상품DB/베트남 홍삼 시장동향(2013.4)

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제목

베트남 홍삼 시장동향(2013.4)

게시일

2015-09-03

국가

베트남

작성자

허운해(하노이무역관)

품목

기타

품목코드

210690

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Date : 2013.04.01

Prepared by : Ms Nguyen Quynh Chi (nqchi.kotra@gmail.com)

I. Market Size and Trend

1.Overview of Vietnam’s red ginseng products market

The market of functional food & health improvement medicines in general and red ginseng processed products in particular is emerging in Vietnam as citizens are enjoying a high living standard. Products of red ginseng including type of tea, drink, capsule… have been available in Vietnam market since 1992, mainly in Ho Chi Minh City and Hanoi. Before, consumption of red ginseng products was not as high as today. The main reason was that the living standard at that time was still low, thus, most people cannot afford the expensive price of red ginseng products. As Vietnamese living standard is gradually increasing while red ginseng products are now grown on large scale, more and more people have a wide choice of buying different kinds of red ginseng products which are suitable for being taken as gifts, daily home use or at everywhere, every time with various brand name, quality and price.

Most Vietnamese people have long been aware of the precious value of ginseng for their health and beauty, which has made ginseng and products of ginseng origin become more affordable to a certain part of Vietnamese consumers. As usual, fresh and dried Ginseng with other medical herb is the most expensive products. They are believed to be the best for health rehabilitation. In modern life, herb-extract capsule and other products such as red ginseng extract, tonic, and drink … become more popular, especially for people who are busy and not familiar with the taste raw ginseng. There are plentiful kinds of other related products: ginseng juice, candy, alcohol and cosmetic…

Most of red ginseng products selling in Vietnam are imported mainly from Korea, China, Japan, the United States, etc…

However, red ginseng products made from Korea are widely known as the best quality; therefore, most of the famous brand names are from this country. Some Korean companies have already set their foot in Vietnam long time ago like Korean Ginseng Corporation, Insam, Inwha Corporation… For Red ginseng tea, Korea brands are the most favorite and occupy Vietnamese ginseng tea about 80% of the market share.

Chinese ginseng products are sometimes of lower quality. Their price is often 25%-30%, even 50% cheaper than Korean products. A part of Vietnamese people due to lack of awareness or money problems that they buy Chinese products. Currently, Chinese ginseng is sometimes remade into Korean ginseng, which is not easy to distinguish between Chinese ginseng and Korean ginseng even for Koreans.

In Vietnam, red ginseng products belong to functional food group, under the control of Vietnam Food Association (VFA) under the Ministry of Health. However, the activities of inspection all kind of such imported products are still in loose control. There are now even imitative red ginseng products in the market, especially red ginseng tea under Korean trademark. Some distributors only import ginseng materials from small Korean company or even unknown sources then make red ginseng tea on their own, illegally imitating big companies’ brands name and design. Not only Vietnamese distributors but also Chinese manufacturers try to produce fake products in Korean package form. To reduce the cost, they do not obey strictly the ingredients and produce lower quality products but with more competitive price. As a result, most end users who cannot distinguish between the genuine and fake ginseng products, between the Chinese and Korean products, are easy to be tricked on without awareness. For example, recently, red ginseng capsule named Kogin is quite popular in red ginseng products market of Vietnam. Since the brand name is famous, there are also fake products with same brand originated from China appearing in the market; therefore, it becomes hard for consumers to choose the right Kogin capsule.

Another product of China has been immigrating into ginseng Vietnam market is red ginseng tea. While some Korean brand names are trying to improve their high quality products, some Chinese exporters try to launch a cheap price strategy for their “Made in China” products in order to achieve the mass market. For instance, with same red ginseng tea of 3 gram; if it is the Kogin brand, the price should be approximately US$ 0.2 per packet; and if it is Chinese product, the price is not up to US$ 0.05 per packet. That is why the Chinese products are able to be sold quickly in Vietnam market.

Besides Korean ginseng, there are many red ginseng products existing in Vietnam market with the brands such as Kenbo, Gunwoo, ILHWA… Additionally, there are also Portable products carried from Korea, Japan or China appearing in open market of Vietnam. The seller of these products say that they are all products made domestically in Korea, Japan… with high quality; since they are duty free products, the price is much cheaper than officially imported products. Nowadays, when shopping, some customers who have powerful income often come to authorized agency/ distributor to purchase the products.

2.Domestic Demand

Vietnamese consumers are willing to purchase red ginseng products for various purposes. It can be divided into 2 main types of factors:

·        For health care use: Consumers who buy red ginseng products because they believe that those are fine tonic and good for their health, even though they have no disease at all. Compared with other drinks in the market, red ginseng products are especially good for the old, that why people often choose them for their parents as usual drinks at home instead of fruit or other normal drinks. Some consumers choose red ginseng supplements to boost their immune system.

·        For gift: Red ginseng recently is seen as a luxurious gift because of their high price and high value in improving human health and beauty. In some special occasions, consumers usually send red ginseng products to their bosses or relatives for showing their deep respect and their wish for recipients’ health. Red ginseng products become more meaningful when they are used as gifts for those who are bearing illness.

Additionally, the following factors also are influencing consumer trends:

·        Population and demographics: Vietnam is a developing nation with a population of over 88 million and a GDP of US$ 100.5 billion for 2010. Around 10% of Vietnam’s population is over 60 years old who are potential for red ginseng products. Also, the younger population is more receptive of convenience and processed foods, leading to increased demand for those products, including red ginseng products.

·        Trade: Since joining the World Trade Organization (WTO) in 2007, Vietnam has been importing more products from overseas. As a result, Vietnamese consumers are trending towards a more varied diet with a wider range of products made by oversea countries.

·        Health consciousness:  Vietnamese are becoming more conscious of health. Thus, healthy products, packaged products are expected to grow as a result.

There are not available figures on the exact demand of ginseng in Vietnam. However, according to some readers of these products, it is estimated that a dozen tons of ginseng and its processed products including red ginseng are imported into Vietnam every year. Ginseng and different kinds of its processed products are on sale here such as ginseng tea, tonic, capsules, ginseng-containing beverage… Ginseng drink and extract are the most popular as it is convenient to use every day. Then, come the ginseng tonic & beverage, with or without ginseng root, which have become widely known thanks to the introduction of Korean manufacturers by their participation in general exhibitions held in Vietnam.

3. Red ginseng food & beverage market size

Overview

In general, consumer spending on food & beverages in Vietnam is growing. The food and beverage retail sector is estimated to be worth US$ 33.7 billion for 2011 and is expected to grow at a compound annual growth rate of 18.9% until 2014. The beverage market overall is growing rapidly and is becoming more diverse. Sales of beverage products are expected to increase between 6.3 – 7.2% per annum for the period 2011 – 2013. Among various nutritious beverage in Vietnam nowadays, the kind of ginseng drink is becoming one of the favorites of Vietnamese consumers.

Competition

Besides red ginseng products, other kinds of nutritious food and beverage are also popular in Vietnamese market nowadays. As the demand of health and fitness is increasing along with higher living standard, people are spending more on daily drink which can provide their health with vitamin and minerals. Apart from red ginseng, nutritious drink extracted from fruits, grain, honey or even vegetables are now enjoying a massive production process to be launched into the market during the summer time. These kinds of products are considered to be easily absorbed and have attractive aroma to both children and adults. As a result, the number of nutritious products consumption is increasing continuously in Vietnam.

The demand for soft drink without gas increases remarkably during the past years, reaching nearly 30%/year. The drinking products with natural extract have caught the buyer’s attention. Local manufacturers such as Vinamilk, Tribeco, Wonderfarm, has kept pace with the new trend and launched a wide variety of nutritious drink and tea made from apples, mango, grape, etc. Other foreign brands of fruit juice are also becoming more popular such as Ligo, Welch’s, Regain, Berri, Drwitt. Since there are various types of tea, drink products in the market, red ginseng tea and drink is facing a big competition. As many distributors said, compare with red ginseng tea; red ginseng extracts and tonic drinks are at better selling than others.

Anyway, Vietnam is still considered as a potential market of red ginseng products. Red ginseng products only compete with other nutritious products in Vietnam but also compete with each Korean red ginseng product brand. Some giant Korean ginseng companies have dipped their toes in Vietnam since 1997 like Korean Ginseng Corporation, Insam, Inwha Corp., Pagin-T and Gunwoo… and more recent brand ones are Kenbo, ILHWA, Dongwon, Korea Bio Science, … with such brands as Red ginseng, Hontamin Ginseng, Kogin, KOTAGIN, etc.

