Apr 36 min read

Unboxing Vietnam's Packaging Boom: Opportunities & Challenges ♻️ | Ngành công nghiệp bao bì Việt Nam trước thách thức và cơ hội mới

Updated: May 7

The packaging industry’s growth is fueled by the burgeoning food and consumer goods industry, the e-commerce boom, and the expanding pharmaceutical sector. Innovations and technological advancements, coupled with a shift towards sustainable and recyclable packaging solutions, are paving the way for a promising future.

1. Background

The packaging industry in Vietnam has been developing since the 1990s when the market economy started to innovate. The industry is one of the fastest-growing in Vietnam with a growth rate of 15% to 20% in the coming years. Currently, there are over 900 factories that operate in the industry, and around 70% are based in the Southern region, primarily in Ho Chi Minh City, Binh Duong, and Dong Nai.

2. Characteristics

The packaging industry in Vietnam is very fragmented with the participation of over 740 manufacturers. The industry is mainly composed of small and medium-sized family-run businesses. Packaging materials in Vietnam are mainly plastic, carton, paper, metal, and glass. Plastic packaging is the largest segment in the Vietnam plastic industry, accounting for 35% of the total market size by revenue in 20204.

3. Opportunities

The development of the food and consumer goods industry entails a great demand for food packaging and packaging machinery. The packaging sector is expected to increase by more than 13% each year, with packaging for the food industry growing on average by 15-20%; plastic packaging alone has seen growth rates of up to 25%. Vietnam will be among three countries reporting the highest growth in the pharmaceutical industry, expanding at an annual rate of 10 percent on average.

Growth of Consumer Goods Industry: The food and consumer goods industry in Vietnam has been growing at a rate higher than the same time frame of the previous year. This growth has led to a significant demand for food packaging and packaging machinery. As a result, modern labeling and lightweight packaging of all shapes and sizes have come into existence. This growth also creates great opportunities for businesses to thrive, especially businesses in packaging and labeling machinery.
E-commerce Boom: With over half of Vietnam’s 96 million people set to shop online by 2025, the demand for packaging products, especially carton paper in the e-commerce sector, is expected to increase. This presents a significant opportunity for the packaging industry to innovate and cater to this growing market.
Pharmaceutical Industry Growth: Vietnam is projected to be among three countries reporting the highest growth in the pharmaceutical industry, expanding at an annual rate of 10 percent on average. This growth will lead to an increased demand for pharmaceutical packaging, providing an opportunity for the packaging industry to expand into this sector.
Innovations and Technological Advancements: The packaging industry in Vietnam has been witnessing several innovations and technological advancements. These include internet packaging, biodegradable packaging, digital printing packaging, and nanotechnology packaging. Embracing these innovations can provide a competitive edge to businesses in the packaging industry.
Sustainability and Recycling: With increasing awareness about environmental sustainability, there is a growing demand for sustainable and recyclable packaging solutions. Over 60% of Vietnamese manufacturers have shifted to sustainable packaging materials. This trend presents an opportunity for businesses to innovate and offer eco-friendly packaging solutions.
International Trade Events: Events like ProPak Vietnam provide an invaluable opportunity for businesses to access potential clients, showcase their products, and learn about advanced technology. Participating in these events can help businesses expand their reach and stay updated with the latest trends in the industry.

To leverage these opportunities, businesses in the packaging industry in Vietnam need to stay abreast of the latest trends, invest in technology and innovation, and focus on offering high-quality, sustainable packaging solutions. They should also consider participating in trade events to network with potential clients and learn from industry leaders.

4. Challenges

Vietnamese packaging businesses, primarily small and medium-sized, face a multitude of challenges. They are often outmatched by powerful foreign companies that have superior financial resources, advanced technology, better management abilities, and stronger connections with critical partners. The potential for rising raw material costs is another significant concern, as it can put pressure on the profitability of these businesses.

Moreover, the decline in global resources poses a challenge for the industry, especially given the population growth and the rising consumption power of the middle class. The global population is projected to reach 9.2 billion by 2040. This growth, coupled with the expanding middle class, is driving the demand for packaged goods. For instance, in Indonesia, the food packaging industry has grown by between 6 and 7% in 2021, reflecting the rising domestic consumption driven by a growing middle-income class. This increased demand puts pressure on packaging businesses to enhance their production capacity and efficiency. Companies need to innovate and adapt their strategies to cater to this growing market.

