In conversation with Mr. Phung Le Minh, AJ Total Vietnam, we tried to understand the Cold Chain Industry in Vietnam. We also discussed the driving factors and regional concentration of the cold storages in Vietnam
“Vietnam's cold supply chain still needs to overcome a number of obstacles before it can advance to the following stage of industrial logistics growth.”
Q1. How would you like to describe the Cold chain industry in Vietnam?
The cold chain business in Vietnam is experiencing many developments and numerous investment prospects. Vietnam is investing more money in its cold chain. The investors are also building a lot of cold warehouses because they believe they can make money and that demand would rise in the coming years.
Q2. I believe there are approximately 50 cold storage warehouses in the country. Do you agree? Can you provide me an estimation for the number of pallets too?
In Vietnam, there may be more than 70 cold storage facilities at this time including small facilities which are generally operated by very small retailers, compared to 48 three years ago (in 2019). In 2019, there were around 7 million cold storage pallets in Vietnam but in 2021 there are more than 8 million pallets and that number is still rising.
Q3. What are the most popular cold storage areas in Vietnam?
With regard to cold storage warehouses, South Vietnam is one of the most developed areas, and it accounts for around 65% of the nation's capacity. The north is the second-most developed area in terms of cold storage facilities.
Q4. How is the Vietnamese government assisting the country's comprehensive cold chain system?
Vietnamese government is developing multiple industrial parks and focusing on improving the infrastructure and providing the financial support and subsidies to the cold chain providers. VASEP has urged the Government and the State Bank of Vietnam to offer favourable loans to those firms that plan to build cold warehouses of 5,000 pallets or above. The loans are recommended to come with zero interest rates in the first two-and-a-half years and low rates in the following years.
Q5. Who are the major end users of the cold chain services in Vietnam?
Meat and seafood along with Fruits and vegetables are the major end users of the cold chain industry in Vietnam. Seafood, Lambs and Meat contribute not less than 50-60% of the share in the overall cold chain market in Vietnam. These end customers now occupy the majority of the cold storage pallets in Vietnam owing to the country's expanding need for frozen food, seafood, lamb, fruits, and vegetables. Additionally, during the post-covid shifts in Vietnamese consumption, there was an increase in demand for frozen food and seafood via online orders.
Q6. What do you think of cold transport in Vietnam and what are the major challenges that cold transport companies face?
In Vietnam, cold transport is quite tough to manage. Anyone can own one to two trucks by investing; however, handling and operating them is a challenging task, since there are many toll stations and the fuel is also quite expensive. Furthermore, managing cold transit is challenging owing to frequent traffic congestion. Although infrastructure is improving, it is still lagging behind compared to other developing nations.
Q7. Which are the current hubs for cold storage in Vietnam, and what are the forthcoming ones?
The Southern Key Economic Zone, HCM city and Hanoi is the hub for the cold storage in Vietnam with more than 70% of the share in total cold storage capacity where as other emerging hubs include Bac Ninh and Hung yen city which attracts the highest FDI given the favourable investment climate. As Vietnam continues to attract FDI, industrial zones have been improving their infrastructure to meet international standards. By 2030, the Vietnamese seafood processing industry is to be developed, and Vietnam is to become a hub for global seafood processing, according to a plan endorsed by Prime Minister which will add the new hubs in the cold storage services.
Q8. How far has Vietnam advanced in terms of automated cold storage technologies?
Vietnam primarily provides non-automated cold storage warehouses, but in the past two years, demand for fully automated pallets has grown, and manufacturers are actively taking advantage of this opportunity. As a result, more than 25% of all pallets in Vietnam are now automated, and that number is steadily rising. The leading companies in the automation of cold storages include AJ Total, Hung Vuong Corporation, ARC, New Era, and Lineage Logistics.
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