The Korean agricultural exports are highly dependent on Japan, China, and the US markets. The exports to Japan, China, and the US account for 48.9% of the US$ 83.5 billion in yearly exports (total up to November 2017). This creates unstable market conditions. For example, Korea has experienced abrupt changes to exports to the three countries because of political and economic issues, such as the deployment of THAAD, the Comfort Woman issue, and the low yen.
Therefore, diversifying the export market is mandatory for increasing agricultural exports. The Korean government is working hard to expand its markets not only in ASEAN where the Korean Wave is in vogue, but also in Brazil, Italy, Kazakhstan, South Africa, and India. In early 2018, Korea Agrafood visited Hanoi in Vietnam, a fast-growing emerging market, and heard what local buyers, consumers, and Korean exporters operating there are saying about the current export of Korean agricultural products, promising export items, and the ways to expand the exports.
Interest in Korean agricultural food products in Vietnam has been rising in the wake of the Korean Wave. According to the statistical data from aT (Korea Agro-Fisheries & Food Trade Corporation), the Korean agricultural food exports to Vietnam, totaling US$ 49.75 million (34,526 tons) in 2007, ballooned to US$ 197.9 million (96,997 tons) in 2009. Last year, the exports to Vietnam reached half a billion dollars for the first time, exceeding US$ 526 million (285,799 tons). That is a nearly 905% growth over 10 years from 2007 through 2016. Up to November of last year, US$ 437.6 million (261,058 tons) of Korean agricultural food products were exported to the country. Now, Vietnam has become the fourth largest importer of Korean food after Japan, China, and the US.
Looking ahead, the Vietnamese market presents even greater growth potential. The current Vietnamese population is about 100 million, the world’s 15th largest. According to the “Assessment of the Aging Population and Forecasting of the Population Structure and Consumer Market Changes,” a report disclosed last year by Korea International Trade Association (KITA), the Vietnamese population will exceed 100 million people in 2025 and keep growing to 110.18 million people in 2050 due to its high birth rate. Notably, Vietnam’s working age population (15 to 64 years of age) will keep growing until 2037 and take up over 60% of the entire population in 2050. This is why exporters are flocking to Vietnam in droves.
Ramyeon takes the lion’s share of exports from Korea (US$ 12.8 million as of Nov. 2017), but the increase of the export of fresh farm products (led by fruit) is starting to take the lead. In fact, the export of strawberry, currently in the spotlight, was US$ 1.6 million by November, having jumped about 380% from the same period of the previous year. The exports of grape and pear were US$ 1.9 million and US$ 8.5 million, up 240% and 128%, respectively, from the same period of the previous year. Apples also increased 148% to US$ 0.9 million, while seaweed increased 42% to US$ 6.3 million, becoming the largest marine product exported.
Specializing in imported fruits, Klever Fruits deals in an increasing amount of Korean fruit. Importing Korean pear, strawberries, grapes, apples, and dried persimmons, Klever Fruits sells them at its own 36 stores as well as at specialty stores. CEO Nguyen Xuan Hai said, “Last year’s sales of Korean fruit were about US$ 1.2 million, about 10 to 15% of our total sales.” Nguyen predicts, “As Korean fruits have excellent taste and flavor, this year’s sales are expected to increase about 50%.”
Choi Jung-ki, aT’s Hanoi Branch Manager, said, “The Vietnamese population is quite young compared to other countries. With economic growth under way, the Vietnamese people’s income levels will continue to rise, which keeps us upbeat about Korean export to Vietnam.” Choi estimated that with about 30 million Facebook users in the country, Vietnamese people must obtain a lot of information on their mobile phones. He added, “Although the online market is not yet thriving here, the active mobile phone usage suggests unlimited potential.”
# Promising Export Items Suggested by Four Local Experts
Long-time observers of the Vietnamese market focus on the Vietnamese people’s interest in health and food safety and forecast an increase in the local consumption of organic and eco-friendly products. As many locals are in their 20s or 30s, one may expect an increase in the export of South Korean baby products that boast their safety. Also, various Korean fruits and ready-to-eat meals sold from convenient stores are counted among promising exports.
▲Choi Jung-ki, aT’s Hanoi Branch Manager
With its high birth rate and large youthful population, Vietnam is greatly interested in baby products. Thus, there are many buyers who are interested in organic or eco-friendly products like Korean-made rice cookies for young children and seaweed. As the country has consumers who buy high-priced baby formulas through social media, I see the great likelihood for increased mid-to-long-term sales of baby food in Vietnam. Also, with the Vietnamese being exposed to Korean street food through YouTube, instantly prepared tteokbokki (rice cake with vegetables and fish cake stir-fried in red pepper sauce) enjoys great local popularity. Shine muscat grape, which sells for 25,000 to 50,000 won per kilogram, will find steady buyers because of its excellent aroma and taste.