However, some customers seem to buy ginseng tea or ginseng products without notice of brand or quality standard. In general, it is widely believed by Vietnamese consumers that the quality of South Korea ginseng is the best choice in comparison to ones coming from North Korea and China. Though the quality of North Korean ginseng is considered to contain natural compound features, South Korea has a more advanced processing industry and the products are manufactured in a more hygienic condition with well-qualified packing methods. However, it is not easy for local consumers to distinguish the origin of ginseng roots whether from North or South Korea; as a result, they are simply called “Korean ginseng”. Any kinds of drink which are considered to be extracted from Korean ginseng are thought to be of high quality and have the effect of disease treatment. As for local trader in Chinese red ginseng products, the decisive factor to them is low price so that the selling prices of their products can be affordable to local consumers.

4. Red ginseng capsule market size

Overview

As a result of living standards and disposable incomes are rising in Vietnam at a time when increasing consumer health consciousness is fuelling interest in herbal supplements. Due to the increasingly stressful pace of modern life, a growing number of consumers no longer have time to eat nutritious meals. That why people are turning towards dietary supplements. In addition, the growing range of available products in this area is also fueling sales. Dietary supplements recorded current retail value growth of 5% in 2009, with sales reaching US$ 12 million.

According to Euromonitor 2010, in Vietnam, herbal products including red ginseng capsules are becoming increasingly popular, especially among middle-age and elderly consumer sections. The market for herbal products records a value growth of 25% in 2010, with sales reaching over US$ 100 million – with vitamin and dietary supplements as key drivers, over 31%.

Red ginseng was the most popular dietary supplement in Vietnam during 2009, recording current retail value of 10%. Ginseng is particularly popular amongst the elderly. Although ginseng is relatively expensive, demand remains constant due to its perceived effectiveness. The widespread availability of fake and low quality ginseng products continues to have a negative impact on sales.

In the market, there are many types of red ginseng capsules, not only the daily tablets but also the specific one for men, women and children. In Particular, nowadays child-specific vitamins & dietary supplements products including red ginseng products for children continue to perform strongly over the period with demand being fuelled by rising disposable incomes and the fact that Vietnam has a large number of children suffering from lost appetite and nutritional deficiency. Some brands now focus on introducing a growing range of different product formats and flavors in a bid to attract parents and children.

Competition

Table 1 below shows the sales of dietary supplements including ginseng capsules in Vietnam from 2004 to 2009. Ginseng capsule products grew slightly over the periods in spite of global financial crisis 2008-2009. Ginseng capsules belong to Herbal Dietary Supplements Group and possess approximately 30% sales volume of the group. The proportion increased slightly through the period in turn 28% (2004), 29.5% (2005), 30.2% (2006), 31.6% (2007), 32.6% (2008), and 33.6% (2009).

Table 1.1 Sales of Dietary Supplements in Vietnam by Subsector: Value 2004-2009 Unit: US$ 1,000
	2004	2005	2006	2007	2008	2009
Dietary Supplements	8,923.81	9,328.57	9,795.24	10,323.81	10,823.81	11,395.24
- Combination Dietary Supplements	590.48	609.52	628.57	652.38	671.43	695.24
- Herbal/Traditional Dietary Supplements	1,433.33	1,533.33	1,638.10	1,733.33	1,828.57	1,938.10
-- Combination Herbal/ Traditional Dietary  Supplements	500.00	519.05	538.10	557.14	576.19	600.00
-- GINSENG	409.52	452.38	495.24	547.62	595.24	652.38
-- Other Herbal/ Traditional Dietary Supplements	523.81	557.14	604.76	628.57	657.14	685.71
- Non-Herbal Dietary Supplements	7,490.48	7,800.00	8,157.14	8,585.71	8,990.48	9,452.38
-- Calcium Supplements	3,571.43	3,747.62	3,957.14	4,190.48	4,409.52	4,652.38
-- Combination Non- Herbal Dietary  Supplements	85.71	90.48	90.48	90.48	90.48	95.24
-- Fish Oils	200.00	209.52	223.81	238.10	252.38	271.43
-- Mineral Supplements	3,266.67	3,400.00	3,561.90	3,742.86	3,909.52	4,104.76
-- Other Non-Herbal  Dietary Supplements	361.90	352.38	328.57	323.81	328.57	333.33
Tonics and Bottled	1,171.43	1,257.14	1,319.05	1,390.48	1,461.90	1,528.57
Source: Official statistics, Trade associations, Trade press, Store checks, Trade interviews, Euromonitor International estimates

As can be seen from the table, compared with other products in the same category, the sales growth of ginseng supplement fluctuated even though the sales volume increases slightly over the period 2005-2009. This drop in growth percentage can be explained for the global financial crisis in 2008 which partly affect the people’s consumption.

Compared with other dietary supplements, red ginseng products only contain small percentage but this number is predicted to grow in the future.

5. Prospect

Red ginseng products are considered as being luxury products in Vietnam, with demand being limited to average and higher income consumers. While Chinese companies will focus on attracting lower income consumers over the forecast period by introducing competitively priced brands. Threats to forecast period growth include the widespread availability of fake products and the growing popularity of vitamin fortified food and drink and functional food brands which may affect the consumption of red ginseng products in Vietnam.

In addition, increasing competition from foreign players as a result of Vietnam’s joining of the WTO will also put downwards pressure on unit prices. However, it should be noted that leading players will be reluctant to lower their prices by too much since Vietnamese consumers are traditionally skeptical of cheap consumer health products due to fears over quality.

Red ginseng products, have a projected forecast period constant retail value CAGR from 2011-2015 of 9% with demand being fuelled by population growth, rising consumer health consciousness, and the introduction of a growing range of new innovative products.

II. Production and Import Situation

1. Local production

Vietnamese has wild ginseng also available named Panax Vietnam Ginseng (Panax Vietnamesis, Ngoc Linh Ginseng). Its existence remained unknown until the 1970s. Wild ginseng has been found in Ngoc Linh mountain region, Kotum province at the height of 1,800 meters. Particularly Panax Ginseng, also known as Ngoc Linh Ginseng, is popularly known worldwide as Vietnamese ginseng, are now being grown in only Ngoc Linh and Quang Nam mountain. It is widely regarded as being even better than world renowned Korean ginseng. Vietnamese ginseng or Panax Vietnam ginseng was taken to Poland and the former Soviet Union for research. Through research, it was discovered that the content of the compound in Vietnamese ginseng might be placed in the four best ginseng groups in the world as listed in order: Korea, the United States, Vietnam and China.

The Science-Production Union of Ginseng & Medicinal Plants and other pharmaceutical enterprises can produce some kinds of ginseng products such as ginseng tea, capsule and tonic… However, their output is quite small for some those reasons:

·        

Vietnamese ginseng (Panax ginseng) is really rare because it is only suitable to grow in Ngoc Linh and Quang Nam mountains. Vietnam scientists have made efforts to expand the growing area of Panax ginseng but failed.

·        Researchers, typically the Army Medical Academy, have successfully researched and applied cellular biomass technology to grow the world’s most precious Ngoc Linh ginseng in a laboratory. However, it is just applied in a small scale; in fact, the research result is still unable to be carried out in mass scale.

Many plans of cultivation, development and protection of ginseng have been made, but due to lack of investment capital, advanced science research…, so far Vietnam has not grown and developed ginseng yet. That is why the production of Vietnamese ginseng is very low even the product is extremely good. It is said that Vietnamese ginseng occupies not over 5% of the market.

Additionally, in 2012, a new company manufacturing red ginseng products is being built in Ho Chi Minh City, Vietnam. Geumsan Korea Ginseng Cooperative (GumHong manufacturing centre from Korea) cooperated with Vietnamese company named BSG Joint Stock Company to invest in a manufacturer of GumHong red ginseng products. This is the first red ginseng products manufacturer in East Asia. The chairman of BSG Joint Stock Company, Ms Vu Thanh Thuy did not reveal the factory scale; however, she said the factory would soon go into operation and the products would have competitive price in local market.

2. Import Situation

2.1. Import size and trendAlthough Vietnam has its wild ginseng, most of ginseng materials and products in the market are imported, mainly from Korea, China, Japan, the United States, etc… In other words, imported ginseng products come into Vietnam by two ways:

·        The official import: Mainly from Korea

·        The unoffcially import: In most cases, red ginseng products arte brought into Vietnam in the form of gifts, hand carried products from Japan, the United States, Korea or through the China - Vietnam borders.

