BMI Vietnam Agribusiness Report Q2 2014

Q2 2014
www.businessmonitor.com
VIETNAM
AGRIBUSINESS REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 1759-1740
Published by:Business Monitor International
Vietnam Agribusiness Report Q2

2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International
Copy deadline: March 2014
Business Monitor International

Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email: subs@businessmonitor.com
Web: http://www.businessmonitor.com
2014 Business Monitor International

All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.
DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as
to the accuracy or completeness of any information hereto contained.
Vietnam Agribusiness Report Q2 2014
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................. 10
Agribusiness ........................................................................................................................................... 10
Business Environment .............................................................................................................................. 12
Industry Forecast .............................................................................................................. 13

Dairy Outlook ......................................................................................................................................... 13
Table: Vietnam Butter Production, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Vietnam Cheese Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Vietnam Milk Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Vietnam Whole Milk Powder Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Vietnam Butter Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Vietman Cheese Consumption, 2009-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Vietnam Milk Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Vietnam Whole Milk Powder Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Livestock Outlook .................................................................................................................................... 23

Table: Vietnam Beef & Veal Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Vietnam Pork Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Vietnam Poultry Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Vietnam Beef & Veal Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Table: Vietnam Pork Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Table: Vietnam Poultry Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Coffee Outlook ........................................................................................................................................ 34

Table: Vietnam Coffee Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table: Vietnam Coffee Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Rice Outlook ........................................................................................................................................... 43

Table: Vietnam Rice Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Table: Vietnam Rice Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Grains Outlook ....................................................................................................................................... 51

Table: Vietnam Corn Production & Consumption, 2013-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Table: Vietnam Corn Development Production Plan & BMI Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Table: Vietnam Corn Production & Consumption, 2008-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Featured Analysis .............................................................................................................. 56

Bright Outlook For Agribusiness In Vietnam ................................................................................................. 56
Table: Vietnam - Select Commodities Production & Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Commodities Price Analysis ............................................................................................. 63

Monthly Softs Update ............................................................................................................................... 63
Table: Select Commodities - Performance & BMI Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: BMI Commodities Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Monthly Grains Update ............................................................................................................................ 72

Table: Select Commodities - Performance & Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Page 4

Table: BMI Commodities Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Upstream Analysis ............................................................................................................ 82

Asia GM Outlook ..................................................................................................................................... 82
Table: Philippines Corn Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Table: Select Countries - GM Crops Use In 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Asia Fertiliser Outlook ............................................................................................................................. 88

Table: Global Benchmark Fertiliser Prices (US$/tonne FOB, reported prices at the end of quarter) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Downstream Analysis ....................................................................................................... 95

Drink .................................................................................................................................................... 95
Alcoholic Drinks .................................................................................................................................... 95
Table: Alcoholic Drinks Volume/Value Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Hot Drinks .......................................................................................................................................... 100

Table: Hot Drinks Value Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Soft Drinks .......................................................................................................................................... 102

Table: Soft Drinks Value/Volume Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Mass Grocery Retail .............................................................................................................................. 106

Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Table: Grocery Retail Sales By Format (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Food ................................................................................................................................................... 110

Food Consumption .............................................................................................................................. 110
Table: Food Consumption Indicators - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Canned Food ...................................................................................................................................... 113

Table: Canned Food Volume/Value Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Confectionery ...................................................................................................................................... 114

Table: Confectionery Value/Volume Sales - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Pasta ................................................................................................................................................. 117

Table: Pasta Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Dairy ................................................................................................................................................. 119

Table: Dairy Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Regional Overview .......................................................................................................... 121

Table: Select Countries - Biofuel Blending Mandates & Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Competitive Landscape .................................................................................................. 127

Table: Major Agribusiness Companies (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Company Profile .............................................................................................................. 128

Vinamilk .............................................................................................................................................. 128
Table: Vinamilk's Financial Highlights, 2007-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Demographic Forecast ................................................................................................... 138

Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Methodology .................................................................................................................... 142
Page 5

Industry Forecast Methodology .............................................................................................................. 142
Sector-Specific Methodology .................................................................................................................. 143
Page 6
BMI Industry View

BMI View: Recent adjustments in our outlook for Vietnam's economy and business environment add
further weight to our positive view on the country's agribusiness sector. The industry holds strong growth
opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee,
livestock and dairy sectors. However, Vietnam is facing growing competition in its key markets, and
the fulfilment of its promising potential will only be achieved if the country steps up its competitiveness and
improves product quality and supply chain efficiency. Vietnam will have to significantly ramp up
investment in crop productivity in order to avoid being left behind, and if it succeeds in producing more
value-added crops and maintaining its status as an export spearhead.
Rice The King Commodity

Vietnam - BMI Agribusiness Market Value By Commodity (% of total)
Note: The BMI Market Value is an addition of all domestically produced commodities' value (calculated by multiplying the
production with the international benchmark prices, converted in US$/tonne); f = BMI forecast. Source: BMI.
Key Forecasts
Rice consumption growth to 2018: 4.0% to 20.9mn tonnes. Rice remains the major food staple in
Vietnam, and we do not see this changing over our forecast period. However, rising interest in other
Page 7
foods such as wheat-based goods - supported by growing affluence - will restrict demand for rice, and
over the forecast period we expect production growth to significantly outpace that of consumption.
Corn production growth to 2017/18: 28.9% to 6.2mn tonnes. Although acreage is likely to remain
stagnant or diminish; current yield immaturity means significant gains are still available via this avenue,
especially as robust local corn prices provide incentives to farmers. Domestic consumption will be
another important driver.
Milk production growth to 2016/17: 21.9% to 484,700 tonnes. Dramatic increases in cattle numbers
and increased public and private sector investment - part of the effort to reduce the country's growing
import dependency - will be the main boost to growth. Commercialisation will also play a key role as
larger, more efficient farms come to play a greater role in milk production.
BMI universe agribusiness market value: US$25.7bn in 2014 (down from US$27.3bn in 2012);
growth expected to average -1.2% annually between 2013 and 2017.
2014 real GDP growth: 5.9% (up from 5.4% in 2013; predicted to average 6.3% over 2014-2018).
2014 consumer price index: 5.8% year-on-year (y-o-y) (down from 6.6% in 2013; predicted to average
5.2% over 2014-2018).
2014 central bank policy rate: 7.00% (same than in 2013; predicted to average 6.20% over 2014-2018).
Key Revisions To Forecasts
2013/14 coffee production forecast revised up, to 27.5mn 60kg bags (compared with a previous
estimate at 24.5mn bags). Concerns over a prolonged drought spell in Central Highlands that hindered
coffee trees blossoms, have now eased. Moreover, cultivated area of higher yielding trees has been
growing at a faster pace than expected.
Key Developments
Despite the rebound in production, Vietnam's coffee exports in 2013/14 will probably see slow growth due
to low robusta prices and a growing coffee export sector crisis. Coffee prices in Vietnam have been on a
declining trend for the past two years, and have averaged US$1,708/tonne in the past six months
(September-February), down 10.9% y-o-y. As a result, coffee farmers have been hoarding beans in order to
obtain better prices later on. Meanwhile, although coffee bean production is thriving, the coffee export
sector is facing a debt crisis. The government scrapped the value added tax on coffee exports in January
2014 in order to help the sector, but uncertainty around this policy has also limited exports since the start of
the year. Following the exceptional 2011/12 production and export season, exports were weak in 2012/13,
amounting 23.8mn bags, down 2.5% y-o-y. Exports slew down even more since the beginning of the
2013/14 season in October.
The ongoing restructuring of Vietnam's largest coffee export company, Vinacafe, is reflective of the
difficulties facing the country's coffee export industry. It also highlights the government's push
Page 8
to restructure ailing state-owned enterprises, which we see as a positive development. The ongoing
difficulties in the coffee export sector are the result of a combination of factors, including the extensive use
of short-term debt to fund long-term projects, high interest rates, and poor management and futures trading
abilities. Although the extension of loan terms and decreasing interest rates will give a breath of fresh air to
exporting companies, the sector's outlook remains hindered by overcapacity in the beans processing
industry and bad management practices.
Vietnam's livestock sector, and especially the pork sector, went through challenging times in 2012 and 2013
due to a rise in feed ingredient and fuel prices, lower demand and plummeting domestic prices. As a result,
many farmers were forced to reduce or suspend their operations in order to limit losses, with as many as
30-50% of individual farmers in southern provinces abandoning their farms, while owners of large farms
with more than 1,000 heads have reduced their herd size by up to 70%. The situation has been improving
since H213, as pork prices are starting to recover, and consumers are showing more confidence in the pork
market. However, we believe pork and poultry production growth will remain below historical
averages. Meanwhile, foreign and locally-owned feed companies such as Charoen Pokphand Vietnam
Livestock, Japfa Comfeed Vietnam and GreenFeed Vietnam Corporation have announced investments
to increase feed production capacity.
Page 9
SWOT
Agribusiness
SWOT Analysis
Strengths
The natural fertility of Vietnam around the Red River Delta in the north and the
Mekong River Delta in the south provides the country with a strong agricultural base.
Vietnam is the world's second largest exporter of rice and coffee. It also enjoys
relatively high rice yields compared with its regional counterparts.
Agricultural productivity has improved considerably since the opening up of the

economy in 1986.
Weaknesses
Vietnam enjoys relatively good international price competitiveness for rice and coffee.
Much of Vietnam's agriculture is based on small-scale farms with poor yields relative
to more developed international competitors.
Transportation and production infrastructure is often poor, making getting crops to

