USD) by 2026. With the rapid expansion of foreign F&B chains, Vietnam's domestic market is becoming more robust. Notably, Mixue, a Chinese chain of fresh ice cream and tea stores, has reached 1,000 stores through franchising after nearly five years of operation in Vietnam – a scale that no F&B brand had ever reached. Despite the global economic slowdown, top F&B brands like Highland Coffee and Trung Nguyen E-Coffee have expanded their chains post-COVID-19. Starbucks Vietnam and Golden Gate are leading examples of resilience and adaptability in the face of the pandemic. Starbucks has strategically opened new stores and seen significant growth in online sales. Golden Gate, despite the shutdown of its restaurants for one-third of the year, recorded 3.32 trillion VND (144.5 million USD) in revenue.

As an industry with the ability to absorb capital and generate immediate cash flow, F&B is expected to attract strong investment this year. The bright business picture of restaurant owners in 2023 makes the F&B sector even more attractive. Recently, F&B is expected to attract strong investment in 2023, with 79.6% of businesses starting their business situation is trending well and having enough resources for development. Despite economic difficulties, 51.7% of shop owners plan to expand in the near future, indicating confidence in the potential F&B market (iPOS’s survey).

1.2 Opportunities

The Vietnamese F&B landscape is undergoing a significant shift driven by changing consumer demographics and preferences. The rise of middle-class households and a growing Gen Z population presents new opportunities. Consumers are increasingly health-conscious, prioritizing wellness in their food choices. Additionally, there's a clear move towards convenient digital payment methods. These trends highlight the evolving needs of Vietnamese consumers that businesses must address to stay relevant. Investing in the Food and Beverage (F&B) sector in Vietnam offers several opportunities:

  • Rising Middle-Class Households: The rise of middle-class households and a growing Gen Z population presents new opportunities. It is estimated that there will be about 17 million middle-income households in Vietnam by 2030. This increase in purchasing power is likely to boost the F&B sector. 

  • Consumer Health and Wellness Trend: Consumers are increasingly health-conscious, prioritizing wellness in their food choices. This opens up opportunities for investment in health-focused F&B products. 

  • Digital Transformation: The COVID-19 pandemic has accelerated the digital transformation of the F&B industry. Investing in technology-driven solutions in the F&B sector could be a promising opportunity.

  • Open to Foreign Investment: Vietnam has increasingly incentivized foreign investment since the investment reform in 1996. It is now possible to set up 100 percent foreign-owned businesses in the F&B space.

1.3 Challenges and Solutions:

Some of the challenges faced by Vietnam’s Food and Beverage (F&B) industry which the business need to overcome well:

  • Culinary Culture Differences: The diversity in culinary culture can pose a challenge, especially for foreign businesses trying to enter the Vietnamese market. Understanding and adapting to local tastes is crucial for success.

  • Keeping Up with Consumer Trends: Consumer preferences in the F&B industry can change rapidly. Businesses need to stay updated with these trends to remain competitive.

  • Digital Transformation: The COVID-19 pandemic has accelerated the shift towards digitalization in the F&B industry. Businesses need to adapt to this change and leverage technology effectively.

  • Regulatory Challenges: The F&B industry is subject to various regulations, which can sometimes be complex and challenging to navigate. Staying updated with the latest regulations and ensuring compliance can help avoid legal issues. Seeking legal advice if necessary can help navigate complex regulations.

These challenges require strategic planning and effective management to overcome. It’s also important to note that these challenges can also present opportunities for businesses that can effectively address them. For instance, businesses that can successfully digitalize their operations or those that can understand and cater to changing consumer trends can gain a competitive advantage in the market.

2. Conditions in Vietnam's F&B Sector 

2.1 Food Safety and Hygiene Regulations

In examining the regulatory landscape of Vietnam's Food and Beverage (F&B) sector, particular attention must be directed towards food safety and hygiene regulations, which constitute integral pillars of the industry's governance. Comprehensive scrutiny of the country's food safety laws and regulations is imperative, encompassing meticulous examination of compliance requirements governing the handling, storage, and preparation of food products. Ensuring adherence to these regulations not only upholds consumer trust and safety but also mitigates potential risks associated with foodborne illnesses. Furthermore, consideration of infrastructure, including the interior design of restaurants, emerges as a pivotal aspect of regulatory compliance. Compliance with structural and hygiene standards in restaurant interiors plays a crucial role in maintaining sanitation and fostering a hygienic environment conducive to safe food handling and consumption. 