In accordance with Vietnam Customs Office’s data and KOTRA Hanoi KBC’s calculations, the annual dollar amount of products HS Code 210690, including red ginseng products imported into Vietnam generally increases over time, even during the 2007-2010 period when the economic crisis is at its peak. By the end of 2011, the total import was approximately US$ 302 million.

In addition, the United States Dollar inflation rate has been maintaining at a very low level from 2007 to 2011, respectively: 2.8, 3.8, -0.4, 1.6 and 3.2 percentage points.

Therefore, the increasing trend of the dollar amount should somehow indicate an inclination of the actual unit counts and expansions of the import market, which dominates 99% of the total sales volume in Vietnam.

According to many experts in the field, this upward trend will continue in the next 5 years, as a result of domestic increasing demand. Generally, together with the trend of processed food, the red ginseng processed products market is expected to grow by roughly 12% to 14% per annum, due to its precious value in improving health, beauty, and the increasing living standards of the nation. The imported volume is forecasted to increase in the coming 5 years (2012 – 2016). However, it is still unclear how this market trend head afterwards.

2.2.      Other Import Affecting Factors

There are numerous other factors influencing the import trend of red ginseng products including economic fluctuations, demographic distribution patterns and “Duty Not Paid” goods.

2.2.1 Economic Fluctuations

Vietnamese economy is still in its hard time and this affects general consumptions of most Vietnamese citizens.

Consumer Price Index:

·        According to the General Statistics Office, until April 2012, Vietnam Consumer Price Index has increased by 18.7% over the past year. The speed of price increase is now much faster than income growth rate, posing serious risks to consuming capacity.

·        Our research findings show that, after adjusting for the increase in price, consumer’s real earnings in urban 4 key cities (HCM, Hanoi, Danang and Cantho) and rural areas fall by 3.6% and 1.7% respectively. Consumers tried to manage their different demands to afford the uplift in prices, which shaped an overall saving trend for the whole market.

Economic Growth Rate:

·        Vietnam’s Real GDP growth rate by the end of 2011 was reported at only 6%, which is much lower than previous years of 7.2% to 8.6%.

·        This is considered a stagnant growth rate for an emerging nation. 80% Vietnamese companies are suffering from losses or break-even situations. Incomes are reduced and spending as a result.

·        The situation is, however, expected to improve in the coming 2 years of 2012 and 2013 since the government is reforming public projects and redirect the funds to functional portfolios.

Trade Deficit:

·        Vietnam imports more than it is exporting. Therefore, a trade deficit is an obvious consequence. In addition, since the State Bank of Vietnam does not hold enough foreign reserves to back up its currency, import becomes worse when it comes along with inflation.

·        The accumulated effect is higher prices, lower income and hampered consumptions especially products under “non-necessities” categories such as cosmetics and accessories.

·        Trade deficit is not a problem Vietnam can resolve in the short run but if the economic situation improves in the coming years, the effects of imported inflation will be much less severe.

2.2.2. Duty Not Paid Goods

Duty Not Paid Goods:

·        Duty Not Paid goods refer to both the products purchased at Airport Duty Free Shops and the goods purchased directly from foreign suppliers, which are carried into Vietnam by individuals without paying any additional taxes or tariffs.

·        In Vietnam, red ginseng products are also repurchased by carried-on goods stores and resold to Vietnamese consumers.

·        The interesting thing is that Vietnamese people prefer such products since they believe that “carried on” goods are most of the time less expensive than products sold in brand stores in Vietnam.

·        Some of the well-known red ginseng products brands such as Cheong Kwan Jang, Cheon Ji Yang also have been brought into Vietnam using this “carried on” way.

·        Therefore, it is very hard to actually calculate these unofficial imports but some traders believe that the worth of “carried on” products is about 9% of the official red ginseng products imported volume.

Counterfeited/ Smuggled Goods:

·        Smuggled products from China are not a new problem in Vietnam. They have recently been restricted by countless efforts of Vietnamese government. However, they are still not out of concerns.

·         Besides, there are a certain number of counterfeited products smuggled into Vietnam. Of these types Chinese ginseng products occupies the largest market shares. They look same like Korean products with Hangeul letter but cost only about half the prices of the real products.

This may affect sales of branded red ginseng product and even the brands images, especially when the counterfeited products have severe negative influences on consumers who use them.

3. Import policy

·        Red ginseng products (slices, tea, candy…) do not belong to Banned products so they can be imported normally following Vietnam custom regulation. Custom procedures and documents will be conducted according to sub 2, Article 11, Decision 194/2010/TT-BTC dated on 6^th December 2010 of Ministry of Finance.

·        According to sub 12, article 1, decision 818/QD-BYT dated 5^th March 2007 of Ministry of Health, products related to HS code 2106 which are food supplements must be tested when imported. Therefore, red ginseng products must have the certificate issued by the Food Safety and Hygiene Administration of the Ministry of Health before imported to Vietnam.

·        Furthermore, according to Appendix 1, Circular 24/2010/TT-BCT dated 28^th May 2010 of Ministry of Industry and Trade, the Ginseng based preparations in group HS 2106 also must have the automatic importing license.

Commodity: HS Code 210690: Others food preparations not elsewhere specified or included

Hs code	Description	Unit	MFN WTO	ATIGA	ACFTA	AKFTA	VAT (%)
21.06	Food preparations not elsewhere specified or included
2106.90	-Other	kg	25	5	10	15	10
2106.90.10	--Dried bean curd and bean curd sticks	kg	20	5	10	15	10
2106.90.20	--Flavored or colored syrups	kg
2106.90.30	--Non-dairy creamer	kg	20	5	10	15	10
	--Autotyped yeast extracts
2106.90.41	---In powder form	kg	15	5	10	10	10
2106.90.49	---Other	kg	15	5	10	10	10
	--Non-alcoholic preparations of a kind used for making or for the manufacture of beverages
2106.90.51	---Preparations of a kind used as raw material for the manufacture of composite concentrates	kg	15	5	10	15	10
2106.90.52	---Composite concentrate for simple dilution with water to make beverages	kg	15	5	10	15	10
2106.90.53	---Ginseng based products	kg	15	5		10	10
2106.90.59	---Other	kg	15	5	10	15	10
	--Alcoholic preparations of a kind used for the making or for the manufacture of beverages.
	---Preparation of a kind used as raw material for the manufacture of composite concentrates.
2106.90.61	----Of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	20	5	10		10
2106.90.62	----Of a kind used for the manufacture of alcoholic beverages, in other forms	kg	20	5			10
	---Composite concentrate for simple dilution with water to make beverages
2106.90.64	----Of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	20	5	10		10
2106.90.65	----Of a kind used for the manufacture of alcoholic beverages, in other forms	kg	20	5	10		10
2106.90.66	----Other, of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	15	5	10	10	10
2106.90.67	---Other, of a kind used for the manufacture of alcoholic beverages, in other forms	kg	15	5	10	10	10
2106.90.69	---Other	kg	15	5	10	10	10
2106.90.70	--Food supplements	kg	15	5	8	7	10
2106.90.80	--Fortificant premixes	kg	15	5	10	10	10
	--Other
2106.90.91	---Other mixtures of chemicals with foodstuffs or other substances with nutritive value, of a kind used for food processing	kg	15	5	10	10	10
2106.90.92	---Ginseng based preparations	kg	15	5		15	10
2106.90.93	---Food preparations for lactase deficient infants	kg	15	5	10	15	10
2106.90.94	---Other food preparations of infant use	kg	15	5	10	15	10
2106.90.95	---Seri	kg	15	5	10	15	10
2106.90.96	---Other chemical foods	kg	10	5	5	7	10
2106.90.98	---Other flavoring preparations	kg	5	5	10	15	10
2106.90.99	---Other	kg	15	5	10	10	10

Note:     

§   MFN: Most favored Nations (Korea belongs to this group of nations)

§  ATIGA: Asian Trade in Good Agreement

§  ACFTA: ASEAN – CHINA Free Trade Area

§  AKFTA: ASEAN – KOREA Free Trade Area

Source: Export – Import Tariff and VAT on Imports Book 2012 (Ministry of Finance)

III. Distribution network

1. Red Ginseng Authorized  Distributor and Agency

Red ginseng authorized distributors/agencies are often companies that specialize in importing, distributing and trading in red ginseng related products. They often have their own showrooms to display and introduce the products to customers. Some even establish a strong distribution network throughout Vietnam. There is a tendency that Vietnamese choose to purchase products from authorized distributors to assure they can buy the genuine products of best quality.