market difficult and negatively affecting quality.
Opportunities
Since the opening up of the economy in 1986, which allowed more private
involvement in agriculture, yields have improved dramatically and look set to continue
doing so.
Vietnam's fast-growing population of more than 80mn provides a large market for
agro-food products.
With BMI forecasting Vietnamese GDP per capita to grow rapidly over our forecast
period, consumers will have more money to spend on food, spurring growth in
agricultural production.
A move towards higher-quality products, especially in the coffee and dairy sectors,
will help to improve Vietnam's product competitiveness.
Page 10
SWOT Analysis - Continued
Threats
Poor knowledge of good farming practices and hygiene standards leaves Vietnamese
agriculture open to disease outbreaks of the kind that have plagued the livestock
industry in recent years.
The rising population and increasing industrialisation of the economy will increase
competition for land use, curtailing the area available for expansion of agriculture.
Climate change and rising sea levels will reduce arable land in the Mekong Delta and
coastal areas of the Central region unless active protection policies are implemented.
This would then weigh on production growth in two of Vietnam's main agriculturalproducing regions.
Page 11
Business Environment
SWOT Analysis
Strengths
Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
Vietnam's location - its proximity to China and South East Asia, and its good sea links
- makes it a good base for foreign companies to export to the rest of Asia, and
beyond.
Weaknesses
Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country's economic growth and links with the outside world.
Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123
out of 176 countries.
Opportunities
Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech
skills and know-how.
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.
Threats
Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
Labour unrest remains a lingering threat. A failure by the authorities to boost skills
levels could leave Vietnam a second-rate economy for an indefinite period.
Page 12
Industry Forecast
Dairy Outlook
BMI Supply View: We are positive about Vietnam's dairy sector. We expect it to maintain its strong
growth momentum on the back of a growing customer base, low milk consumption per capita, rising
disposable incomes and increasing health awareness among consumers. Distribution networks are
expanding, and dairy producers are launching aggressive advertising campaigns. Since the opening up of
the economy in 1986, there has been considerable change in the structure of the Vietnamese dairy industry.
The contribution of state farms, which were previously responsible for almost all milk production, has fallen
to around just 5%, with the other 95% coming mainly from small- and medium-sized private farms.
Recent investment in the sector, with the development of milk farms and dairy farms, has boosted the short
term outlook. Production grew by 8.4% annually in the past five seaons. In 2013/14, we see output showing
strong growth, of 5.0% year-on-year (y-o-y), reaching 417,600 tonnes that year. Out to 2017/18, we are
forecasting Vietnamese fluid milk production growth of 21.9% on the 2012/13 level to 484,700 tonnes.
Dramatic increases in cattle numbers and increased public and private sector investment - part of the effort
to reduce the country's growing import dependency - will be the main boost to growth. Commercialisation
will also play a key role as larger, more efficient farms come to play a greater role in milk production. A
sustained period of high global milk prices on the back of rising global demand and supply sluggishness
will also prove supportive of production and encourage producers to consider the long-term impact of their
approach to cattle farming. Finally, the sector is likely to benefit from the continued increase in yields,
which have risen almost 130% over the past decade and are expected to continue to do so given the new
investment in the sector.
BMI Demand View: Vietnamese dairy consumption has expanded significantly in the last 15 years, driven
by relatively large increases in domestic consumption as well as rising incomes. Per capita milk
consumption in Vietnam more than doubled between 2000 and 2012 to 12kg per person per year. Despite
this increase, the country remains below the regional average of 65kg. Though there has been an increase in
milk production over the years, the country produces neither cheese nor butter. Condensed milk and yoghurt
are highly popular dairy products. We expect the country to be increasingly reliant on dairy imports to meet
its domestic needs.
Vietnamese dairy consumption growth will remain strong over our forecast period to 2018. Strong
economic growth will filter through into rising disposable incomes, pushing up demand for non-essential
foodstuffs. Through to 2018, we expect fluid milk consumption growth of 36.1% to 272,400 tonnes, while
Page 13
demand for butter, cheese and whole milk powder will soar 46.9%, 229.6% and 24.3% respectively, albeit
from far lower bases. Increased urbanisation, increased ownership of Western goods and the ongoing spread
of modern, organised retail will all prove supportive of strong dairy consumption growth, even if forecast
higher global dairy prices limit the growth outlook to some extent.
Table: Vietnam Butter Production, 2013-2018
2013e
2014f
2015f
2016f
2017f
2018f
13.4
14.5
15.7
16.9
18.3
19.7
Butter Consumption, '000 tonnes
e/f = BMI estimates/forecasts. Sources: FAPRI, BMI.
Table: Vietnam Cheese Consumption, 2013-2018
2013e
2014f
2015f
2016f
2017f
2018f
4.4
6.0
7.5
9.3
11.6
14.6
Cheese Consumption, '000 tonnes
e/f = BMI estimates/forecasts. Sources: FAPRI, BMI.
Table: Vietnam Milk Production & Consumption, 2013-2018
2013e
2014f
2015f
2016f
2017f
2018f
Milk Production, '000 tonnes
397.7
417.5
433.4
449.9
467.0
484.7
Liquid Milk Consumption, '000 tonnes
200.1
213.6
227.8
242.3
257.3
272.4
e/f = BMI estimates/forecasts. In all instances year indicates data for harvest year ending that calendar year i.e. 2011 =
2008-09. Sources: General Statistics Office of Vietnam, BMI, FAPRI.
Table: Vietnam Whole Milk Powder Consumption, 2013-2018
Whole Milk Powder Consumption, '000 tonnes
2013e
2014f
2015f
2016f
2017f
2018f
36.8
38.4
40.1
41.9
43.8
45.8
e/f = BMI estimates/forecasts. Sources: FAPRI.
Page 14
Private Investment To Support Production Growth
The recent announcement by dairy company FrieslandCampina and agricultural bank Rabobank that the
two institutions will team up to improve the quality of milk in Vietnam and Indonesia is the latest sign that
the Vietnamese dairy sector has bright days ahead. The companies will provide US$30mn to support local
dairy farmers by providing knowledge, financing (affordable loans) and expertise. The provided loans will
be used to purchase cows, improve facilities and fund the installation of biomass units.
This move, coupled with the constant expansion of milk capacity (by Vinamilk, for example) and of
manufacturing (Vietnamese company BIOMIN just opened a premix company), bodes well for milk
production growth.
Access To US Confirms Vinamilk's Long-Term Opportunities
Vietnam Dairy Products Joint-Stock Company (Vinamilk) was given the green light in July 2013 to export
its products to the US market. This reinforces our positive view of the company, as it will support
Vinamilk's promising future sales growth. The company continued to record strong growth in Q313 (JulySeptember) with revenues growing by 21.3% y-o-y to VND8,028bn (US$381mn) and net income by 21.2%
y-o-y to VND1,908bn (US$90mn). Margins retreated slightly in Q313 but remained above historical
averages. Profit margins came in at 21.1%, down 0.02 percentage points y-o-y. The positive performance
was mainly driven by a strong growth in export sales, which increased 115.6% y-o-y. Domestic sales were
more moderate (at 8.8% y-o-y) and driven mostly by demand for powdered milk and Vinamilk's newly
introduced value-added and premium products in the domestic market. Export sales now account for 18% of
total sales (as of Q313), compared with 8.5% a year ago.
Page 15
Strong Growth
Vinamilk - Revenue Growth, % y-o-y (RHS) & Select Income, VNDmn (LHS)
Source: BMI, Bloomberg
We remain positive about Vinamilk's long-term prospects given the strong growth potential for dairy
consumption in Vietnam and the region, the company's investment in supply chain, and its capacity
expansion and its strong financial position. The company is well positioned to benefit from the industry's
growth, as it has a well-known brand (a recent survey by Kantar Worldpanel indicates Vinamilk's
products are consumed by 94% of households in Vietnam) and a large distribution network.
We believe Vinamilk's strategy of developing mainly in the domestic market, and more specifically in
value-added segments, will be to its benefit. Vinamilk has large market shares in key domestic markets for
which we forecast strong consumption growth in the coming years. For example, Vinamilk enjoys a 40%
market share in Vietnam's liquid milk segment, for which we forecast consumption to expand by 38.9%
between 2012 and 2017, to 257,250 tonnes on the back of increased urbanisation, Westernisation and the
ongoing spread of organised retail networks. Moreover, Vinamilk plans to scale up its production and
market share in the powdered milk segment (which only accounts for 20% of total sales in Vietnam), for
which we believe demand will rise by 19% over the coming five years.
Page 16
Vinamilk On Top
Selected Companies - Operating (LHC) & Profit (RHC) Margins, %
Source: Bloomberg
With new downstream projects coming online soon, the company is now heavily investing in upstream
capacity and plans to spend VND1,555bn (US$73mn) in capex for the next three years. Vinamilk, which
sources 25% of its raw milk from small-scales farms in Vietnam, is ramping up its cow farming business
and aims to source 40% of its raw milk needs from internally-owned farms by 2016.
We also highlight Vinamilk's export growth potential. Exports (mainly to Iraq, Cambodia, the Philippines,
Thailand and Australia) only accounted for 14% of total revenue in FY12, compared with 10% in FY07.
Exports are likely to see sustained growth in the coming years, favoured by the access to new markets such
as the US, and by the full implementation of the Association of Southeast Asian Nations Economic
Community (AEC) in the coming years. Although the current 2015 timeline for integration looks unlikely,
we do expect closer commercial and financial ties with lower import tariffs across the region in the coming
years. Vinamilk is trying to capitalise on looser investment regulations in the region and plans to build a
factory in Cambodia in order to save costs.
Finally, high margins, combined with low debt levels and interest expenses, puts Vinamilk ahead of its
peers (Megmilk, Mengniu and Namyang) in terms of financial performance.
Page 17
Well Diversified
Vinamilk - Revenue By Product (LHS) & Geography (RHS), 2012, % Of Total
Source: BMI, Vinamilk
Our view for international milk prices to remain elevated in H213 and to average higher over 2013 could
hamper Vinamilk's performance over the coming quarters. Indeed, Vinamilk's gross margins are highly
sensitive to global milk prices, as the company imports 70-75% of its raw milk materials, mainly from
Australia and New Zealand. Pressure from high milk prices is likely to ease from 2014, as we expect prices
to head down on a rebound in supply.
Page 18
Highly Concentrated Market

