Vietnam's cold chain sector booming as domestic demand soars

Vietnam’s cold chain industry is set to soar as demand for chilled and frozen food surges across the country.

While cold chain infrastructure in Vietnam is still dominated by the US$8bn seafood export industry, the emerging South-east Asia nation is undergoing an organised retail revolution.

Proliferating restaurants, shopping malls and supermarkets are driving demand for refrigerated transport as well as storage for domestic consumption.

“Socio-economic development has boosted organised retail,” explained Luong Quang Thi, general director of domestic refrigerated transport specialist ABA Cooltrans.

“Convenience stores and mini-marts have become more popular with the Vietnamese. By last June there were 1,500 convenience stores across the country and the number is expected to boom in the next three years, with 1,300 new supermarkets and around 350 trade centres by 2020,” he added.

ABA Cooltrans hopes to put itself at the forefront of Vietnam’s cold chain expansion. The company’s 200 reefer trucks handled 54,000 tonnes in 2016, and a newly acquired 15,000 pallet-capacity cold storage facility in Hanoi saw throughput of 100,000 tonnes.

ABA Cooltrans general director Luong Quang Thi

ABA plans to add 200 reefer trucks and two new cold storage facilities by 2020. Customers today include leading national retailers Big C and Vinamart, as well as multinationals such as Unilever and 3PL Damco.

Mr Luong noted the impact that evolving consumer tastes and trends were having on the cold chain sector.

“As the average consumer becomes more health conscious, and more aware of the food they eat, food safety compliance will be another factor to drive reefer logistics at the domestic level.

“Logistics companies face pressure, mostly in terms of costs and disconnected or non-integrated infrastructure. But this is also a huge opportunity to upscale efficiently to meet the needs of the cold chain market.

“There needs to be more consolidation and collaboration between asset owners if Vietnam’s cold chain is to meet the quality demanded,” he explained.

Cold storage demand in Vietnam is high, according to a recent StoxPlus survey, which showed a 90% occupancy rate at nearly all facilities. Capacity has quadrupled over the past 10 years, but most facilities are used by the seafood export industry rather than for domestic consumption.

“The demand for servicing the retail segment is also showing growth and this requires a different approach that shifts away from storage alone, into the larger domain of supply chain,” added Mr Luong.

According to the World Bank, Vietnam’s domestic agriculture production is lagging behind regional neighbours Laos and Cambodia, in terms of supply chain development, with regular losses of 25-30% of fruit and vegetable yields due to a lack of refrigerated transport and storage.

Mr Luong says a key challenge is the perception by stakeholders that the cold chain is a cost pressure rather than an investible asset. However, this mindset is quickly changing, he believes.

“In the next few years, the logistics market will be upgraded as everyone starts to put an eye on the cold chain, and their concerns will no longer be purely on the immediate cost but on quality and the overall value chain.

“Today, the focus may be on cutting costs and associated quality of service, but tomorrow the survivors will be those who focused on service excellence. And this does not only apply to logistics players, but to all cold chain stakeholders,” he said.