2.2 Fire fighting and protection 

Fire fighting and protection requirements in Vietnam's Food and Beverage (F&B) industry entail several crucial measures to ensure the safety of personnel, customers, and property. These include implementing preventive measures such as regular inspection and maintenance of fire-prone areas, ensuring proper ventilation, and maintaining clear fire exits. Additionally, F&B establishments must install and maintain essential fire safety equipment such as extinguishers, smoke detectors, alarms, and sprinkler systems. Employees should receive comprehensive fire safety training to respond effectively in emergencies, while emergency response plans should be developed and regularly reviewed. Building compliance is essential, involving adherence to building codes, use of fire-resistant materials, and compliance with occupancy limits and escape requirements. F&B businesses must obtain permits, undergo periodic inspections, and ensure compliance with fire safety regulations. Moreover, maintaining communication with local fire authorities, participating in drills, and promptly reporting hazards are vital for effective emergency response coordination. Adhering to these requirements is paramount for F&B establishments to enhance safety, mitigating fire-related risks and protecting lives and property.

2.3 Import and Export Regulations

Vietnam's Food and Beverage (F&B) industry is governed by a complex set of import and export regulations. These regulations aim to maintain food safety standards, protect consumer health, and facilitate fair trade practices. Key aspects include customs clearance procedures, import/export licensing requirements, tariff classifications, and compliance with international trade agreements. Importing ingredients requires adherence to stringent requirements, including obtaining import permits, health certificates, and documentation certifying their safety and authenticity. Exporting finished goods from Vietnam requires meeting domestic and destination country regulations, including food safety and quality standards, labeling requirements, and packaging standards. Businesses must maintain strict compliance with legal requirements, documentation, and procedural obligations. This involves staying informed about changes, engaging with legal advisors, and establishing robust internal processes. By adhering to these regulations, F&B businesses can effectively manage risks, minimize delays, and capitalize on opportunities for international trade and market expansion. 

2.4 Advertising and Marketing Regulations

The advertisement law in Vietnam outlines specific prohibitions and restrictions for the Food and Beverage (F&B) industry to protect consumers, prevent misleading advertising, and promote public health. Key prohibitions include false or misleading claims about product quality, safety, or health benefits, unsubstantiated health claims, advertising to children, alcohol advertising, tobacco advertising, labeling requirements, environmental claims, and cultural and cultural sensitivity. Advertisements must be accurate, substantiated, and not deceive consumers. Health claims must be supported by scientific evidence. Advertising to children must adhere to strict guidelines to prevent unhealthy eating habits or exploit children's vulnerability. Alcohol advertising must adhere to strict regulations on content, placement, and targeting. Advertising for tobacco products is prohibited in media and public spaces. Labeling requirements must be met, and environmental claims must be substantiated. Social and cultural sensitivity is also crucial, with offensive or inappropriate advertisements potentially prohibited. Violations of these regulations can lead to fines, penalties, or legal consequences.

2.5 Environmental Regulations

The Food and Beverage (F&B) industry must adhere to environmental laws to minimize their ecological footprint and maintain sustainable operations. Key steps include understanding regulations, developing compliance plans, providing training and education to employees, monitoring and reporting, engaging with regulatory authorities, implementing best practices for environmental sustainability, and conducting regular audits and reviews. Understanding regulations at local, national, and international levels, including waste management, water usage, pollution control, and sustainability practices, is crucial. Compliance plans should outline specific actions to meet regulatory requirements, such as waste reduction strategies, energy-efficient technologies, and pollution prevention measures. Employee training on proper waste handling, water conservation, and pollution prevention is also essential. Regular communication with regulatory authorities helps businesses stay informed about changes in regulations and seek guidance on compliance issues. By taking proactive steps, F&B businesses can minimize their environmental impact, reduce regulatory risks, and demonstrate their commitment to sustainability and corporate responsibility.