Vietnam - Liquid & Powdered Milk Production Market Share (% of total)
Thailand's Fears Over Trade Liberalisation Overplayed
Thai milk farmers and processors fear losing market share - both domestically and abroad - due to
the AEC's impending import liberalisation in 2015. Vietnam's dairy sector, although still lagging being
Thailand's, is developing rapidly, with milk production increasing by 18.3% on average in the past 10 years
and forecast to soar by 20.9% on the 2011/12 level to 461,600 tonnes in 2016/17. Vietnam has been trying
to upstage Thailand through massive dairy cow imports and rapid expansion of milk-processing facilities
and dairy operations. Vietnam's state-owned dairy company Vinamilk now has a capacity that is three times
that of Dutch Mill, Thailand's leading milk producer. In Cambodia, where Thai milk used to dominate the
market, cheaper Vietnamese dairy products have been gaining market share.
Page 19
Mostly New Zealand

Vietnam - Milk & Milk Products Imports By Country, 2010 (% of total)
Source: BMI, USDA
We believe that Thai dairy farmers' fears regarding trade liberalisation are relatively overplayed, as farmers
are already relatively efficient by regional standards. Vietnam still imports 75% of its dairy products needs,
while Thailand is 75% self-sufficient. Moreover, Thailand has higher dairy cow efficiency than Vietnam
and China, recording annual yields of 3,380kg of milk per head, compared with 2,060kg/head in China and
2,170kg/head in Vietnam.
Strong Government Support
The Ministry of Agriculture and Rural Development (MARD) continues to place a high priority on
developing the country's dairy industry in an effort to keep up with the growing domestic demand for fresh
milk. We believe the MARD's goal to increase dairy cattle herd to 500,000 head by 2020 (from 145,000
head in 2011) and production of raw liquid milk to 1mn tonnes (from an estimated 382,000 tonnes in 2012)
is rather challenging.
Page 20
Table: Vietnam Butter Consumption, 2008-2013
Butter Consumption, '000 tonnes
2008
2009
2010
2011
2012
2013e
10.8
10.8
10.8
11.3
12.5
13.4
e = BMI estimates. Sources: FAPRI, BMI.
Table: Vietman Cheese Consumption, 2009-2013
2008
2009
2010
2011
2012
2013e
3.1
3.8
3.5
3.5
4.0
4.4
Cheese Consumption, '000 tonnes
e = BMI estimates. Sources: 1 FAPRI, BMI.
Table: Vietnam Milk Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013e
262.2
278.2
306.7
345.0
382.0
397.7
158.4
175.1
167.6
174.8
185.3
200.1
e = BMI estimates. In all instances year indicates data for harvest year ending that calendar year i.e. 2011 = 2008-09.
Sources: General Statistics Office of Vietnam, BMI, FAPRI.
Table: Vietnam Whole Milk Powder Consumption, 2008-2013
Whole Milk Powder Consumption, '000 tonnes
2008
2009
2010
2011
2012
2013e
33.2
33.2
33.2
35.1
36.8
36.8
e = BMI estimates. Source: FAPRI.
Risks To Outlook
Another economic slowdown on the back of fiscal and monetary tightening would weigh on our
consumption growth forecasts, as it would force consumers to cut back on discretionary spending.
Page 21
The lack of a national quality control body for dairy products will continue to place downside risks to our
production and consumption forecasts, as it places the dairy industry at risk of a health scandal, which
would further tarnish the image of dairy products in Vietnam.
Page 22
Livestock Outlook
BMI Supply View: Within the Vietnamese livestock industry, pig farming is by far the most dominant
sector, with pork production comprising about two-thirds of total meat production as of 2011/12. Despite
going through hard times over recent years owing to disease outbreaks, soaring input costs and competition
from cheap imports, we expect Vietnam's livestock production to grow strongly, led by poultry production,
over the medium term. Rising incomes will stimulate domestic meat consumption growth (owing to diet
diversification), and production will increase to keep pace. That said, we expect the country to continue
being a net importer of livestock over our forecast period.
We expect livestock production to recover slightly in 2013/14, following two years of challenging
environment with elevated international feed prices. We see poultry production outperforming the rest of
the complex, growing by a robust 7.2% year-on-year (y-o-y) to 815,000 tonnes in 2013/14. The pork sector,
which was hurt in 2013 by news of use of banned substances to promote lean growth in pigs, will continue
to record lacklustre activity. We forecast production to grow by a mild 1.8% y-o-y to 2.3mn tonnes in
2013/14. Beef and veal production is forecast to broadly stagnate in 2013/14 around 420,000 tonnes.
We see strong growth potential for the Vietnamese livestock industry, on the back of rising income. Poultry
will record the strongest growth, and we forecast production to expand 32.7% to 1.0mn tonnes to 2017/18
compared to the 2012/13 level. Pork output should rise 12.0% to 2.5mn tonnes, which will not be enough to
fill in the country's growing demand for the meat. The country will remain reliant on pork imports to satiate
demand. Beef production will remain the least significant of Vietnam's livestock sectors and is expected to
grow by a low 3.7% over the 2012/13 level to 417,000 tonnes.
Page 23
Strong Consumption Potential

Vietnam - Population (mn) & GDP Per Capita (US$, % chg y-o-y)
Source: BMI, Asian Development Bank, Vietnam General Statistics Office, UN
BMI Demand View: Meat consumption in Vietnam has risen significantly over the last decade, with per
capita consumption rising by over 100% from 2000 to 2013 to reach 37.1kg per year. Buoyed by strong
income growth as well as population growth, we see healthy demand growth for livestock over 2013-2018.
Poultry consumption is forecast to grow by 37.8% to 1.1mn tonnes, while pork (from a higher base) and
beef consumption will increase by 18.8% and 22.8% respectively. We forecast pork consumption to reach
2.6mn tonnes, with beef consumption reaching 508,300 tonnes. We believe pork consumption will continue
to be the dominant meat consumed, comprising more than 60% of total meat consumption. A household
survey conducted in 2010 found that 40% of household meat expenditure was spent on pork, with
preference given to fresh pork over chilled or processed meat.
Page 24
Table: Vietnam Beef & Veal Production & Consumption, 2013-2018
2013
2014f
2015f
2016f
2017f
2018f
Beef & Veal Production, '000 tonnes
402.0
404.0
407.0
409.0
413.0
417.0
Beef & Veal Consumption, '000 tonnes
414.0
418.1
439.0
461.0
484.0
508.3
f = BMI forecasts. Source: USDA.
Table: Vietnam Pork Production & Consumption, 2013-2018
2013
2014f
2015f
2016f
2017f
2018f
Pork Production, '000 tonnes
2,220.0
2,260.0
2,327.8
2,380.2
2,432.5
2,487.3
Pork Consumption, '000 tonnes
2,200.0
2,255.0
2,329.4
2,410.9
2,505.0
2,612.7
Table: Vietnam Poultry Production & Consumption, 2013-2018
2013
2014f
2015f
2016f
2017f
2018f
Poultry Production, '000 tonnes
760.0
815.0
859.0
906.3
956.1
1,008.7
Poultry Consumption, '000 tonnes
790.0
829.5
883.4
940.8
1,008.6
1,088.3
Page 25
Sector Profitability Improves, But Challenges Remain
Vietnam's livestock sector, especially the pork sector, experienced significant challenges in 2012 and
2013 on the back of a rise in feed ingredient and fuel prices, lower demand and plummeting domestic
prices. Media reports on the use of banned growth hormones in swine farms led consumers to substitute to
alternative protein sources such as seafood. Pork prices decreased by around 14% in 2012, to VND43,000/
kg (US$2.07/kg) in December of that year, according to industry sources. By contrast, feed ingredient prices
have risen steadily on the back of elevated grain prices. As a result, many farmers were forced to reduce or
suspend their operations in order to limit losses, with as many as 30-50% of individual farmers in southern
provinces abandoning their farms. Owners of large farms with more than 1,000 head are thought to have
reduced their herd size by up to 70%.
In the first six months of 2013, the market price has been significantly below production costs; farms have
therefore showed unprofitable or less profitable cash flows. Pork prices averaged around VND40,200/kg in
southern regions over the first half of 2013, compared with production costs estimated at VND41,000/kg.
The situation has been improving since H213. Pork prices are starting to recover, and consumers are
showing more confidence in the pork market and are spending on pork products. A survey done by the
General Statistics Office showed the estimated total number of pigs to be 26.3 million in December 2013,
only 0.9% lower y-o-y. Prices are currently around VND50,000/kg.
Production growth in the pork industry will remain below-par in 2013/14, expanding by 1.8% y-o-y,
compared with the 10 year average of 6.1%. Poultry production will grow by a strong 7.2% in 2013/14
which is still significantly lower 10-year average of 8.5%.
Page 26
Changing Meat Consumption Trends