·        Distributors: Distributors will purchase goods from foreign companies for resale. They can be the normal distributors or mono distributors for a typical brand name. As for a mono distributors, between foreign company and Vietnam distributor, there should have a tight contract that states clearly the duty for each beneficial. Any buyers from Vietnam when in demand of purchasing products from foreign company should purchase through the mono distributor. In return, the mono distributor will take charges of providing market research, marketing and promotion and after sales service to consumers. Nowadays, this type of distribution is quite popular in Vietnam. It not only helps foreign companies save time and money in developing and promoting their products in new market but also save human resources to take responsibilities of the sales volume in oversea countries.

·        Agency: Agencies will sell products for a commission. They are small businesses that do not have enough power to do the import function. They can be whether small companies or just local shops. They can also provide services under the instruction of mono distributors. Agencies can receive the authority to sell products in typical province or area. In this case, they can also carry out market research, marketing, promotion and after sales services to end users. They will have tight contact with the official distributors to execute the business and ensure a sales target.

·        Drug store: Red ginseng capsule also can be distributed at drug store in Vietnam as a kind functional food.

Market share:

·        Since red ginseng products are becoming more popular in the awareness of Vietnamese people. The number of authorized distributors specializing in red ginseng and red ginseng products increase remarkably. It is predicted that authorized distributors and agency will be the most dominant market distributors of red ginseng products.

·        By now, these distributors are estimated to possess 45% market share. As the red ginseng market grows, their share will gradually increase. Experts believe that shares of authorized distributors and agencies will remain a share of around 50% to 60% in 2020.

Sales volume:

·        As market share of these distributors is predicted to go down significantly in the future, their sales volumes are now heading upward since the red ginseng products market is expanding years after years. When surveying some official distributors, the average sales value of red ginseng products is estimated at US$ 1-2 million per year.

Major red ginseng products:

·        More than 25% of the red ginseng products sold in authorized distributors and agencies are ginseng roots, ginseng slice.

·        Another 35% of which is red ginseng extracts, tonic, tea, capsule, candy…

·        About 20% are cordyceps roberti, Linhzhi mushroom.

·        The others are different functional products and related healthy products.

·        Red ginseng products in these stores are mostly imported from the Korea.

Typical authorized distributors and agencies:

·        Vietnam International Trade and Investment Corporation - VIMART:

This is a very famous company in Hanoi’s red ginseng field. It has 7 showrooms in Hanoi area, 5 showrooms in Ho Chi Minh City and more than 10 other showrooms located in other provinces in Vietnam. Besides red ginseng, the company also trade in other functional products. Vimart is currently the monopoly partner with PoCheon Ginseng Farmer Association in Korea.

·        Rodis Vietnam:

Rodis Vietnam is a creditable company in Hanoi. This is the only company that has authority to import and distribute red ginseng products of Cheon Ji Yang brand name in Korea. Not only be the monopoly distributor in Vietnam but also in Laos and Kampuchea. It has 3 showrooms in Hanoi and 2 other branches in Bac Ninh Province and Ho Chi Minh City.

·        Tacy Corporation:

The company is now trading in red ginseng products of Cheong Kwan Jang brand name and also other brands. They have 2 showrooms in Hanoi. They also provide their products to consumers through the fast express and online booking.

·        Hiep Phong Co., Ltd:

The company specializes in selling different kinds of herbal products including red ginseng capsule, red ginseng extract, tonic… Hiep Phong has about 10 year experience in importing and distributing ginseng capsule. Hiep Phong has a wide distribution system through many cities and provinces in Vietnam. Indeed, it has offices in 3 biggest cities of Vietnam: Hanoi, Hochiminh city and Danang City.

·        Truong Xuan Thinh Joint Stock Company

The company is currently the monopoly importer and distributor for Cheong Kwan Jang brand name from Korea.

2. Retail channel

The retail market in Vietnam can be roughly divided into six types of modern distribution with specific characteristics, including hypermarkets, supermarkets, commercial centers, shopping centers, convenience stores and specialty super markets. The most important retail channels for red ginseng products are:

Small retailers

The sector is retail stores, in which, almost all kind of usual products can be found. The retail channel in Vietnam is fragmented and still very traditional. Most stores are independent and small-sized family operated. They sell different kind of products from different manufacturers to serve the end users.

Traditional stores, convenient stores and gas stations: This retail format holds 62.4% of revenues in the food and beverage industry in general and is expected to grow at a rate of 19.7% per annum for the next few years. Most of these small retailers are traditional and independently owned stores, even in urban areas. The largest city in Vietnam, Ho Chi Minh City has over 2,000 wet markets and 6,000 independent stores. Wet markets and traditional stores still dominate 88% of Vietnam retail market in 2007.

Despite the fact that those retail stores possess a large proportion of market share in Vietnam, their share on red ginseng sales volume are less than other channels. Some of them do not focus on selling high quality red ginseng products as authorized distributors. They can have both Korean and Chinese or maybe other nations’ products in their stock to have variety of price list for customers to purchase. Since they are small businesses and are unable to import oversea products, they often get their products from the distributors who mainly trade in “Made in China” products.

Large retailers

The modern retail trade concept (initially called supermarkets, hypermarkets, cash and carry wholesale centre, minimarts) has grown tremendously in the last eight years.  At the end of 1998, Viet Nam had at least 30 supermarkets and four trade centers. By the end of 2010, Viet Nam had about 531 supermarkets and 89 trade centers. Before 1999, open-air wet markets and non-staple food small private shops were the norm, but in the most recent eight years, Viet Nam’s urban economy has begun a steady transition away from the traditional trade (open-air wet markets and small shops) to modern trade (supermarkets, hypermarkets, shopping centers, etc.). More than two third of supermarkets and department stores are based in Ho Chi Minh City and Hanoi. At the end of 2006, Hanoi had 91 supermarkets and 3 trade centers; Ho Chi Minh City has 134 supermarkets and 14 trade centers (according to classification criteria in stipulated in Decision 1371/QD-BTM).

Red ginseng products distributed in this way can be imported directly by these large retailers. Or they are just the products that the authorized distributors register to exhibit in large retailers.

Market share:

·        Red ginseng products did not exist in 1995. In fact, it is only a recently emerged type of business.

·        Large and modern retailers such as hypermarkets and supermarkets account for only 5.4% of market share. However, large retailers have the highest forecast sales growth rate of around 21.4% per annum until 2014.

·        Experts believe that they are going to maintain this share in the long run since consumers are starting to prefer the perceived hygienic conditions, convenience and air conditioning of modern retailers.

 Sales volume:

·        According to KOTRA’s surveys, sales volume of retail channels have been on an increasing trend. For example, in Uni Mart, the best selling products are red ginseng drink, alcohol, ginseng roots, slices and masks.

Major red ginseng products:

·        As mentioned above, these shops retail all kinds of red ginseng products as long as they are the market’s favorites.

·        They often sell products of Korea.

Popular Specialty Stores:

·        Big C

Big C is the only brand name of hypermarkets. Currently Big C is present in Hanoi, Ho Chi Minh City, Hue, Da Nang, Vinh, Nam Dinh and Vinh Phuc Province. Because of its size, Big C stores are usually located on the outskirt of the city. As fantastic as its collection of goods and the attached low price, most Big C stores are usually crowed of people. Everyone can enter Big C without showing member cards, that why when compared with Metro Cash & Carry, Big C attracts more different kinds of customers.

·        Metro Cash & Carry

Metro Cash & Carry stores give the impression of hypermarket but are not. Metro’s clients are most industry and wholesalers while hypermarkets’ are end users. In order to indentify customers, Metro issues special member cards. However, in fact, many end users are still able to come to Metro. They pass on the cards to each other. Metro does not strictly control the type of clients that have to be wholesalers.

·        Supermarket

Supermarket retail price is a bit higher compared with a hypermarket, is better fitted for weekly shopper. Some of the most famous supermarket names in Vietnam are: Hapro mart, Intimex, Co.opmart, Fivimart and Citimart. Supermarkets in Vietnam offer more or less similar goods and services. Some offer frequent buyer card, with which you earn points to get deduction on the following.

·        Department Store

Department stores sell luxurious items such as brand name clothes, shoes and high class electronic devices. Parkson and Diamond Plaza are two most popular department stores in Ho Chi Minh City, while in Hanoi there are Vincom, Grand Plaza, the Manor and the most recent one-Parkson. In those department stores, red ginseng products are often sold in the form of booths of which the authorized distributors pay for the area for selling products. Since ginseng is belong to luxurious item, red ginseng processed products are also be sold together with ginseng. For instance, Quy Hoang Company and Tacy Company both have booths in Grand Plaza as their other showrooms to display and sell red ginseng products.