3. Step-by-Step Guide to Initiating Your F&B Company  

To enter the F&B market in Vietnam, foreign investors are required to have a company register the business lines of food and beverage provision. This can be proceeded in two ways, establish a new company or acquire a current local F&B company. In this section, we will have a deep dive into these two options. 

3.1 Establish an F&B company

Like other foreign-invested companies, to operate a business in Vietnam, foreign investors are required to register their companies in 2 steps. Firstly, it is the step of registering the investment project with the Department of Planning and Investment (DPI). The result of this step is the Investment Registration Certificate (IRC). For this sector, the licensing authorities are likely to seek consultancy and approval from the People’s Committee to assess the feasibility of the project in relation to local planning. During the application process, the investors are also required to explain further their operation in Vietnam. Therefore, it is noteworthy to mention clearly on the 1st application to reduce the time of back and forth. Hence, meticulous drafting of the investment project proposal becomes imperative during this phase, incorporating detailed information. Investors are mandated to demonstrate to the authorities a clear investment roadmap, backed by a robust financial plan. Some elements that can be added to the application for clear explanation are location serving F&B service, fire protection, environment protection, etc. Since this sector has been opened 100% to foreign investors, they can invest in Vietnam without any limitation on capital. This presentation should elucidate how the project contributes to the Vietnamese economy and human resources, along with delineating the key milestones for project development. Such precision aids in mitigating protracted deliberations and queries from regulatory authorities. 

The second step is to register the enterprise with the Business Registration Office (BRO), an affiliate of DPI. Once the IRC is obtained, the subsequent registration of the enterprise is contingent upon the approved project scope. There are various company structures such as a single-member company, multi-member company, or joint-stock company, which can be actively decided at investors’ discretion. Each requires the attainment of an Enterprise Registration Certificate (ERC). The application for the ERC is facilitated through the National Portal, offering an online platform for submission. 

3.2 Acquiring a Local F&B Gem - Key consideration  

In addition to establishing a new company, investors may opt for the acquisition of capital or shares in an existing F&B company, hereafter referred to as the "target company". This approach allows investors to leverage the target company's current licensing, client base, location, or proprietary recipes. However, due diligence is crucial to ensure the suitability of the target company. 

The paperwork process for obtaining necessary approvals from licensing authorities typically follows these steps: Firstly, investors must register the contribution of capital or purchase of shares or stakes in the target company. According to the Law on Investment, foreign investors must obtain M&A approval before changing shareholders in certain cases:

a) When the capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization operating in restricted business lines.

b) When the capital contribution or purchase of shares or stakes results in a foreign investor or business organization being treated as a foreign investor holding over 50% of the charter capital of the business organization. This includes scenarios where the foreign investor's ownership increases from less than or equal to 50% to over 50%, or when the foreign investor already holds over 50% of the charter capital and increases their stake.

c) When the foreign investor contributes capital or purchases shares or stakes in a business organization holding a land use rights certificate for land on an island, in a border or coastal commune, or in an area affecting national defense and security.

This process resembles registering an investment project, as the application content is similar. Obtaining this approval is a prerequisite for proceeding with subsequent steps in the acquisition process.

The second step involves updating the shareholders of the target company. Similar to the process for enterprise registration, this step can be completed online through the National Portal to the Business Registration Office (BRO). The process is relatively straightforward, as it must align with the approved scope outlined in the M&A approval.

The final step applies exclusively to target companies holding the Investment Registration Certificate (IRC). This step entails updating the information of investors on the IRC and is submitted to the Department of Planning and Investment (DPI). Once again, this step is based on the M&A approval obtained in the previous stages of the acquisition process.

4. Key Considerations in an M&A Deal

Entering into a merger or acquisition (M&A) deal in Vietnam presents significant opportunities for business expansion, yet careful consideration of several critical elements during the legal due diligence stage is paramount. These considerations encompass various facets of the target company's operations and legal standing, ensuring a comprehensive assessment of potential risks and liabilities and contribute to a smooth transition and continued F&B service viability.

  • Permits and Licenses: Thorough examination of the target company's permits and licenses is essential to verify compliance with regulatory requirements and avoid operational disruptions post-acquisition.