Vietnam - Livestock Consumption (% of total meat consumption)
e/f = BMI estimate/forecast. Source: BMI
Feed And Animal Breeding Subsectors More Profitable
While Vietnamese livestock production companies (except feed companies) struggle to stay afloat amid
financial and output woes, foreign rivals have used this opportunity to gain greater control Vietnam's more
lucrative husbandry sub-sectors, such as feed production, live animal breeding, as well as veterinary
services and medicine. Of the total capital investment in the livestock sector in 2012, investment in the
production of meat only accounted for 4.1% (US$15.1mn), while investment in feed production accounted
for 94.9% (US$346.8mn). Investors have been encouraged to invest in the production of animal feed
because domestic supply does not meet demand, and the livestock sector largely depends on imports. In
2012, domestically produced animal feed reached 12.7mn tonnes, accounting for 56% of the country's total
demand. Foreign-owned millers accounted for around 52% of total domestic production. The most recent
investment in the sector is from Charoen Pokphand Food-owned CP Vietnam, which planned to open two
new feed mills in 2013.
Page 27
Compared with the attractive feed sector, the livestock industry is still heavily traditional, with small-scale
and dispersed farms. Despite a slight improvement in profitability of the industry in 2013, the domestic
livestock sector will continue to face structural challenges, namely high interest rates and a lack of foreign
investment into the sector. Indeed, livestock farmers must bear interest rates of around 13-15%, while
foreign companies enjoy 1-4% rates. Moreover, the livestock business generates volatile and low profits and
presents important risks. Disease outbreaks are still very much a risk, while insurance schemes and the
public policy on aid against disasters and diseases are under-developed.
In spite of all those challenges, we continue to hold a positive view on the livestock industry in the medium
term. Rising income and changing diets will support production out to 2016/17, with poultry output growth
outperforming the rest of the industry.
On The Recovery
Select Companies - Operating (LHC) & Profit (RHC) Margins (%)
Fragmented Feed Industry Disadvantages Local Companies
The domestic livestock industry is made up of mainly small-scale or backyard farm operations that have
poor hygiene standards and are susceptible to epidemics. The Vietnamese livestock sector is often plagued
by disease outbreaks owing to the lack of proper sanitation facilities in farms and meat production facilities.
Since 2009, the country's livestock sector has experienced multiple rounds of avian influenza, H5N1 bird
Page 28
flu virus, foot-and-mouth disease and porcine reproductive respiratory syndrome, also known as blue ear
disease. In our view, disease outbreaks will constantly feature as a challenge to the industry as long as it
remains fragmented and low in technology and health standards.
The fragmented nature of the industry has thus resulted in foreign companies, with their sophisticated and
larger-scale production facilities, dominating livestock production in Vietnam. In the poultry sector, for
example, the three main companies dominating the landscape are China-based CP Vietnam Livestock
Corporation, Indonesia-based Japfa and Malaysian company Emivest; these firms supply around 6mn
chickens to the domestic market monthly, leaving hundreds of domestic firms to compete for the remaining
market share.
Another advantage that foreign firms enjoy in the sector is that they are not subject to the high lending costs
that local famers have to pay. Being able to rely on their parent companies also allows these foreign players
to dig into deep pockets and purchase raw materials at lower costs in foreign currencies.
In 2012, 40 out of 243 Vietnamese feed manufacturers were forced to close their doors due to low
profitability, as grains prices remained elevated and to fierce competition in Vietnam's feed industry,
according to the Vietnam Feed Association. A large number of these companies were located in Dong Nai
or Binh Duong, the region considered the southern hubs of the animal feed making industry in Vietnam.
Most of the feed making plants with an annual capacity of at least 50,000 tons belong to foreign companies.
Page 29
Mainly Foreign Companies

Vietnam - Feed Production By Company, 2011 (% of total)
Source: BMI, Vietnam Animal Feed Association
Local Feed Company Expands
Vietnam's feed industry is one of the world's fastest agribusiness markets. It is estimated that approximately
a third of Vietnam's feed is prepared in backyard farms from domestic and far yard scraps. However, its
commercial feed output it growing at an extremely rapid pace. The animal feed industry has been receiving
significant - mainly foreign - investment in recent years, given the attractive prospects of the livestock and
aquaculture industries of the country. Foreign-invested feed companies continue to meet most of the
domestic demand, such as Thailand's Charoen Pokphand Group and US-based Cargill, according to the
Ministry of Industry and Trade. Vietnam currently has 59 foreign-invested firms and joint ventures which
hold over 50% of the domestic animal (compound) feed market share while 180 local firms retain the
remaining 30%, according to the Vietnam Animal Feed Association. According to reports, 30% of domestic
firms have been forced out of the animal feed business as a result.
CP Vietnam Livestock announced in March 2012 it is investing US$100mn in several core businesses in
Vietnam, including feed mills, farms, processed food, ready-to-eat food and CP shops, its distribution store.
Page 30
The company plans on establishing four feed mills in Vietnam in the coming year. The feed mill in Hai
Duong province near Hanoi, has started operations recently, with annual capacity of 720,000 tonnes. CPV is
also expanding in Binh Dinh, where the facility, which will be completed in 2014, will have an annual
capacity of 216,000 tonnes. Finally, CPV plans on establishing two other feed mills in southern Vietnam.
Japfa Comfeed Vietnam also plans on building two new mills before 2015, including one in Hoa Binh,
which will have a capacity of 156,000 tonnes per year.
Imbalances To Be Maintained
Vietnam - Poultry & Pork Production & Consumption ('000 tonnes)
f = BMI forecast. Source: BMI, USDA
Local companies are also expanding: GreenFeed Vietnam Corporation in April 2013 opened a new mill
in Binh Dinh with initial capacity of 220,000 tonnes per year. The Hong Ha Nutrition Joint Stock Co
inaugurated in 2012 an animal production line in Ha Nam Province. The factory is expected to raise its
capacity to 400,000 tonnes annually, nearly 10 times its capacity of 48,000 tonnes seven years ago. This has
come on the back of VND150bn (US$7.1mn) invested in 2011.
We believe the ongoing consolidation of the sector is likely to continue, with foreign livestock and feed
companies buying local assets and increasing their exposure to the sector.
Page 31
Table: Vietnam Beef & Veal Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013
Beef & Veal Production, '000 tonnes
333.0
369.0
384.0
387.0
400.0
402.0
Beef & Veal Consumption, '000 tonnes
344.0
375.0
392.0
395.0
410.0
414.0
Source: USDA.
Table: Vietnam Pork Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013
1,915.0
2,090.0
2,090.0
2,130.0
2,175.0
2,220.0
1,890.0
2,071.0
2,072.0
2,113.0
2,160.0
2,200.0
Source: USDA.
Table: Vietnam Poultry Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013
417.0
503.0
621.0
696.0
730.0
760.0
499.0
538.0
660.0
754.0
775.0
790.0
Source: USDA.
Risks To Outlook
Should the government initiate regulatory changes related to disease control and disaster aid, and improve
lending conditions for the domestic sector, the meat production sector is likely to finally attract more
investment. This poses an upside risk to our production forecasts. In an attempt to aid the industry, the
Vietnamese government issued a document in early August 2012 showing that the State Bank of Vietnam
asked commercial banks to offer an annual lending rate at 11% on loans to agricultural firms. Meanwhile,
the National Assembly offered a 30% reduction of corporate income tax in 2012 to agricultural enterprises.
Although these policies will not completely eliminate difficulties, they are a first step towards the
improvement of the sector's outlook.
Page 32
Disease poses a major downside risk to our forecasts for livestock production in Vietnam. It is a particular
risk for our poultry and pork output forecasts, although it could also affect our beef outlook.
A reduction in consumer spending, as a result of a return to more normal fiscal and monetary policy, could
adversely affect livestock consumption growth. Prolonged demand sluggishness would also weigh on
production growth.
Competition from cheap imports remains a risk to Vietnamese livestock farmers. Efficiency improvements
are being made - as demonstrated by our robust production forecasts - and yet this risk might only be fully
realised beyond 2012 once government intervention is reduced.
An upside production risk is continued government investment. If the sector continues to receive investment
from the government, the ensuing efficiency increases could pose upside risks to our forecasts.
Page 33
Coffee Outlook
BMI Supply View: Vietnam's coffee sector has grown significantly over the last 20 years, with yields
doubling and the area planted expanding from 42,000 hectares (ha) to more than 509,000ha. Vietnam is the
world's biggest producer of robusta coffee, with more than 95% of its coffee output consisting of the robusta
variety and only around 2-3% of production devoted to the premium arabica variety. The Vietnamese coffee
market year runs from October to September, and harvesting takes place between November and February.
After reaching a record high in 2011/12 thanks to excellent growing conditions, Vietnam's coffee crop was
hampered by inclement weather in 2012/13, and production broadly stagnated at 26.05mn 60kg bags.
Production was hurt by unseasonal rains during the blossoming period (January to March).
Vietnam is on track to record its second largest coffee crop ever in the 2013/14 season, which started in
October 2013 with the harvest. We have revised up our coffee production forecasts as cultivated area has
been growing at a faster pace than expected. The robusta harvest is complete now, and we now believe
output will record strong growth of 5.6% year-on-year (y-o-y), reaching 27.5mn bags (compared with a
previous estimate of 24.5mn bags). Vietnam's production surplus is likely to swell to 25.5mn bags in
2013/14, compared with the five-year average of 20.0mn bags.
Following a dry period early this year, rain has been improving the prospects for production. There is likely
some decline in productivity due to the lack of moisture during much of the fruiting and fruit-filling stages,
but recent rains in major growing areas have mitigated the impact of the drought. The USDA estimates the
yield at a hefty 2.63tonnes/hectare (ha) in 2013/14, compared with 2.47 tonnes/ha in 2012/13. As a result of
the production increase, Vietnam's exports are likely to bounce back following the decline in 2012/13's
outbound shipments.
Out to 2017/18, we expect production to rise by 7.4% on the 2012/13 level, to 28.0mn bags. Vietnam will
continue to reap the fruits of its replanting programme. However, we believe production will record large
swings, due to the vulnerability of old trees (which still represent a large part of the total trees) to diseases.
Export opportunities, coming from the increasing demand from emerging markets of robusta coffee, will
continue to support production.
BMI Demand View: As GDP and population rise, spending on food and drink items such as coffee is likely
to increase. Urbanisation and the spread of Western-style coffee shops are expected to add to this trend.
Coffee consumption grew impressively by 56.8% from 0.43kg per capita in 2005 to 1.21kg per capita in
2013, one of the highest growth rates out of all coffee-exporting countries over the period. We predict that
Page 34
consumption will rise 11.0% in 2014 to reach 2.1mn bags that year, boosted by the rebound in economic
growth and the ever expanding coffee retail industry. That said, we note that coffee consumption growth
comes from a relatively low base, and we expect 81.0% growth to 3.3mn bags over our forecast period to
2018 compared to the 2013 levels. Coffee consumption per capita is forecast to expand to 2.10kg per capita
by 2018. The Ministry of Agriculture and Rural Development has said it hopes to boost domestic
consumption to 10-15% of the national coffee crop. We do not believe this will be achieved in our forecast
period, but the existence of such a sizeable target underlines the apparent potential of domestic
consumption.
Table: Vietnam Coffee Production & Consumption, 2013-2018
Coffee Production, '000 60kg bags