베트남 홍삼 시장동향(2013.4)

게시일

2015-09-03

국가

베트남

작성자

허운해(하노이무역관)

품목

기타

품목코드

210690

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Date : 2013.04.01

Prepared by : Ms Nguyen Quynh Chi (nqchi.kotra@gmail.com)

I. Market Size and Trend

1.Overview of Vietnam’s red ginseng products market

The market of functional food & health improvement medicines in general and red ginseng processed products in particular is emerging in Vietnam as citizens are enjoying a high living standard. Products of red ginseng including type of tea, drink, capsule… have been available in Vietnam market since 1992, mainly in Ho Chi Minh City and Hanoi. Before, consumption of red ginseng products was not as high as today. The main reason was that the living standard at that time was still low, thus, most people cannot afford the expensive price of red ginseng products. As Vietnamese living standard is gradually increasing while red ginseng products are now grown on large scale, more and more people have a wide choice of buying different kinds of red ginseng products which are suitable for being taken as gifts, daily home use or at everywhere, every time with various brand name, quality and price.

Most Vietnamese people have long been aware of the precious value of ginseng for their health and beauty, which has made ginseng and products of ginseng origin become more affordable to a certain part of Vietnamese consumers. As usual, fresh and dried Ginseng with other medical herb is the most expensive products. They are believed to be the best for health rehabilitation. In modern life, herb-extract capsule and other products such as red ginseng extract, tonic, and drink … become more popular, especially for people who are busy and not familiar with the taste raw ginseng. There are plentiful kinds of other related products: ginseng juice, candy, alcohol and cosmetic…

Most of red ginseng products selling in Vietnam are imported mainly from Korea, China, Japan, the United States, etc…

However, red ginseng products made from Korea are widely known as the best quality; therefore, most of the famous brand names are from this country. Some Korean companies have already set their foot in Vietnam long time ago like Korean Ginseng Corporation, Insam, Inwha Corporation… For Red ginseng tea, Korea brands are the most favorite and occupy Vietnamese ginseng tea about 80% of the market share.

Chinese ginseng products are sometimes of lower quality. Their price is often 25%-30%, even 50% cheaper than Korean products. A part of Vietnamese people due to lack of awareness or money problems that they buy Chinese products. Currently, Chinese ginseng is sometimes remade into Korean ginseng, which is not easy to distinguish between Chinese ginseng and Korean ginseng even for Koreans.

In Vietnam, red ginseng products belong to functional food group, under the control of Vietnam Food Association (VFA) under the Ministry of Health. However, the activities of inspection all kind of such imported products are still in loose control. There are now even imitative red ginseng products in the market, especially red ginseng tea under Korean trademark. Some distributors only import ginseng materials from small Korean company or even unknown sources then make red ginseng tea on their own, illegally imitating big companies’ brands name and design. Not only Vietnamese distributors but also Chinese manufacturers try to produce fake products in Korean package form. To reduce the cost, they do not obey strictly the ingredients and produce lower quality products but with more competitive price. As a result, most end users who cannot distinguish between the genuine and fake ginseng products, between the Chinese and Korean products, are easy to be tricked on without awareness. For example, recently, red ginseng capsule named Kogin is quite popular in red ginseng products market of Vietnam. Since the brand name is famous, there are also fake products with same brand originated from China appearing in the market; therefore, it becomes hard for consumers to choose the right Kogin capsule.

Another product of China has been immigrating into ginseng Vietnam market is red ginseng tea. While some Korean brand names are trying to improve their high quality products, some Chinese exporters try to launch a cheap price strategy for their “Made in China” products in order to achieve the mass market. For instance, with same red ginseng tea of 3 gram; if it is the Kogin brand, the price should be approximately US$ 0.2 per packet; and if it is Chinese product, the price is not up to US$ 0.05 per packet. That is why the Chinese products are able to be sold quickly in Vietnam market.

Besides Korean ginseng, there are many red ginseng products existing in Vietnam market with the brands such as Kenbo, Gunwoo, ILHWA… Additionally, there are also Portable products carried from Korea, Japan or China appearing in open market of Vietnam. The seller of these products say that they are all products made domestically in Korea, Japan… with high quality; since they are duty free products, the price is much cheaper than officially imported products. Nowadays, when shopping, some customers who have powerful income often come to authorized agency/ distributor to purchase the products.

2.Domestic Demand

Vietnamese consumers are willing to purchase red ginseng products for various purposes. It can be divided into 2 main types of factors:

·        For health care use: Consumers who buy red ginseng products because they believe that those are fine tonic and good for their health, even though they have no disease at all. Compared with other drinks in the market, red ginseng products are especially good for the old, that why people often choose them for their parents as usual drinks at home instead of fruit or other normal drinks. Some consumers choose red ginseng supplements to boost their immune system.

·        For gift: Red ginseng recently is seen as a luxurious gift because of their high price and high value in improving human health and beauty. In some special occasions, consumers usually send red ginseng products to their bosses or relatives for showing their deep respect and their wish for recipients’ health. Red ginseng products become more meaningful when they are used as gifts for those who are bearing illness.

Additionally, the following factors also are influencing consumer trends:

·        Population and demographics: Vietnam is a developing nation with a population of over 88 million and a GDP of US$ 100.5 billion for 2010. Around 10% of Vietnam’s population is over 60 years old who are potential for red ginseng products. Also, the younger population is more receptive of convenience and processed foods, leading to increased demand for those products, including red ginseng products.

·        Trade: Since joining the World Trade Organization (WTO) in 2007, Vietnam has been importing more products from overseas. As a result, Vietnamese consumers are trending towards a more varied diet with a wider range of products made by oversea countries.

·        Health consciousness:  Vietnamese are becoming more conscious of health. Thus, healthy products, packaged products are expected to grow as a result.

There are not available figures on the exact demand of ginseng in Vietnam. However, according to some readers of these products, it is estimated that a dozen tons of ginseng and its processed products including red ginseng are imported into Vietnam every year. Ginseng and different kinds of its processed products are on sale here such as ginseng tea, tonic, capsules, ginseng-containing beverage… Ginseng drink and extract are the most popular as it is convenient to use every day. Then, come the ginseng tonic & beverage, with or without ginseng root, which have become widely known thanks to the introduction of Korean manufacturers by their participation in general exhibitions held in Vietnam.

3. Red ginseng food & beverage market size

Overview

In general, consumer spending on food & beverages in Vietnam is growing. The food and beverage retail sector is estimated to be worth US$ 33.7 billion for 2011 and is expected to grow at a compound annual growth rate of 18.9% until 2014. The beverage market overall is growing rapidly and is becoming more diverse. Sales of beverage products are expected to increase between 6.3 – 7.2% per annum for the period 2011 – 2013. Among various nutritious beverage in Vietnam nowadays, the kind of ginseng drink is becoming one of the favorites of Vietnamese consumers.

Competition

Besides red ginseng products, other kinds of nutritious food and beverage are also popular in Vietnamese market nowadays. As the demand of health and fitness is increasing along with higher living standard, people are spending more on daily drink which can provide their health with vitamin and minerals. Apart from red ginseng, nutritious drink extracted from fruits, grain, honey or even vegetables are now enjoying a massive production process to be launched into the market during the summer time. These kinds of products are considered to be easily absorbed and have attractive aroma to both children and adults. As a result, the number of nutritious products consumption is increasing continuously in Vietnam.

The demand for soft drink without gas increases remarkably during the past years, reaching nearly 30%/year. The drinking products with natural extract have caught the buyer’s attention. Local manufacturers such as Vinamilk, Tribeco, Wonderfarm, has kept pace with the new trend and launched a wide variety of nutritious drink and tea made from apples, mango, grape, etc. Other foreign brands of fruit juice are also becoming more popular such as Ligo, Welch’s, Regain, Berri, Drwitt. Since there are various types of tea, drink products in the market, red ginseng tea and drink is facing a big competition. As many distributors said, compare with red ginseng tea; red ginseng extracts and tonic drinks are at better selling than others.

Anyway, Vietnam is still considered as a potential market of red ginseng products. Red ginseng products only compete with other nutritious products in Vietnam but also compete with each Korean red ginseng product brand. Some giant Korean ginseng companies have dipped their toes in Vietnam since 1997 like Korean Ginseng Corporation, Insam, Inwha Corp., Pagin-T and Gunwoo… and more recent brand ones are Kenbo, ILHWA, Dongwon, Korea Bio Science, … with such brands as Red ginseng, Hontamin Ginseng, Kogin, KOTAGIN, etc.