  • Contracts and Agreements: Reviewing existing contracts and agreements provides insights into the company's contractual obligations, potential liabilities, and the stability of business relationships with suppliers, customers, and partners.

  • Regulatory Compliance: Evaluating compliance with tax and environmental regulations is crucial to assess potential financial liabilities and legal risks that could impact the company's operations and reputation.

  • Intellectual Property Assets: Assessing the target company's intellectual property assets ensures their protection and valuation, guarding against infringement risks and preserving the company's competitive advantage.

  • Franchise System: If the target company operates under a franchise system, understanding the terms of franchise agreements and obligations is essential to assess the continuity and sustainability of the business model.

  • Data Privacy and Security: Given the increasing importance of data privacy regulations, evaluating the target company's data handling practices and compliance with data protection laws is vital to mitigate risks of data breaches and regulatory penalties.

  • Real Estate Considerations: Reviewing real estate holdings and leases helps identify potential liabilities, ensure compliance with zoning regulations, and assess the long-term viability of the company's physical assets.

  • Other Matters: Considerations such as ongoing litigation and disputes, as well as human resources-related issues, should be thoroughly examined to identify potential legal risks and liabilities that could impact the company's financial health and reputation.

By conducting a comprehensive analysis of these critical elements during the legal due diligence stage of an M&A deal, investors can make informed decisions, mitigate risks, and maximize the potential benefits of the transaction for business expansion in Vietnam.

5. Intellectual Property Protection for Your F&B Brand

In the realm of Food and Beverage (F&B) enterprises, the imperative for intellectual property (IP) stems from multifaceted advantages crucial for industry competitiveness. Foremost, the establishment of a robust brand is indispensable, and a registered trademark plays a pivotal role in fostering brand recognition, thereby delineating products amidst market competitors. The fortification of a brand, encompassing logos and product nomenclature, is instrumental in cultivating consumer trust, imparting a sense of reliability and quality consistency. Additionally, trademarks serve as instrumental tools in market differentiation, enabling F&B businesses to carve a distinctive identity within the crowded market landscape. Furthermore, the protection of unique recipes, formulations, and production processes through mechanisms such as patents or trade secrets is integral to preserving the innovative core of the company. Robust IP protection not only underpins market expansion initiatives by mitigating the risk of brand infringement in new territories but also presents opportunities for licensing and franchising endeavors, where well-protected brands and proprietary recipes can be leveraged for collaborative ventures. Significantly, a robust IP portfolio stands as an appealing facet for investors, influencing investment decisions and fostering strategic partnerships, thus substantiating its pivotal role in augmenting the overall value of an F&B company.

There are many ways to protect an F&B brand through IP laws, and we list down some common options below: 

5.1 Register Trademark:

  • Brand Protection & Recognition: Registering a trademark is pivotal for F&B businesses, offering legal exclusivity that safeguards brand identity. This not only fosters brand recognition but also differentiates products in a competitive market.

  • Market Differentiation: A distinctive trademark sets F&B businesses apart, enhancing market differentiation. It becomes a valuable asset, contributing to brand value and influencing consumer choices.

5.2 Register Industrial Designs:

  • Visual Identity Safeguard: Industrial design registration protects the visual elements of F&B products, crucial for those with unique packaging or shapes. It safeguards the creative and ornamental aspects, preserving brand distinctiveness.

  • Innovation Protection: Registering industrial designs encourages ongoing innovation, ensuring that creative endeavors are legally shielded. This protection reinforces the visual appeal that contributes to consumer preference and market success.

5.3 Register Trade Secret:

  • Preserving Formulas & Processes: Registering trade secrets, especially for recipes and production processes, preserves a competitive advantage in the F&B sector. It ensures the confidentiality of unique elements that define products.

  • Long-Term Competitive Edge: Unlike patents, trade secrets offer a lasting competitive edge. F&B businesses can maintain exclusivity over unique processes, contributing to long-term success.

In summary, strategically utilizing trademark registration, industrial design protection, and trade secret registration empowers F&B businesses to protect their brand and innovations, fostering a strong market presence and sustained success.


Reference Sources: 


25 views0 comments

Comments


bottom of page