Coffee Consumption, '000 60kg bags
2013e
2014f
2015f
2016f
2017f
2018f
26,050.0
27,500.0
27,637.5
27,692.8
27,831.2
27,970.4
1,848.2
2,051.4
2,318.1
2,619.5
2,960.0
3,344.8
e/f = BMI estimates/forecasts. Sources: USDA, Vietnam Coffee and Cocoa Association.
Slow Exports Growth In 2013/14
Despite the rebound in production, Vietnam's coffee exports in 2013/14 will probably see slow growth due
to low robusta prices and a growing coffee export sector crisis. First, coffee prices in Vietnam have been on
a declining trend for the past two years, and have averaged US$1,708/tonne in the past six months
(September-February), down 10.9% y-o-y. As a result, coffee farmers have been hoarding beans in order to
obtain better prices later on. Meanwhile, although coffee bean production is thriving, the coffee export
sector is facing a debt crisis. Of the 127 local coffee export firms that operated in Vietnam a year ago, 56
have ceased trading or shifted to other businesses, as the industry is plagued by insolvency, high interest
rates and a credit squeeze, according to industry reports. Bean hoarding from farmers and lower prices are
aggravating the export sector' debt woes. The problems pose downside risks to exports volumes in 2013/14
and beyond, as trading companies lack funds to operate normally and ship the beans. The government
scrapped the value added tax on coffee exports in January 2014, but uncertainty around this policy has also
limited exports since the start of the year.
Following the exceptional 2011/12 production and export season, exports were weak in 2012/13, amounting
23.8mn bags, down 2.5% y-o-y. Exports slew down even more since the beginning of the 2013/14 season in
October, reaching 9.67mn bags (580,000 tonnes) in the first five month, down 18.7% y-o-y.
Page 35
Slower Exports
Vietnam- Coffee Exports ('000 tonnes)
Source: BMI, Vicofa
Crisis Brewing For Coffee Exporters
The ongoing restructuring of Vietnam's largest coffee export company, Vinacafe, is a clear evidence of the
difficulties of the coffee export industry. The Vietnam National Coffee Corporation (Vinacafe), a stateowned enterprise that owns more than 25 subsidiary units, is Vietnam's largest coffee exporter, ahead
of Nestl Vietnam and Trung Nguyen. Vinacafe's total debt, including its subsidiaries', amounted to
VND2,970bn (US$141.7mn) in FY1212, while profits were at VND105bn (US$5mn). Vinacafe is not alone
in its struggles, with reports that of the 127 local coffee export firms that operated in Vietnam a year ago, 56
have ceased trading or shifted to other businesses. Many coffee operators are trapped with crippling debt,
and banks are reluctant to lend them more money. The value of non-performing loans or debts in the sector
likely to go unpaid stands at VND8,000bn ($379mn), or 60% of all coffee industry loans, according to the
country's deputy agriculture minister. Two major coffee exporters - An Giang Coffee and Thai Hoa - were
forced to delist from Vietnam's stock exchange in the past 14 months due to rising losses.
The crisis is the result of a combination of factors, including the extensive use of short-term debt to fund
long-term projects, high interest rates, and poor management and futures trading abilities. In the hot growth
Page 36
period of the coffee industry from 2008 to 2011, some companies accepted loan interest rates of 24% per
annum. The extent of the damage was only revealed when robusta prices started to decrease in 2012. In
addition, many exporters took on debt and invested heavily in storage capacity and bean processing plants,
leaving the sector oversupplied. For example, Thai Hoa invested in two plants with a capacity of 110,000
tonnes a year in the central province of Quang Tri, which only had 5,000 hectares of coffee plantations with
a maximum output of 10,000 tonnes, according to industry sources. The supply of raw materials in the
province and its neighbours can only meet around 40% of the plants' capacity.
At A Three-Year Low
Vietnam - Coffee Prices Fob (US$/tonne)
As a result of coffee exporters' inability to repay their debts, the government is stepping in to resolve the
issue. It has allowed banks to triple the loan length for coffee export companies to 36 months and adopted a
restructuring plan for Vinacafe in January 2013. The project will be concluded in 2015 and will make
Vinacafe focus on its core business, including coffee production, processing and trading. The company is
making an exit from non-core investments such as sugar, fertilisers, seeds and construction companies. The
government is also adopting an aggressive stance for loss-making subsidiaries, as it decided to let Vinacafe
Quang Tri One-member go bankrupt.
Page 37
Although we believe the worst is over for the coffee export sector, significant challenges remain. The
extension of loan terms gave exporters a bit of breathing space and will help them repay at least part of their
debt. In addition we view the Vietnamese government's latest push to restructure ailing state-owned
enterprises (as is the case with Vinacafe) as a positive development for the economy (see 'More
Restructuring To Come For SOEs', September 26 2013). By privatising SOEs and channelling more
economic resources towards supporting the private sector through infrastructure investment and tax
incentives, we believe that Vietnam will become an even more attractive destination for foreign direct
investment. However, the overcapacity of bean processing and poor management practices will hinder a
complete recovery for coffee exporters in the short term. Moreover, we believe easy credit in Vietnam is
now a thing of the past, and credit growth is unlikely to return to the high double-digit rates seen over the
past decade. Banks are especially cautious on lending more to the coffee sector, which is likely to push
more exporters out of the industry in the coming months. As such, we believe the government's move to
extend loans may not be sufficient for an industry that is currently having difficulties covering its working
capital needs.
Little Change Ahead

Vietnam - Coffee Area By Region, 2012 & 2020 Goal (% of total)
Source: USDA, BMI
Page 38
Major Robusta Grower
Vietnam is the world's largest producer of robusta coffee, with more than 95% of its coffee output
consisting of the robusta variety and only around 2-3% of production devoted to the premium arabica
variety. We expect Vietnam to maintain its specialisation in robusta production, even if the government
recently announced plans to expand arabica planting area and output. Vietnam expects to double production
of the superior-quality bean to 96,000 tonnes by 2020, from output of 48,000 tonnes in 2011/12, in a bid to
reap more benefits from coffee plantations, as the arabica variety is normally sold for around double the
price of robusta. Vietnam intends to expand arabica area planted in northern and central regions to 40,000ha
over the coming eight years, from the current 32,000-35,000ha (there is no official agency providing exact
data on area planted to coffee). International prices continue to provide a strong incentive for farmers to
expand coffee cultivation in Vietnam.
The Question Of Planted Area
Favoured by stable and elevated Robusta prices, Vietnam has seen its area dedicated to coffee increase
strongly in the past years. Planted area has increased from around 500,000 ha in 2005/06 to over 640,000 ha
in 2012/13 according to estimates by the Ministry of Agriculture and Rural Development (MARD) and the
USDA. However, the quality has not followed, and farmers have faced many difficulties, including
inclement weather and decreasing coffee quality. Coffee yields have picked up strongly in the past two
seasons, as the results of the replanting programme going on for several years now are starting to be seen.
Yields are estimated at 2.63tonne/ha in 2013/14, compared with 2.47tonne/ha last season and the
2008/09-2011/12 average of 2.20tonne/ha.
The MARD plans to focus on quality rather than on plantation expansion. It aims at reducing planted area
back to 500,000 ha by 2020 and to 479,000 ha by 2030. However, given the coffee price competitiveness,
the reduction in planted area is unlikely to happen. Vietnam plans to develop high yield coffee breeding
varieties through replanting programmes of old trees. According to the MARD, there are about
140,000-160,000 ha of aged trees needed to be replanted in the next 5-10 years, and about 200,000 ha by
2020. The Bank of Viet Nam announced in May that the sector will receive preferential credit loans of
VND8-10 trillion (US$381-476mn) from now until 2016 to help implement the programme of old coffee
crops recultivation.
Page 39
Increasing Weight On The International Market
Coffee has proven to be one of main agricultural export engines of the Vietnamese economy and the bulk of
Vietnam's coffee production is for exports. Only about 6% of total production is for domestic consumption.
Vietnamese exports were exceptionally strong and well above annual averages in 2011/12, mainly due to
the bumper crop and relatively high robusta prices on the international markets. The total value of all types
of coffee exports hit a record US$3.7bn in 2012, up 34.5% y-o-y. We expect Vietnam to remain a key
player on international markets in the coming years and to slowly increase its exports, partly due to growing
demand for soluble coffee in Asia. MARD encourages domestic players to diversify their exports towards
higher-value processed coffee products, such as soluble coffee. Exports of processed coffee started in
2003/04 and have been slowly increasing in the past few years, reaching 2.0% of total exports in 2011/12.
Low Value-Added Exports