However, some customers seem to buy ginseng tea or ginseng products without notice of brand or quality standard. In general, it is widely believed by Vietnamese consumers that the quality of South Korea ginseng is the best choice in comparison to ones coming from North Korea and China. Though the quality of North Korean ginseng is considered to contain natural compound features, South Korea has a more advanced processing industry and the products are manufactured in a more hygienic condition with well-qualified packing methods. However, it is not easy for local consumers to distinguish the origin of ginseng roots whether from North or South Korea; as a result, they are simply called “Korean ginseng”. Any kinds of drink which are considered to be extracted from Korean ginseng are thought to be of high quality and have the effect of disease treatment. As for local trader in Chinese red ginseng products, the decisive factor to them is low price so that the selling prices of their products can be affordable to local consumers.

4. Red ginseng capsule market size

Overview

As a result of living standards and disposable incomes are rising in Vietnam at a time when increasing consumer health consciousness is fuelling interest in herbal supplements. Due to the increasingly stressful pace of modern life, a growing number of consumers no longer have time to eat nutritious meals. That why people are turning towards dietary supplements. In addition, the growing range of available products in this area is also fueling sales. Dietary supplements recorded current retail value growth of 5% in 2009, with sales reaching US$ 12 million.

According to Euromonitor 2010, in Vietnam, herbal products including red ginseng capsules are becoming increasingly popular, especially among middle-age and elderly consumer sections. The market for herbal products records a value growth of 25% in 2010, with sales reaching over US$ 100 million – with vitamin and dietary supplements as key drivers, over 31%.

Red ginseng was the most popular dietary supplement in Vietnam during 2009, recording current retail value of 10%. Ginseng is particularly popular amongst the elderly. Although ginseng is relatively expensive, demand remains constant due to its perceived effectiveness. The widespread availability of fake and low quality ginseng products continues to have a negative impact on sales.

In the market, there are many types of red ginseng capsules, not only the daily tablets but also the specific one for men, women and children. In Particular, nowadays child-specific vitamins & dietary supplements products including red ginseng products for children continue to perform strongly over the period with demand being fuelled by rising disposable incomes and the fact that Vietnam has a large number of children suffering from lost appetite and nutritional deficiency. Some brands now focus on introducing a growing range of different product formats and flavors in a bid to attract parents and children.

Competition

Table 1 below shows the sales of dietary supplements including ginseng capsules in Vietnam from 2004 to 2009. Ginseng capsule products grew slightly over the periods in spite of global financial crisis 2008-2009. Ginseng capsules belong to Herbal Dietary Supplements Group and possess approximately 30% sales volume of the group. The proportion increased slightly through the period in turn 28% (2004), 29.5% (2005), 30.2% (2006), 31.6% (2007), 32.6% (2008), and 33.6% (2009).

Table 1.1 Sales of Dietary Supplements in Vietnam by Subsector: Value 2004-2009 Unit: US$ 1,000
	2004	2005	2006	2007	2008	2009
Dietary Supplements	8,923.81	9,328.57	9,795.24	10,323.81	10,823.81	11,395.24
- Combination Dietary Supplements	590.48	609.52	628.57	652.38	671.43	695.24
- Herbal/Traditional Dietary Supplements	1,433.33	1,533.33	1,638.10	1,733.33	1,828.57	1,938.10
-- Combination Herbal/ Traditional Dietary  Supplements	500.00	519.05	538.10	557.14	576.19	600.00
-- GINSENG	409.52	452.38	495.24	547.62	595.24	652.38
-- Other Herbal/ Traditional Dietary Supplements	523.81	557.14	604.76	628.57	657.14	685.71
- Non-Herbal Dietary Supplements	7,490.48	7,800.00	8,157.14	8,585.71	8,990.48	9,452.38
-- Calcium Supplements	3,571.43	3,747.62	3,957.14	4,190.48	4,409.52	4,652.38
-- Combination Non- Herbal Dietary  Supplements	85.71	90.48	90.48	90.48	90.48	95.24
-- Fish Oils	200.00	209.52	223.81	238.10	252.38	271.43
-- Mineral Supplements	3,266.67	3,400.00	3,561.90	3,742.86	3,909.52	4,104.76
-- Other Non-Herbal  Dietary Supplements	361.90	352.38	328.57	323.81	328.57	333.33
Tonics and Bottled	1,171.43	1,257.14	1,319.05	1,390.48	1,461.90	1,528.57
Source: Official statistics, Trade associations, Trade press, Store checks, Trade interviews, Euromonitor International estimates

As can be seen from the table, compared with other products in the same category, the sales growth of ginseng supplement fluctuated even though the sales volume increases slightly over the period 2005-2009. This drop in growth percentage can be explained for the global financial crisis in 2008 which partly affect the people’s consumption.

Compared with other dietary supplements, red ginseng products only contain small percentage but this number is predicted to grow in the future.

5. Prospect

Red ginseng products are considered as being luxury products in Vietnam, with demand being limited to average and higher income consumers. While Chinese companies will focus on attracting lower income consumers over the forecast period by introducing competitively priced brands. Threats to forecast period growth include the widespread availability of fake products and the growing popularity of vitamin fortified food and drink and functional food brands which may affect the consumption of red ginseng products in Vietnam.

In addition, increasing competition from foreign players as a result of Vietnam’s joining of the WTO will also put downwards pressure on unit prices. However, it should be noted that leading players will be reluctant to lower their prices by too much since Vietnamese consumers are traditionally skeptical of cheap consumer health products due to fears over quality.

Red ginseng products, have a projected forecast period constant retail value CAGR from 2011-2015 of 9% with demand being fuelled by population growth, rising consumer health consciousness, and the introduction of a growing range of new innovative products.

II. Production and Import Situation

1. Local production

Vietnamese has wild ginseng also available named Panax Vietnam Ginseng (Panax Vietnamesis, Ngoc Linh Ginseng). Its existence remained unknown until the 1970s. Wild ginseng has been found in Ngoc Linh mountain region, Kotum province at the height of 1,800 meters. Particularly Panax Ginseng, also known as Ngoc Linh Ginseng, is popularly known worldwide as Vietnamese ginseng, are now being grown in only Ngoc Linh and Quang Nam mountain. It is widely regarded as being even better than world renowned Korean ginseng. Vietnamese ginseng or Panax Vietnam ginseng was taken to Poland and the former Soviet Union for research. Through research, it was discovered that the content of the compound in Vietnamese ginseng might be placed in the four best ginseng groups in the world as listed in order: Korea, the United States, Vietnam and China.

The Science-Production Union of Ginseng & Medicinal Plants and other pharmaceutical enterprises can produce some kinds of ginseng products such as ginseng tea, capsule and tonic… However, their output is quite small for some those reasons:

·        

Vietnamese ginseng (Panax ginseng) is really rare because it is only suitable to grow in Ngoc Linh and Quang Nam mountains. Vietnam scientists have made efforts to expand the growing area of Panax ginseng but failed.

·        Researchers, typically the Army Medical Academy, have successfully researched and applied cellular biomass technology to grow the world’s most precious Ngoc Linh ginseng in a laboratory. However, it is just applied in a small scale; in fact, the research result is still unable to be carried out in mass scale.

Many plans of cultivation, development and protection of ginseng have been made, but due to lack of investment capital, advanced science research…, so far Vietnam has not grown and developed ginseng yet. That is why the production of Vietnamese ginseng is very low even the product is extremely good. It is said that Vietnamese ginseng occupies not over 5% of the market.

Additionally, in 2012, a new company manufacturing red ginseng products is being built in Ho Chi Minh City, Vietnam. Geumsan Korea Ginseng Cooperative (GumHong manufacturing centre from Korea) cooperated with Vietnamese company named BSG Joint Stock Company to invest in a manufacturer of GumHong red ginseng products. This is the first red ginseng products manufacturer in East Asia. The chairman of BSG Joint Stock Company, Ms Vu Thanh Thuy did not reveal the factory scale; however, she said the factory would soon go into operation and the products would have competitive price in local market.

2. Import Situation

2.1. Import size and trendAlthough Vietnam has its wild ginseng, most of ginseng materials and products in the market are imported, mainly from Korea, China, Japan, the United States, etc… In other words, imported ginseng products come into Vietnam by two ways:

·        The official import: Mainly from Korea

·        The unoffcially import: In most cases, red ginseng products arte brought into Vietnam in the form of gifts, hand carried products from Japan, the United States, Korea or through the China - Vietnam borders.