▲Ko Sang-goo, President of K-Market
The convenience store culture is still unfamiliar to people of Vietnam. If they become aware that even if you don’t go to a restaurant, you can still have a personal meal at a convenience store, they will start consuming more ready-to-eat food such as tteokbokki. Korean companies should prepare for this possibility. With the spreading perception of seaweed as a health food, there will be growing consumption of seaweed snacks, seasoned seaweed and the like. Consumption of Korean fruits will also increase. In particular, the export of strawberries which were first exported in 2016, are expected to increase even more. Many Vietnamese tourists who visit South Korea buy strawberries on their way home. A steady supply from Korea will meet sufficient consumption in Vietnam. Pear is another item that is likely to become a growing export.
▲Phan Thi Thanh Nga, Lotte Mart Store Manager
I think that Korean kimchi will find a growing demand. Vietnamese people, who eat kimchi together with Vietnamese-style shabu-shabu, ramen, or rice, are looking for Korean kimchi. In addition, as people show increasing interest in health, I foresee the increased consumption of various health foods including drinkable fruit vinegar and other foods which people eat for weight control.
▲Nguyen Xuan Hai, CEO of Klever Fruits
The persimmon which I tried in Busan when I visited South Korea was firm and had excellent fragrance and taste. I think the fruit suits the taste of Vietnamese people, so if it is exported to Vietnam, it should sell quite well. I have also sampled dried persimmon in the Myeongdong area of Seoul. Dried persimmons were first imported in Vietnam in 2015 and will likely find increased sales. Chamoe (Korean melons), if imported, will sell well, too.
# Korean Farm Food Distributors in Hanoi
K-Market, Lotte Mart, and Klever Fruits are among the leading distributors of Korean agricultural products in Hanoi, the capital of Vietnam. Local consumers can also find Korean agriproducts at hypermarket chains, such as AEON Mall and Big C Supermarket.
With 68 stores, K-Market is the largest distributor in Hanoi. Korean agriproducts take up 30% of its US$ 100 million in annual sales. With both refrigerator and freezer storage available, K-Market carries a variety of Korean food products including fruits, fish cake, kimchi, and fresh makgeoli (Korean rice wine). Ko Sang-goo, President of K-Market, said, “Through MOUs with exporters and local administration, we are importing in-season Korean agricultural foods such as ginseng, pear, and apple,” and added, “We carry about 9,000 items.”
Klever Fruits, which specializes in imported fruit, carries a great variety of Korean products. With 33 stores in Hanoi and three in Ho Chi Minh, Klever Fruits is a wholesale distributor and retail seller of Korean fruit such as pears, strawberries, grapes, dried persimmons, and apples. Last year, the sales of Korean fruit was approximately US$1.2 million. Korean fruit accounts for about 10 to 15% of the total sales at Klever Fruits. Nguyen Xuan Hai, CEO of Klever Fruits, said, “Korean fruit has excellent fragrance and taste.” He added, “Since we see an increase of strawberry consumption from November through April, we are holding a variety of sales events.”
In Lotte Mart, which has two stores in Hanoi and Ho Chi Minh City, Korean food products account for about 30% of imported agricultural foods. Phan Thi Thanh Nga, a branch manager of Lotte Mart, said, "Recently, Korean grapes and strawberries are popular because they are delicious, fresh, and have attractive packaging. In case of processed food, ramyeon and glass noodles are very popular." He continued, “As the interest in safety increases, the demand for Korean agricultural foods is also increasing."
Many Korean agricultural food products are offered in the AEON Mall. Ngoc Anh, a consumer who was buying Korean soybean paste, said, "I became interested in Korean food while watching Korean movies and advertisements, which led me to purchase them. Today I bought soybean paste to cook a soup, and ramen, seaweed, and some instant Korean steamed rice called Morning Sunshine (Achim Hetsal)." She also mentioned that ramyeon and instant tteokbokki were her favorite Korean food. At the tasting booth, Vietnamese consumers flocked to try seaweed snacks and dumplings.
# Partnership between aT and NANUM C&C Gives Momentum to the Export of Powdered Milk
aT’s localization support project is a service helping Korean exporters and foreign companies break into a foreign market and expand sales of Korean agricultural products there. NANUM C&C, a distributor of baby formula of Namyang Dairy Product Co., Ltd. in Vietnam, also received help from the project.
Kim Seong-gon, CEO of NANUM C&C, who is responsible for exports of Namyang products to Vietnam and Cambodia, explained, “We first exported powdered milk to Vietnam in 2003 and are now distributing it throughout Vietnam. To promote the products, we host pregnancy and parenting classes over 50 times a year. With the support of aT, we have been able to increase the frequency of classes and generally improve our marketing strategy."
Each pregnancy and parenting class attracts about 200 future mothers, and it is highly efficient in promoting Namyang products. Kim said, "In addition to introducing the products, the class includes lectures by obstetricians and pediatricians as well as discussions of pregnancy and parenting led by staff of a postpartum care center. The classes are immensely popular.”