Vietnam - Coffee Exports ('000 60kg bags)
f = BMI forecast. Source: BMI, USDA, Vicofa
Vietnam now accounts for 17.7% of the world's total exports and exports to more than 80 countries, with
Germany, the US, Italy and Spain as its biggest clients. Vietnam overtook Colombia as the second largest
exporter in 2000, and its impact on international markets has been steadily growing ever since.
Page 40
Getting Into Sustainable Production
Sustainably produced farm produce is a top seller - especially to developed markets and environmentally
conscious customers - and the government of Vietnam knows it. Through numerous public-private
partnerships, the Vietnamese government has started to pursue sustainable farming practises, placing
significant emphasis on the coffee sector. According to statistics from Nedcoffee Vietnam, the amount of
coffee produced under the UTZ Certified, 4C Association and Rainforest Alliance criteria has risen to
115,000 tonnes (or 1,916 60kg bags) of coffee beans in 2011 from close to zero a few years ago. This
represents a small 10% of total national coffee production; BMI therefore expects this trend to gather more
traction given the government's strong support.
Table: Vietnam Coffee Production & Consumption, 2008-2013

2008
2009
2010
2011
2012
2013e
18,000.0
16,980.0
18,500.0
19,450.0
26,000.0
26,050.0
850.0
950.0
1,200.0
1,337.0
1,665.0
1,848.2
e = BMI estimates. Sources: USDA, Vietnam Coffee and Cocoa Association.
Risks To Outlook
In the short term, we see downside risks to our 2014/15 production forecast, due to the drought-like
conditions Vietnam has been experiencing since February 2014. Adverse weather conditions, if prolonged,
will severely diminish the coffee production in the coming season.
In the long term, ageing coffee plantations pose downside threats to our production outlook. Old trees (older
than 20 years) account for around 30% of the total production area, according to Vicofa, and approximately
137,000ha of old and low-quality coffee trees need to be replaced over the next five years. In August 2012,
MARD approved a plan for Vietnam's coffee sector development to the year 2020, which aims at replacing
ageing trees and adopting sustainable production practices in order to reap premium prices in developed
countries. MARD plans to maintain the area under cultivation at 500,000ha by 2020, with an output of
2.4tonnes/ha, and 479,000ha with an output of 2.5tonnes/ha by 2030. However, if farmers do not receive
enough support from the government for their replanting programme, the proportion of higher-yielding
coffee trees could fall, weighing on the country's capacity to at least maintain production growth.
Page 41
Favourable weather, improved inputs, better irrigation and fertilizer application practices, and more
productive coffee areas could offset this potential drop in supply.
With Vietnam's coffee industry so dependent on exports, our forecasts for production will be heavily
dependent on world demand and prices for robusta coffee. BMI is expecting prices to remain relatively high
over the medium term, but should further demand weakness - or indeed global oversupply - cause prices to
come in lower than expected, production could undershoot our growth forecast.
While Vietnam's coffee consumption forecast indicates significant growth, it is coming from a low base.
This highlights the fact that despite government efforts to lift local consumption, coffee remains a luxury,
discretionary item. Its status leaves it exposed to any period of reduced consumer confidence resulting from
government monetary normalisation or a secondary economic slowdown. Such a scenario would likely see
our consumption growth forecast missed.
Page 42
Rice Outlook
BMI Supply View: Vietnam is a key grower and world provider of rice. Production is growing fast,
boosted by higher yielding rice varieties and better culture management. Output grew by more than 25%
between 2000 and 2012.After a record year in 2010/11, Vietnamese rice stagnated at 26.5mn tonnes in
2011/12. In 2012/13, we believe production came in at 27.6mn tonnes, up 1.7% year-on-year (y-o-y). Area
harvested grew by 1.6% y-o-y to 7.86mn hectares (ha), and yields by 1.1% to 5.64tonne/ha, up by a mild
0.5% y-o-y. This will be another record high and well above 10-year average of 23.9mn tonnes.
In the 2013/14 season which started in January, we maintain our view that Vietnam's rice production will
reach a new record high, although y-o-y growth will remain modest. Output is projected to increase by 0.5%
y-o-y, to 27.7mn tonnes, which compares with five-year average annual growth of 2.5%. Area under
cultivation is likely to decline slightly to 7.80mn ha, while yields will reach an all time high of 5.68tonne/
ha. Production growth in 2012/13 and 2013/14 and strong 2012/13 ending stocks - estimated at 2.3mn
tonnes by the US Department of Agriculture (USDA) - will support the country's export capacity as well as
the continuous discount Vietnamese rice prices enjoy relative to global prices. We forecast the country's rice
production balance in 2013/14 - at 7.3mn tonnes - to be 10.6% higher than the five-year average, which
would take exports to 6.8mn and 7.5mn tonnes, according to the Food and Agriculture Organization and
USDA respectively, slightly higher than in 2012/13.
Looking at the 2014/15 season, we see production rising by 1.5% y-o-y following 2013/14 mild growth.
However, we see downside risks coming from the probably return of El Nio Phenomenon, which usually
brings dry weather to South East Asia and could hamper yields.
Compared with many of its agricultural sub-sectors, Vietnamese rice is very competitive relative to many of
its regional peers and is well positioned to benefit from both regional and global demand growth. Another
advantage of Vietnamese rice is its relatively higher yields. The government is looking to increase by 50%
the area planted with hybrid rice varieties, and this bolsters our bullish outlook for the country's rice
production capabilities over the long term. Over our five-year forecast period to 2017/18, we expect rice
output to grow by 8.6% to 29.9mn tonnes.
Page 43
Higher In Vietnam
Selected Countries - Rice Yields (tonnes/ha)
BMI Demand View: We forecast a modest consumption increase of 1.4% to 20.3mn tonnes in 2014. Over
the longer term, we expect consumption to climb by 4.0% to 20.9mn tonnes in 2018 compared to the 2013
level. Rice remains the major food staple in Vietnam, and we do not see this changing over our forecast
period. However, rising interest in other foods such as wheat-based goods - supported by growing affluence
- will restrict demand for rice, and over the forecast period we expect production growth to significantly
outpace that of consumption. Ultimately, demand growth will be influenced by population growth, as per
capita consumption is expected to remain roughly the same as the population continues to diversify its diet
on the back of rising incomes. As such, the country will remain one of the world's top rice exporters.
Page 44
Table: Vietnam Rice Production & Consumption, 2013-2018
2013e
2014f
2015f
2016f
2017f
2018f
Rice Production, '000 tonnes
27,550.0
27,680.0
28,095.2
28,713.3
29,316.3
29,931.9
Rice Consumption, '000 tonnes
20,065.0
20,345.9
20,488.4
20,631.8
20,734.9
20,859.4
e/f = BMI estimates/forecasts. Source: USDA.
Production Growth On Yield Improvements
As rice harvested area broadly stagnates, production growth in 2012/13 and 2013/14 will almost entirely
rely on yield improvements. The USDA estimates rough rice yields will reach a record high of 5.7 tonnes/ha
in 2013/14, compared with 5.66 tonnes/ha in 2012/13 and the 10-year average of 4.98 tonnes/ha. Increases
in yields are resulting from the introduction of better rice varieties. The Ministry of Agriculture and Rural
Development (MARD) is also encouraging farmers to implement the large-scale farm model (between 50ha
and 100ha), under which farmers consolidate individual small farms into larger farms to reduce per hectare
production costs stemming from land preparation, irrigation, planting and harvesting. In 2011, more than
85% of paddy farming households were cultivating rice in plots of 0.5ha or less. Since the implementation
of the plan in 2011/12, the total area of large-scale farms has reached 100,000ha. In the coming years, we
expect that most of the increase in rice production will come from yield improvement. Vietnamese yields
currently stand well above neighbouring countries but still have room before reaching Australian rice yields
of 9.2 tonne/ha, which are the world's highest.
Page 45
Boasting From Low Prices

Rice - CBOT Rough Rice & Select Countries Rice Export Price (US$/tonne)
Note: All export quotes are for 25% broken rice contracts. Source: BMI, FAO, Bloomberg
Exports To Remain Strong Despite Stiffer Competition
Competition is increasing among South Asian and South East Asian countries. As a result, Vietnamese rice
exports between January and October 2013 amounted 6.0mn tonnes, according to official figures, down
12.6% y-o-y. India is increasing its market share in African countries, to which Vietnam usually exports
more than 20% of its rice, and the country is likely to maintain high exports in 2012/13 and 2013/14.
Meanwhile, Thai prices have corrected by almost 28% in the past 12 months. The premium of Thai
rice over Vietnamese rice is now at its lowest level since October 2011, when Thailand implemented its
Rice Pledging Scheme, which led to a significant increase in rice prices and a decline in exports. With the
sharp improvement in Thailand's rice competitiveness, Vietnamese exporters are facing acute competition.
Finally, China, which has been the largest Vietnamese rice buyer since the start of the year (accounting for
roughly 22% of the total), is reducing its rice imports. These developments could be partially offset by
increased demand from the Philippines following Typhoon Haiyan (see 'Typhoon Lifts Rice, Palm Oil
Import Outlook', November 18 2013), a traditional client of Vietnam.
Page 46
We expect rice exports from Vietnam to pick up and be strong overall over the year. Vietnamese export
prices are still very competitive and are among the lowest in Asia. Supported by a flexible pricing strategy
and efforts to move into new markets, exports in 2013/14 could reach 7.5mn tonnes, according to the
USDA, exceeding 2012/13 levels of 7.2 mn tonnes.
A bright spot among bleak news is the current strength of China's imports. The country has stood out as the
main destination for Vietnamese rice for the past year and is likely to maintain high imports in 2013/14 (at
around 2.4mn tonnes, up 9.7% y-o-y) due to insufficient supply and high domestic prices. As traditional
markets such as the Philippines and Indonesia increase their self-sufficiency ratios in the coming years,
Vietnam is ramping up its efforts to export to African (Guinea) and American countries (Haiti, Chile, US).
Due to its stable export policy and strong production, Vietnam is likely to maintain its rank as the third
largest rice exporter, competing with India and Thailand. Vietnamese authorities plan to export 6mn-7mn
tonnes of rice annually until 2015.
Benefiting From Recent High Imports