In accordance with Vietnam Customs Office’s data and KOTRA Hanoi KBC’s calculations, the annual dollar amount of products HS Code 210690, including red ginseng products imported into Vietnam generally increases over time, even during the 2007-2010 period when the economic crisis is at its peak. By the end of 2011, the total import was approximately US$ 302 million.

In addition, the United States Dollar inflation rate has been maintaining at a very low level from 2007 to 2011, respectively: 2.8, 3.8, -0.4, 1.6 and 3.2 percentage points.

Therefore, the increasing trend of the dollar amount should somehow indicate an inclination of the actual unit counts and expansions of the import market, which dominates 99% of the total sales volume in Vietnam.

According to many experts in the field, this upward trend will continue in the next 5 years, as a result of domestic increasing demand. Generally, together with the trend of processed food, the red ginseng processed products market is expected to grow by roughly 12% to 14% per annum, due to its precious value in improving health, beauty, and the increasing living standards of the nation. The imported volume is forecasted to increase in the coming 5 years (2012 – 2016). However, it is still unclear how this market trend head afterwards.

2.2.      Other Import Affecting Factors

There are numerous other factors influencing the import trend of red ginseng products including economic fluctuations, demographic distribution patterns and “Duty Not Paid” goods.

2.2.1 Economic Fluctuations

Vietnamese economy is still in its hard time and this affects general consumptions of most Vietnamese citizens.

Consumer Price Index:

·        According to the General Statistics Office, until April 2012, Vietnam Consumer Price Index has increased by 18.7% over the past year. The speed of price increase is now much faster than income growth rate, posing serious risks to consuming capacity.

·        Our research findings show that, after adjusting for the increase in price, consumer’s real earnings in urban 4 key cities (HCM, Hanoi, Danang and Cantho) and rural areas fall by 3.6% and 1.7% respectively. Consumers tried to manage their different demands to afford the uplift in prices, which shaped an overall saving trend for the whole market.

Economic Growth Rate:

·        Vietnam’s Real GDP growth rate by the end of 2011 was reported at only 6%, which is much lower than previous years of 7.2% to 8.6%.

·        This is considered a stagnant growth rate for an emerging nation. 80% Vietnamese companies are suffering from losses or break-even situations. Incomes are reduced and spending as a result.

·        The situation is, however, expected to improve in the coming 2 years of 2012 and 2013 since the government is reforming public projects and redirect the funds to functional portfolios.

Trade Deficit:

·        Vietnam imports more than it is exporting. Therefore, a trade deficit is an obvious consequence. In addition, since the State Bank of Vietnam does not hold enough foreign reserves to back up its currency, import becomes worse when it comes along with inflation.

·        The accumulated effect is higher prices, lower income and hampered consumptions especially products under “non-necessities” categories such as cosmetics and accessories.

·        Trade deficit is not a problem Vietnam can resolve in the short run but if the economic situation improves in the coming years, the effects of imported inflation will be much less severe.

2.2.2. Duty Not Paid Goods

Duty Not Paid Goods:

·        Duty Not Paid goods refer to both the products purchased at Airport Duty Free Shops and the goods purchased directly from foreign suppliers, which are carried into Vietnam by individuals without paying any additional taxes or tariffs.

·        In Vietnam, red ginseng products are also repurchased by carried-on goods stores and resold to Vietnamese consumers.

·        The interesting thing is that Vietnamese people prefer such products since they believe that “carried on” goods are most of the time less expensive than products sold in brand stores in Vietnam.

·        Some of the well-known red ginseng products brands such as Cheong Kwan Jang, Cheon Ji Yang also have been brought into Vietnam using this “carried on” way.

·        Therefore, it is very hard to actually calculate these unofficial imports but some traders believe that the worth of “carried on” products is about 9% of the official red ginseng products imported volume.

Counterfeited/ Smuggled Goods:

·        Smuggled products from China are not a new problem in Vietnam. They have recently been restricted by countless efforts of Vietnamese government. However, they are still not out of concerns.

·         Besides, there are a certain number of counterfeited products smuggled into Vietnam. Of these types Chinese ginseng products occupies the largest market shares. They look same like Korean products with Hangeul letter but cost only about half the prices of the real products.

This may affect sales of branded red ginseng product and even the brands images, especially when the counterfeited products have severe negative influences on consumers who use them.

3. Import policy

·        Red ginseng products (slices, tea, candy…) do not belong to Banned products so they can be imported normally following Vietnam custom regulation. Custom procedures and documents will be conducted according to sub 2, Article 11, Decision 194/2010/TT-BTC dated on 6^th December 2010 of Ministry of Finance.

·        According to sub 12, article 1, decision 818/QD-BYT dated 5^th March 2007 of Ministry of Health, products related to HS code 2106 which are food supplements must be tested when imported. Therefore, red ginseng products must have the certificate issued by the Food Safety and Hygiene Administration of the Ministry of Health before imported to Vietnam.

·        Furthermore, according to Appendix 1, Circular 24/2010/TT-BCT dated 28^th May 2010 of Ministry of Industry and Trade, the Ginseng based preparations in group HS 2106 also must have the automatic importing license.

Commodity: HS Code 210690: Others food preparations not elsewhere specified or included

Hs code	Description	Unit	MFN WTO	ATIGA	ACFTA	AKFTA	VAT (%)
21.06	Food preparations not elsewhere specified or included
2106.90	-Other	kg	25	5	10	15	10
2106.90.10	--Dried bean curd and bean curd sticks	kg	20	5	10	15	10
2106.90.20	--Flavored or colored syrups	kg
2106.90.30	--Non-dairy creamer	kg	20	5	10	15	10
	--Autotyped yeast extracts
2106.90.41	---In powder form	kg	15	5	10	10	10
2106.90.49	---Other	kg	15	5	10	10	10
	--Non-alcoholic preparations of a kind used for making or for the manufacture of beverages
2106.90.51	---Preparations of a kind used as raw material for the manufacture of composite concentrates	kg	15	5	10	15	10
2106.90.52	---Composite concentrate for simple dilution with water to make beverages	kg	15	5	10	15	10
2106.90.53	---Ginseng based products	kg	15	5		10	10
2106.90.59	---Other	kg	15	5	10	15	10
	--Alcoholic preparations of a kind used for the making or for the manufacture of beverages.
	---Preparation of a kind used as raw material for the manufacture of composite concentrates.
2106.90.61	----Of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	20	5	10		10
2106.90.62	----Of a kind used for the manufacture of alcoholic beverages, in other forms	kg	20	5			10
	---Composite concentrate for simple dilution with water to make beverages
2106.90.64	----Of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	20	5	10		10
2106.90.65	----Of a kind used for the manufacture of alcoholic beverages, in other forms	kg	20	5	10		10
2106.90.66	----Other, of a kind used for the manufacture of alcoholic beverages, in liquid form	kg	15	5	10	10	10
2106.90.67	---Other, of a kind used for the manufacture of alcoholic beverages, in other forms	kg	15	5	10	10	10
2106.90.69	---Other	kg	15	5	10	10	10
2106.90.70	--Food supplements	kg	15	5	8	7	10
2106.90.80	--Fortificant premixes	kg	15	5	10	10	10
	--Other
2106.90.91	---Other mixtures of chemicals with foodstuffs or other substances with nutritive value, of a kind used for food processing	kg	15	5	10	10	10
2106.90.92	---Ginseng based preparations	kg	15	5		15	10
2106.90.93	---Food preparations for lactase deficient infants	kg	15	5	10	15	10
2106.90.94	---Other food preparations of infant use	kg	15	5	10	15	10
2106.90.95	---Seri	kg	15	5	10	15	10
2106.90.96	---Other chemical foods	kg	10	5	5	7	10
2106.90.98	---Other flavoring preparations	kg	5	5	10	15	10
2106.90.99	---Other	kg	15	5	10	10	10

Note:     

§   MFN: Most favored Nations (Korea belongs to this group of nations)

§  ATIGA: Asian Trade in Good Agreement

§  ACFTA: ASEAN – CHINA Free Trade Area

§  AKFTA: ASEAN – KOREA Free Trade Area

Source: Export – Import Tariff and VAT on Imports Book 2012 (Ministry of Finance)

III. Distribution network

1. Red Ginseng Authorized  Distributor and Agency

Red ginseng authorized distributors/agencies are often companies that specialize in importing, distributing and trading in red ginseng related products. They often have their own showrooms to display and introduce the products to customers. Some even establish a strong distribution network throughout Vietnam. There is a tendency that Vietnamese choose to purchase products from authorized distributors to assure they can buy the genuine products of best quality.

