Vietnam Health Supplements Market: Trends, Opportunities, Market Entry

Vietnam’s health supplement market is growing rapidly due to the country’s demand for health and personal care products. In this article, Vietnam Briefing provides an overview of the health supplements market, including industry drivers, challenges, market entry options and requirements for investors.

Vietnamese health products have recently started experiencing a rapid increase compared to their regional counterparts.

Over the past two decades, there have been substantial changes in Vietnam’s health supplement (also known as diet foods or functional foods). Based on a report by the British Chamber of Commerce in August 2021, the total market value of the local health supplements market has reached $562.9 billion, with a growth rate of 13%. And the average year-on-year (yoy) growth rate of the market is expected to be 20% over the next 10 years.

Increased personal disposable income and increased health awareness

Vietnam has one of the fastest growing middle and affluent classes in Southeast Asia. According to the World Bank, in 2020, Vietnam’s GDP per capita was 2,785 US dollars, while the government will try to achieve GDP growth of up to 6.5% in 2022. This is expected to have a positive effect on the consumer spending and stimulate product demand. which can cover the nutritional deficit.

Moreover, with a population of approximately 97 million people, of which more than 8 million are over the age of 65, the demand for health care supplements in Vietnam has increased significantly in recent years. The local population is increasingly aware of health risks, prevention through the use of dietary food products to alleviate diseases such as high blood pressure, diabetes, obesity and cardiovascular diseases which have increased.

Self-medication

Self-medication has been recognized as a common problem in Vietnam. The rate of self-medication varied from 40% to 60% in rural areas and up to 76% in urban areas. This practice is favored due to the lax management of over-the-counter drugs and the rising cost of health services.

The cost of paying for medical examination and treatment services out of pocket for individuals is 43%, quite high compared to many countries in the world. This is related to the fact that health insurance funds have not yet covered the full range of health care needs and services while the level of financial coverage is limited.

Foreign brands are more trusted than domestic brands

The growing demand for dietary supplements has led to an increased use of imported products, as people tend to trust these brands more than domestic brands. Foreign brands tend to position themselves in the high-end segment to appeal to mid to high-end consumers, while local brands generally focus on the mass market.

Also, foreign players are more active in non-herbal or traditional dietary supplements, while local players are more active in herbal/traditional/healing products. Imported products represent 40% of the market, indicating that locals are more open to trying foreign brands.

Favorite Herbal Health Supplements

In Vietnam, herbal, traditional and curative supplements accounted for more than 70% of the market in 2021. It has been predicted that herbal supplements will continue to dominate the health supplement market.

The high prevalence of herbal supplements in the beauty and personal care sector has also boosted the health food supplement market in Vietnam. This is because people assume that herbal or traditional products have fewer or no side effects than standard products made from natural ingredients.

Ginseng is the most popular herbal dietary supplement in Vietnam, and it is expected to rise rapidly as it boosts the immune system, which is a major issue amid the pandemic.

National players dominate

Herbalife, Trafaco JSC, Amway Vietnam Ltd, Nu Skin Vietnam Co Ltd and Hau Giang Pharmaceutical JSC are the top five health supplement companies in Vietnam. However, the majority of large companies hold less than 5% of the market, demonstrating that the Vietnamese supplement industry is highly competitive, with the number of establishments increasing to 3,108 with 11,127 products in 2021.

In addition, more than 70% of the food supplements consumed on the market are products of national production. The remaining 20% ​​is imported from well-known markets such as the United States, Germany, Canada, South Korea, Japan, etc.

While domestic products still dominate with a 70% market share, several major foreign brands have invested significantly to expand the market such as Cheing Kwan Jang, Pharmaton, IMC, etc. With advantages in technology, product quality, inspection and strict manufacturing process, they are strong competitors that are likely to rapidly dominate the market in the near future.

It should be noted that, under Decree No. 15/2018/ND-CP, all functional food establishments must comply with Good Manufacturing Practices (GMP). GMP is a system that ensures that products are produced in accordance with quality standards. In 2020, more than 200 factories met or exceeded GMP requirements.

Opportunities

In addition to the high demand among the elderly, the proportion of people consuming health supplements has increased to 58.5% for the population over 18, thanks to the exposure of the benefits of these products via the Internet and media focused about health.

In addition, the Vietnam Functional Food Association (VAFF) – which is a social organization of Vietnamese enterprises, institutions and entrepreneurs – has not only signed cooperation agreements with national agencies such as the Department of Food Safety (Ministry of Health), the Department of Competition Management (Ministry of Industry and Commerce), but is also a member of the ASEAN Alliance of Health Supplement Associations (AAHSA) and the International Alliance of Dietary/Food Supplement Associations (IADSA).

Such agreements will allow Vietnam to access vast regional and international expertise attracting investors who can locate their regional or global manufacturing and research and development facilities in the country.

VAFF maintains the relationship by exchanging information and updating new information on health supplements with markets such as USA, China, Japan and EU, especially on legal documents, standards and new products to keep up with new trends and quality for Vietnamese people. market.

Challenges

Although the dietary supplement industry has grown rapidly, the fight against illegal products is a challenge for the authorities. Local and international businesses must compete with substandard and illegal products that may be more attractive due to lower prices.

Moreover, there are many misleading claims in advertisements on online platforms such as Zalo, Facebook and Youtube. With high demand, consumers often do not bother to verify claims or are unaware of the origin of products.

Government regulations have also been unable to keep up with fake advertising campaigns.

Market entry strategy

Foreign dietary supplement manufacturers can enter the Vietnamese market through a local distributor or by setting up a trading company.

In terms of entering through a local distributor, choosing the right partner can make or break a company’s investment strategy, and is understandably a source of concern for most managers. Therefore, the first and most important condition to be considered is that the local partner must obtain a business license to market the products of the investor.

If the investor has set up a trading company in Vietnam, he should be aware of the risks and certain requirements. Since the health supplements industry is a conditional sector, investors should be aware of the following key requirements:

• application for investment registration certificate;
• application for business registration certificate; and
• application for a license to sell functional foods.

In either case, to distribute health supplements in Vietnam, companies must perform product declaration procedures and must ensure that their products comply with labeling and health and safety requirements.

In addition, the certificate of satisfaction of hygiene and food safety standards must be obtained, while all standards concerning health, safety and hygiene must be maintained as long as the company is in operation.

Take away food

The dietary supplement market is a promising area not only for manufacturers but also for consumers. Nevertheless, issues relating to security standards and advertisements are the main concerns of investors. However, with a local population increasingly aware of health risks and a large population over the age of 65, there are several opportunities for investors as the sector is only expected to grow.