Vietnam - Total Exports, '000 tonnes (LHS) & Exports To China, % Of Total (RHS)
Source: BMI, China General Customs Administration, General Statistics Office Of Vietnam
Page 47
Rice Cartel Plan Unlikely To Materialise
We believe Thailand's strong push to form a rice cartel along with five other Association of Southeast Asian
Nations (ASEAN) countries in order to control and boost international rice prices is unlikely to materialise.
In August 2012, the country revived its long-held goal to form a cartel and announced five rice-exporting
nations in South East Asia (the traditional top two global rice exporters - Thailand and Vietnam - and their
smaller neighbours Cambodia, Laos and Myanmar) are in talks to create a formal alliance aimed at boosting
prices and increasing export revenues. The project primarily aims to encourage information sharing and
cooperation in production and marketing, with the goal of increasing rice export prices by 10% annually.
Thailand has for many years toyed with the idea of using its dominant market position to influence the price
of rice. This is a decade-long project, as Thailand has been unsuccessfully attempting to create an
international alliance to coordinate rice prices since 2002. A project similar to the current one gained
attention in 2008, but Thailand withdrew its proposal as it immediately came under strong criticism, both
domestically and internationally.
Creating a cartel is increasingly essential for the country, as it will help plunging exports to recover and
sustain the government rice mortgage scheme. The government has been paying above-market prices to its
own farmers in a costly programme to boost rural incomes and is reluctant to increase the flow of rice to the
market by lowering prices (see 'PTP Poised To Maintain Rice Policy', August 23 2012).
We reiterate our view that the rice cartel plan is unlikely to materialise for two main reasons. First, we do
not expect Vietnam to participate in the cartel. The project can count on strong support from Thailand and
Cambodia. However, Vietnam, which would be one of the two pillars of the project given the volume of its
exports, has shown a clear scepticism towards such a plan in past years. The country's exports are benefiting
from Thailand's rice scheme programme, and Vietnam has been making inroads into some markets
traditionally dominated by Thailand. Indeed, Vietnam rice is now enjoying a US$100/tonne discount over
Thai rice. Participating in the rice cartel would very likely lead to a compression of the price differentiation
and could hamper Vietnamese exports. Moreover, the poor record of cooperation between Thailand and
Vietnam is strongly weighing against the implementation of a rice cartel. Second, pro-cartel countries
would most likely face fierce opposition from key rice importers and ASEAN members Indonesia and the
Philippines.
We also highlight that conditions of the rice sectors in the various countries differ significantly, making
cooperation difficult. Thailand and Vietnam are the two leading rice exporters in the world, while output
from Cambodia, Laos and Myanmar is relatively meagre but improving. Laos is a net importer of rice, and
Page 48
Cambodia and Myanmar export small quantities. A lack of adequate facilities and infrastructure such as rice
mills, storage and transport is constraining production and export growth. Regulating supply of perishable
and bulky agricultural commodities in these conditions will prove to be challenging.
Even if the cartel is formed, we believe it is unlikely to reach its goal of setting high prices. The five
countries only account for 42% of total rice exports in the 2011/12 season, according the USDA, and have
to face strong competition from India, Pakistan and the US. Moreover, major importers such as China,
Japan, Indonesia and the Philippines produce large quantities of rice domestically, which will make it even
harder for the cartel to be effective in setting market prices.
Table: Vietnam Rice Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013e
24,375.0
24,393.0
24,993.4
26,370.0
27,100.0
27,550.0
19,400.0
19,000.0
19,150.0
19,400.0
19,788.0
20,065.0
e = BMI estimates. Source: USDA.
Risks To Outlook
There are upside risks to our Vietnamese rice consumption forecasts. Rice remains a substantial part of the
local diet, and any period of prolonged food price inflation or economic weakness would most likely see
more consumers revert to traditional diets, therefore lifting overall demand.
On the production side, the risks to our output forecast for 2014/15 are skewed to the downside, due to
potential weather problems. There are reports that the probability of El Nio returning in 2014 is growing
according to various meteorologist departments. This phenomenon brings dry weather to Vietnam's main
rice producing regions, which poses a downside risks to yields and production.
Over the long term, we believe the gradual transformation of rice cultivation methods in Vietnam presents
the main upside risk to our production forecasts. The Cultivation Department of the MARD is endeavouring
to develop a large-scale rice farming model whereby neighbouring farmers work with businesses and
government officials to increase rice yields. In this model, businesses provide capital for farmers to increase
farm inputs such as fertiliser and machinery. They also provide a ready consumer network for farmers. In
return, they reserve the exclusive right to purchase after the harvest. Currently, large-scale rice farms cover
Page 49
10,000ha of total rice area harvested. The plan aims to expand this to 1mn ha in 2015, or approximately
10% of total area harvested for rice. We believe that this plan poses salient upside risks to our forecast for
rice production growth.
Page 50
Grains Outlook
BMI Supply View: Corn is one of Vietnam's most important food crops, along with rice, and the country
has a significant production of corn, which has grown by a hefty 9.5% annually since 2000. In the 2012/13
season, which ended in April 2013, we believe production came in at 4.8mn tonnes, up 2.8% year-on-year
(y-o-y). Looking at the 2013/14 season, we forecast Vietnam's corn production to maintain its decade-long
expansion and to reach an all time high at 4.9mn tonnes, up 2.1% y-o-y. Following a long term trend, output
growth will be driven by a sustained improvement in yields rather than area expansion. Area harvested is
estimated to broadly stagnate at 1.1-1.2mn hectares (ha) according to the USDA and the Ministry of
Agriculture and Rural Development (MARD) respectively. Yields should grow to 4.38-5.30tonne/ha, up
1.9% y-o-y according to those sources, which is higher than the South East Asian average yield of
3.42tonnes/ha in 2013/14.
Area harvested and yields increased by 24.2% and 38.3% respectively and between 2003/04 and 2012/13,
as domestic corn consumption rose significantly on the back of improving incomes. Indeed, as incomes
have risen, consumers have been encouraged to buy more meat, of which corn is the main feedstock. More
than 80% of the country's total corn output goes towards the feed industry.
To 2017/18, we expect corn production to increase by 28.9% to 6.2mn tonnes. Acreage is likely to remain
stagnant or diminish; current yield immaturity means significant gains are still available via this avenue,
especially as robust local corn prices provide incentives to farmers. The important growth driver will be
domestic consumption, especially from the livestock and aquaculture sectors. Despite the potential for corn
production given the robust growth of the livestock and aquaculture industries, the sector is encountering
many challenges, including high production costs and high post-harvest losses of 13-15% according to
industry sources.
BMI Demand View: Corn consumption almost doubled from 2005 to 2013, and we expect this trend to
continue, although not at such a strong rate. The demand gains will partly come from growth in the
livestock sector, as beef, veal and poultry production are all expected to register strong growth.
To 2018, corn consumption growth will continue to exceed that of production, at 29.7% and will attain
8.2mn tonnes. As a result, Vietnam will very likely become increasingly reliant on corn imports to meet
domestic demand. However, strong economic growth over our forecast period is likely to ensure that the
impact of a rising import bill on consumption is deemed manageable. Animal feed will remain the primary
use for corn to 2018 and beyond. Indeed, we have a positive view on livestock production to 2018 owing to
income growth and the fact that the sector has been identified as a recipient of government modernisation
Page 51
efforts. Bullish projections from our Food & Drink team reinforce this; we forecast per capita food
consumption to grow by 147.3% to US$650.7 by 2018.
Table: Vietnam Corn Production & Consumption, 2013-2018
2013
2014f
2015f
2016f
2017f
2018f
Corn Production, '000 tonnes
4,780.0
4,880.0
5,172.8
5,483.2
5,812.2
6,160.9
Corn Consumption, '000 tonnes
6,300.0
6,646.5
6,998.8
7,362.7
7,752.9
8,171.6
Government's Plan To Boost Production
We believe the government's goal to produce 7.5mn tonnes of corn by 2020 is realistic. According to our
forecast, production will miss this objective by only a couple hundred thousand tonnes. MARD plans to
boost area under cultivation to 1.3mn ha and yields to 5.8 tonnes/ha. Moreover, corn production is likely to
accelerate in the coming years, pushed by the booming demand for feed and by the commercialisation of
genetically modified (GM) seeds.
Table: Vietnam Corn Development Production Plan & BMI Forecasts
Unit
2012
2013f
2014f
2015f
2020f
MARD Area
000 ha
1,200
1,200
1,200
1,200
1,300
MARD Yield
tonne/ha
5.0
5.2
5.3
5.4
5.8
MARD
Production
000 tonnes
6,000
6,240
6,360
6,480
7,500
BMI
Production
000 tonnes
4,700
4,800
5,050
5,353
na
na = not applicable. f = forecast. Source: BMI, MARD
The MARD is now conducting large-scale field trials of GM corn varieties and should grant the final
approval for commercial GM corn production in the coming years. Vietnam already uses hybrid seeds to
plant 90% of the annual corn area according to the Ministry, with imports accounting for 80% of the hybrid
seeds used, coming from Thailand and Indonesia. We forecast poultry and pork production to grow by
Page 52
32.7% and 12.0% to 2017/18 compared with the 2012/13 level. We expect corn production to grow by
28.9% to 6.2mn tonnes over the period.
Consumption Driven By Feed