·        Distributors: Distributors will purchase goods from foreign companies for resale. They can be the normal distributors or mono distributors for a typical brand name. As for a mono distributors, between foreign company and Vietnam distributor, there should have a tight contract that states clearly the duty for each beneficial. Any buyers from Vietnam when in demand of purchasing products from foreign company should purchase through the mono distributor. In return, the mono distributor will take charges of providing market research, marketing and promotion and after sales service to consumers. Nowadays, this type of distribution is quite popular in Vietnam. It not only helps foreign companies save time and money in developing and promoting their products in new market but also save human resources to take responsibilities of the sales volume in oversea countries.

·        Agency: Agencies will sell products for a commission. They are small businesses that do not have enough power to do the import function. They can be whether small companies or just local shops. They can also provide services under the instruction of mono distributors. Agencies can receive the authority to sell products in typical province or area. In this case, they can also carry out market research, marketing, promotion and after sales services to end users. They will have tight contact with the official distributors to execute the business and ensure a sales target.

·        Drug store: Red ginseng capsule also can be distributed at drug store in Vietnam as a kind functional food.

Market share:

·        Since red ginseng products are becoming more popular in the awareness of Vietnamese people. The number of authorized distributors specializing in red ginseng and red ginseng products increase remarkably. It is predicted that authorized distributors and agency will be the most dominant market distributors of red ginseng products.

·        By now, these distributors are estimated to possess 45% market share. As the red ginseng market grows, their share will gradually increase. Experts believe that shares of authorized distributors and agencies will remain a share of around 50% to 60% in 2020.

Sales volume:

·        As market share of these distributors is predicted to go down significantly in the future, their sales volumes are now heading upward since the red ginseng products market is expanding years after years. When surveying some official distributors, the average sales value of red ginseng products is estimated at US$ 1-2 million per year.

Major red ginseng products:

·        More than 25% of the red ginseng products sold in authorized distributors and agencies are ginseng roots, ginseng slice.

·        Another 35% of which is red ginseng extracts, tonic, tea, capsule, candy…

·        About 20% are cordyceps roberti, Linhzhi mushroom.

·        The others are different functional products and related healthy products.

·        Red ginseng products in these stores are mostly imported from the Korea.

Typical authorized distributors and agencies:

·        Vietnam International Trade and Investment Corporation - VIMART:

This is a very famous company in Hanoi’s red ginseng field. It has 7 showrooms in Hanoi area, 5 showrooms in Ho Chi Minh City and more than 10 other showrooms located in other provinces in Vietnam. Besides red ginseng, the company also trade in other functional products. Vimart is currently the monopoly partner with PoCheon Ginseng Farmer Association in Korea.

·        Rodis Vietnam:

Rodis Vietnam is a creditable company in Hanoi. This is the only company that has authority to import and distribute red ginseng products of Cheon Ji Yang brand name in Korea. Not only be the monopoly distributor in Vietnam but also in Laos and Kampuchea. It has 3 showrooms in Hanoi and 2 other branches in Bac Ninh Province and Ho Chi Minh City.

·        Tacy Corporation:

The company is now trading in red ginseng products of Cheong Kwan Jang brand name and also other brands. They have 2 showrooms in Hanoi. They also provide their products to consumers through the fast express and online booking.

·        Hiep Phong Co., Ltd:

The company specializes in selling different kinds of herbal products including red ginseng capsule, red ginseng extract, tonic… Hiep Phong has about 10 year experience in importing and distributing ginseng capsule. Hiep Phong has a wide distribution system through many cities and provinces in Vietnam. Indeed, it has offices in 3 biggest cities of Vietnam: Hanoi, Hochiminh city and Danang City.

·        Truong Xuan Thinh Joint Stock Company

The company is currently the monopoly importer and distributor for Cheong Kwan Jang brand name from Korea.

2. Retail channel

The retail market in Vietnam can be roughly divided into six types of modern distribution with specific characteristics, including hypermarkets, supermarkets, commercial centers, shopping centers, convenience stores and specialty super markets. The most important retail channels for red ginseng products are:

Small retailers

The sector is retail stores, in which, almost all kind of usual products can be found. The retail channel in Vietnam is fragmented and still very traditional. Most stores are independent and small-sized family operated. They sell different kind of products from different manufacturers to serve the end users.

Traditional stores, convenient stores and gas stations: This retail format holds 62.4% of revenues in the food and beverage industry in general and is expected to grow at a rate of 19.7% per annum for the next few years. Most of these small retailers are traditional and independently owned stores, even in urban areas. The largest city in Vietnam, Ho Chi Minh City has over 2,000 wet markets and 6,000 independent stores. Wet markets and traditional stores still dominate 88% of Vietnam retail market in 2007.

Despite the fact that those retail stores possess a large proportion of market share in Vietnam, their share on red ginseng sales volume are less than other channels. Some of them do not focus on selling high quality red ginseng products as authorized distributors. They can have both Korean and Chinese or maybe other nations’ products in their stock to have variety of price list for customers to purchase. Since they are small businesses and are unable to import oversea products, they often get their products from the distributors who mainly trade in “Made in China” products.

Large retailers

The modern retail trade concept (initially called supermarkets, hypermarkets, cash and carry wholesale centre, minimarts) has grown tremendously in the last eight years.  At the end of 1998, Viet Nam had at least 30 supermarkets and four trade centers. By the end of 2010, Viet Nam had about 531 supermarkets and 89 trade centers. Before 1999, open-air wet markets and non-staple food small private shops were the norm, but in the most recent eight years, Viet Nam’s urban economy has begun a steady transition away from the traditional trade (open-air wet markets and small shops) to modern trade (supermarkets, hypermarkets, shopping centers, etc.). More than two third of supermarkets and department stores are based in Ho Chi Minh City and Hanoi. At the end of 2006, Hanoi had 91 supermarkets and 3 trade centers; Ho Chi Minh City has 134 supermarkets and 14 trade centers (according to classification criteria in stipulated in Decision 1371/QD-BTM).

Red ginseng products distributed in this way can be imported directly by these large retailers. Or they are just the products that the authorized distributors register to exhibit in large retailers.

Market share:

·        Red ginseng products did not exist in 1995. In fact, it is only a recently emerged type of business.

·        Large and modern retailers such as hypermarkets and supermarkets account for only 5.4% of market share. However, large retailers have the highest forecast sales growth rate of around 21.4% per annum until 2014.

·        Experts believe that they are going to maintain this share in the long run since consumers are starting to prefer the perceived hygienic conditions, convenience and air conditioning of modern retailers.

 Sales volume:

·        According to KOTRA’s surveys, sales volume of retail channels have been on an increasing trend. For example, in Uni Mart, the best selling products are red ginseng drink, alcohol, ginseng roots, slices and masks.

Major red ginseng products:

·        As mentioned above, these shops retail all kinds of red ginseng products as long as they are the market’s favorites.

·        They often sell products of Korea.

Popular Specialty Stores:

·        Big C

Big C is the only brand name of hypermarkets. Currently Big C is present in Hanoi, Ho Chi Minh City, Hue, Da Nang, Vinh, Nam Dinh and Vinh Phuc Province. Because of its size, Big C stores are usually located on the outskirt of the city. As fantastic as its collection of goods and the attached low price, most Big C stores are usually crowed of people. Everyone can enter Big C without showing member cards, that why when compared with Metro Cash & Carry, Big C attracts more different kinds of customers.

·        Metro Cash & Carry

Metro Cash & Carry stores give the impression of hypermarket but are not. Metro’s clients are most industry and wholesalers while hypermarkets’ are end users. In order to indentify customers, Metro issues special member cards. However, in fact, many end users are still able to come to Metro. They pass on the cards to each other. Metro does not strictly control the type of clients that have to be wholesalers.

·        Supermarket

Supermarket retail price is a bit higher compared with a hypermarket, is better fitted for weekly shopper. Some of the most famous supermarket names in Vietnam are: Hapro mart, Intimex, Co.opmart, Fivimart and Citimart. Supermarkets in Vietnam offer more or less similar goods and services. Some offer frequent buyer card, with which you earn points to get deduction on the following.

·        Department Store

Department stores sell luxurious items such as brand name clothes, shoes and high class electronic devices. Parkson and Diamond Plaza are two most popular department stores in Ho Chi Minh City, while in Hanoi there are Vincom, Grand Plaza, the Manor and the most recent one-Parkson. In those department stores, red ginseng products are often sold in the form of booths of which the authorized distributors pay for the area for selling products. Since ginseng is belong to luxurious item, red ginseng processed products are also be sold together with ginseng. For instance, Quy Hoang Company and Tacy Company both have booths in Grand Plaza as their other showrooms to display and sell red ginseng products.