Lastly, the development of e-commerce and mobile platforms presents an unprecedented challenge, necessitating new technologies and strategies for packaging and delivery. The rise of e-commerce has revolutionized how consumers shop and businesses operate. Over the past two years, e-commerce sales have grown by 55%, partly driven by the pandemic. This growth in online shopping has led to a surge in demand for efficient, sustainable, and visually appealing packaging options. Packaging becomes the primary tangible representation of the brand when customers shop online. Therefore, packaging businesses need to constantly adapt their packaging strategies, design, and practices to keep pace with evolving industry trends. They may need to invest in new technologies and strategies to ensure safe transit of goods in variable and challenging delivery conditions.

Despite these hurdles, they also represent opportunities for innovation and growth in the industry. By addressing these challenges, Vietnamese packaging businesses can improve their competitiveness and sustainability.

5. Recommendations

To thrive in this perfect timing, packaging companies must update what the market needs. The Vietnamese packaging industry must ensure high-quality labels. According to recent research, about half of the Vietnamese end users have the tendency to look for labels and packaging design at a higher quality. The main priorities for businesses in the sector are to boost internal resources, boost resilience and resilience through a strong focus on resources, and reallocate resources to critical areas. In particular:

Invest in Quality: High-quality packaging can enhance the perceived value of a product, attract customers, and reduce damage during shipping. Investing in quality could involve:
- Sourcing Better Raw Materials: This could mean finding suppliers who provide higher-quality materials, or materials that better meet the company’s needs.
- Adopting Advanced Manufacturing Processes: This could involve investing in new machinery or technology that allows for more precise, efficient, or flexible production.
- Hiring Skilled Designers: Good design can make a product stand out on the shelf and convey key information to consumers. Hiring talented designers, or providing further training to existing staff, could help improve the company’s packaging designs.
Embrace Innovation: The packaging industry is constantly evolving, with new technologies and trends emerging all the time. Companies can stay competitive by:
- Keeping Up with Industry Trends: This could involve regularly attending industry events, subscribing to trade publications, or conducting market research.
- Investing in R&D: Developing new packaging solutions in-house can allow a company to stay at the forefront of the industry and offer unique products to their customers.
Focus on Sustainability: As consumers become more environmentally conscious, there is increasing demand for packaging that is recyclable, biodegradable, or made from renewable resources. Companies can respond by:
- Exploring Sustainable Materials: This could involve researching different materials, conducting life cycle assessments, or working with suppliers to develop new solutions.
- Obtaining Certifications: Certifications like the Forest Stewardship Council (FSC) certification for paper products can provide assurance to customers that the company’s products are environmentally friendly.
Expand into New Sectors: Diversifying the company’s offerings can help spread risk and open up new opportunities for growth. This could involve:
- Market Research: Understanding the needs and preferences of customers in different sectors can help the company develop products that meet these needs.
- Partnerships or Acquisitions: Working with or acquiring companies in other sectors can provide a quick way to diversify the company’s offerings.
Resource Management: Efficient use of resources can help a company reduce costs, improve productivity, and become more resilient. This could involve:
- Investing in Employee Training: Well-trained employees can work more efficiently, make fewer mistakes, and contribute more to the company.
Improving Operational Efficiency: This could involve streamlining processes, investing in more efficient machinery, or adopting lean manufacturing principles.
Reallocating Resources: If certain areas of the company are not performing well, it may be beneficial to reallocate resources to more profitable areas.

In conclusion, Vietnam's packaging industry is experiencing rapid growth, driven by the expanding food and consumer goods sectors, e-commerce boom, and rising pharmaceutical industry. However, to capitalize on these opportunities, domestic businesses must address challenges like limited resources compared to foreign competitors and rising raw material costs. By focusing on high-quality, sustainable packaging solutions, embracing innovation, and participating in trade events, Vietnamese packaging companies can strengthen their position and thrive in this dynamic market.

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Cơ hội:

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