NANUM C&C’s role in the development of a new product reflecting the demand of local consumers also had a positive effect on the expansion of exports. According to Kim, Vietnamese consumers prefer small-sized baby formula products, so the company has developed and is distributing Imperial Mom XO and IAMMOTHER MOM in 400g packages exclusively for the Vietnamese market.”
As a result of the continuous efforts of NANUM C&C and the support of aT, the export amount of Namyang products to Vietnam has reached US$ 8–9 million. This year, the export target is US$ 10 million. Kim emphasized, “We’ve benefited a lot from last year’s support, so this year, we plan to apply for help in promotion and PR activities at hypermarkets.”
# Park Min-soon, At the Frontline in Promoting Korean Food
Park Min-soon opened a Korean restaurant in Vietnam in 2014, on the advice of his acquaintance who noticed a good growth potential of the Vietnamese food and dining market. The restaurant’s specialty is dakgalbi (Korean spicy stir-fried chicken dish). He said, "As foreign companies entered Vietnam, local people started to accept foreign food and food culture, so I decided to open a restaurant serving the food that I can make best, dakgalbi.”
Last year, Park also opened a Korean style cart-bar. What is most remarkable about it is that he operates it not in a Korea Town, but in Badinh, a typical area of Hanoi, busy with local people. Park explained, “Young Vietnamese learn about Korean food through internet but do not have many opportunities to taste it. I wanted to make a place for the Vietnamese to try Korean food.”
The menu of his restaurant is composed of classic Korean dishes—dakgalbi, budae-jjigae (sausage stew), tteokbokki, gimbap (seaweed rolls), etc. Park said, “Most of the Korean food in Vietnam tastes different from Korean food in Korea. I thought it would be better to serve it as is, and I cook it that way to introduce the Vietnamese to the authentic flavors of Korean dishes.” He added, “When I tell my customers, the taste of my dishes is the same as in Korea, they like it very much. I also promote Korean food by carrying out events on Facebook and other social media.”
Sharing with us his goal of opening 7 franchise stores, Park said, “There is no franchise specializing in Korean food in Vietnam. I hope to build a system where restaurants can serve Korean food without having a professional Korean chef.”
# Interview with Choi Jung-ki, the Head of aT Office in Hanoi
An important role in the ten-fold increase of Korean food to Vietnam from US$ 50 million in 2007 to US$ 500 million last year was played by the aT office in Hanoi. Especially noteworthy is the fact that the aT office has been striving to directly connect the export of fresh agricultural produce to farmers’ incomes. The most popular among fresh Korean products in Vietnam is strawberry. When it was first introduced in the market in 2016, sales exceeded US$ 1 million. As of November last year, Korea shipped US$ 1.68 million worth of strawberries to the country. Exports of grapes and pears in 2017 expanded by 240% and 128%, respectively, compared to the previous year. The export of apples rose by 148%, reaching US$ 1 million; seaweed exports amounted to US$ 6.3 million.
Choi said, “With the increased export of fresh agricultural produce to Vietnam, farming households in Korea can earn more. We invest about a half of our entire budget on promoting fresh Korean fruit to local consumers.” He noted that the Korean pear has a good storability, so it is now distributed throughout the country. He also revealed that aT is constantly looking for new buyers for strawberries, in hope of boosting strawberry exports to US$ 3 million.
Observing a rising interest of the Vietnamese in health, the aT office in Hanoi is intensifying the promotion of Korean ginseng and red ginseng products. Choi said, “Last November, we hosted a seminar to raise awareness of Korean ginseng, where a Vietnamese expert explained the efficacies of Korean ginseng. The event received a positive response.”
Thanks to aT’s promotional activities, exports of ginseng and red ginseng products last year increased by 32% compared to 2016. Choi said, “Ginseng products are popular as gifts, so there definitely is a consumer base for Korean ginseng in Vietnam."
Choi evaluates the growth possibility of the Vietnamese market as high. He said, “Vietnam has a large ratio of young people and the number of Facebook users is estimated at around 30 million, which means a large exposure through the mobile technology. Many exporters are interested in Vietnam because the market has a great potential for growth, such as sales using mobile technology, expansion of convenience stores, and so on.”
Yet, Choi cautions that exporters need to approach the market from a medium or long-term perspective. He said, “Some people call Vietnam ‘the next China,’ but it is important to remember that the market size is smaller than the Chinese, and the income level is lower.” He explained that most of the distribution in Vietnam takes place outside of online market or large retailers, in the street market.” Choi stressed, “Korean exporters should realize that Vietnamese consumers are used to buying a product after being able to see and feel it. These are just a couple of examples of why exporters need to study the Vietnamese market sufficiently before entering it and to approach it with a five to ten years outlook.”
Lee Hyun Woo firstname.lastname@example.org
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