Vietnam - Corn (LHC) & Wheat (RHC) Consumption ('000 tonnes)
Structural Production Deficit Driven By Livestock Growth
Vietnam suffers from a structural deficit in corn, as its livestock and aquaculture industries maintain a
healthy appetite for feed, while corn and soybean production remains relatively low and wheat output is
non-existent. Corn production will come short of consumption by 1.2mn tonnes in 2013/14 as consumption
is forecast to reach 6.6mn tonnes, up 5.5% y-o-y. As a result, Vietnam, which is traditionally highly
dependent on grain imports, will see its imports grow in 2013/14. Lower international prices in 2013
compared with H212, especially regarding corn prices, will also encourage imports.
The local livestock industry generally uses cassava, wheat, broken rice and corn as feed. In recent years,
rice and cassava have been more focused on export markets and fell short of supplying the domestic animal
feed industry. Feed wheat has recently been an alternative source, but its use is based on its price
competitiveness and its availability in the market. In 2013/14, the use of feed wheat for the local animal
feed industry will stagnate around 1.5mn tonnes due to limited international supply and elevated import
prices.
Page 53
Soaring Feed Demand

Vietnam - Corn Consumption (LHS) & Production Balance (RHS), '000 tonnes
f = BMI forecasts. Source: BMI, USDA, FAPRI
Vietnam's dependency on imports to satisfy grains demand is expected to continue to grow over the long
term. Import dependency for corn, for example, rose from 5.2% in 2005 to 20.0% in 2012.
Table: Vietnam Corn Production & Consumption, 2008-2013
2008
2009
2010
2011
2012
2013
Corn Production, '000 tonnes
4,600.0
4,432.0
4,630.0
4,648.0
4,650.0
4,780.0
Corn Consumption, '000 tonnes
5,200.0
5,400.0
6,100.0
5,900.0
6,000.0
6,300.0
Source: USDA.
Risks To Outlook
We highlight downside risks to our corn production and consumption forecasts through to 2017/18. Corn,
like many Vietnamese agricultural crops, is suffering from a reduction in acreage, a result of under-
Page 54
investment and the country's rapid pace of urbanisation. We expect yield growth, coming from a fairly low
base as it is, to be sufficient to support output growth in spite of stagnant or reduced acreage. However, the
ongoing introduction of hardier and higher yielding crops will ultimately necessitate greater investment;
corn prices will have to remain in favourable territory in the medium term to ensure that this investment is
forthcoming.
An important long-term downside consumption risk is that the country's dependence on imports could
impede Vietnamese demand growth should a sustained period of inflated global corn prices occur. Fiscal
and monetary tightening also pose a risk to consumption growth. Corn is not a luxury good, and thus
demand will not retrench in line with tighter spending conditions. However, corn production in the country
did dip by 3.7% y-o-y in 2008/09 on the back of tighter credit regulations throughout Vietnam during that
time.
Page 55
Featured Analysis
Bright Outlook For Agribusiness In Vietnam
BMI View: Recent developments in the country's economic and business environment outlooks add further
weight to our positive view on Vietnam's agribusiness sector. The industry holds strong growth
opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee,
livestock and dairy sectors. However, Vietnam is facing growing competition in its key markets, and the
fulfillment of its promising potential will only be achieved if the country steps up its competitiveness and
improves both product quality and supply chain efficiency.
Recent developments related to Vietnam's economy and business environment have added further weight to
our already positive outlook on the country's agribusiness sector. Over the past decade, Vietnam's economic
growth story has been marked by tumultuous periods of high inflation and currency volatility that weighed
on export competitiveness. However, 2013 looks set to be a major turning point for the economy, with the
government pushing for policies aimed at maintaining price stability, coupled with ongoing efforts to
further address macroeconomic imbalances in the economy. Although Vietnam's agriculture sector will not
be directly affected by these reforms, we believe the measures will still prove positive for overall
agricultural production as well as the industry's business environment.
Page 56
Highest Yields In South East Asia

Selected Countries - Rough Rice Yields (tonnes/ha)
BMI believes credit conditions are likely to ease in the coming quarters as Vietnam rides out the credit
crisis it has been experiencing in recent years. Given the ongoing challenges in the coffee export industry
(see 'Crisis Brewing For Coffee Exporters', October 3), improving credit conditions will certainly benefit
the agribusiness sector in the coming quarters.
The government is also taking a more aggressive stance towards the restructuring of state-owned
enterprises, as it intends to channel greater economic resources towards supporting the private sector
through infrastructure investment and tax incentives. Vietnam is eager to attract foreign investment into a
host of sectors, including agriculture, and this is likely to provide a much-needed push towards efficiency
improvement in the industry. Foreign direct investment (FDI) in agriculture is currently very modest,
accounting for only 1-3% of Vietnam's total FDI. The government is pushing for the increase of public
private partnership (PPP) programmes in various agriculture subsectors, such as cultivation, breeding and
the seafood industry. However, the rise of PPPs in the primary sector will be slow unless the government
sets up specific documents for PPPs in the agricultural field. So far, only investment in the infrastructure
sector enjoys such a regulatory framework.
Page 57
These developments reinforce our broader bullish view on Vietnam's agriculture sector, underpinned by
increasing public support for the industry and a positive outlook on production and export potential in the
coming years.
On the production side, the natural fertility of Vietnam's soil, along with increasing agricultural
productivity, will support robust growth in various sectors, including rice, poultry and pork, and the dairy
industry. We forecast output in each of these segments to grow by more than 10% between 2012 and 2017.
The livestock sector is benefiting from ongoing industrialisation in the feed industry, which provides a
good quality and regular supply of feed ingredients. Productivity is rising overall, driven by the slow
improvement in cultivation and breeding practices. For example, milk yields grew by 225% from
0.8 tonnes/cow in 2000 to 2.6 tonnes/cow in 2012.
Vietnam Price Competitive

Select Countries - 25% Broken Rice Export Prices (US$/tonne)
Source: BMI, FAO
Output growth will also be supported by strong demand for Vietnam's agricultural products from domestic
and export markets. Economic and revenue growth, along with urbanisation, is fuelling consumption growth
in key agricultural and food products. We forecast GDP per capita to grow by a hefty 153.3% between 2012
Page 58
and 2020 to reach US$4,336. This will mostly benefit the Vietnamese dairy and livestock sectors, which are
able to ramp up production to supply growing domestic demand.
Vietnam's export outlook also looks promising, as the country is relatively competitive compared with its
traditional competitors, namely Thailand, Indonesia, India and Brazil. The country enjoys low labour costs,
high productivity relative to its competitors, especially in the sectors of rice and coffee, and proximity to
high import growth markets, notably China. Vietnam can also count on cheap - yet lower-quality - domestic
products, which helps it to tap into price-sensitive markets such as China and African countries, particularly
in terms of rice.
We expect Vietnam to retain its status as a leading exporter in key commodities such as rice and coffee.
Competition will be fierce on the rice market, and Vietnam will be neck-and-neck with Thailand, in our
view. Both countries are expected to record significant production surpluses in the coming years, of around
9mn tonnes for Vietnam and 10mn tonnes for Thailand. Coffee exports also have bright days ahead,
particularly given that Vietnam's main competitor in the robusta market, Indonesia, is struggling to ramp up
production. Demand in Vietnam's traditional coffee export markets (US, Europe, Japan) will continue to
grow. In fact, our shipping team forecasts Vietnam to outperform Brazil and other major Asian agricultural
exporters in term of agricultural export growth.
Low-Value Exports
Coffee - Vietnam (LHC) & Brazil (RHC) Exports ('000 60 kg bags)
f = BMI forecast. Source: BMI, USDA, Vicofa
Page 59
Long Road Ahead For Improvements In Competitiveness
However, Vietnam will only realize its agricultural potential it steps up its competitiveness, and the
industry's overall business environment improves. If exports are still held back by a number of structural
inefficiencies. With competition increasing in key markets due to production growth abroad and the
upcoming implementation of the Association of Southeast Asian Nations Economic Community, Vietnam
needs to step up investment if it is to remain competitive.
We believe Vietnam will need to boost quality and productivity in the agriculture industry. The
consolidation of the sector will be a first step towards productivity gains, and could be reached either via
a decrease in the number of farms, the creation of cooperatives, or the increased cooperation between
producers and trading firms. The size of the average farm in Vietnam is stagnating at a low 0.6 hectares, and
this relatively small scale reduces credit access and investment in infrastructure and technology. The
improvement in infrastructure and the supply chain could also reduce transport and handling costs, pushing
down final selling prices. For example, exports out of the Mekong Delta, the largest rice-producing region
in the country, are being held back by dredging shortfalls in the Delta, and the Cai Cui port can only handle
low volume boats.
Page 60
Leaving Something To Be Desired

Selected Countries - Long-Term Political & Economic Risk Ratings & Business Environment Ratings
Components
Note: Score is out of 100. 100 being best, 0 worst. Source: BMI
The move towards quality improvements (via the improvement in cultivation techniques, the set-up of
quality controls and harsher sanitary regulations, the creation of established brands, etc.) will help Vietnam
move up the value chain, and allow the country to command higher export prices. This is mostly the case
for the coffee sector, as Vietnam almost exclusively exports unprocessed coffee beans. In contrast, Brazil
has managed to bring exports of processed roasted and soluble coffee to 13% of total shipments.
Table: Vietnam - Select Commodities Production & Consumption
2012
2013f
2014f
2015f
2016f
2017f
19,788.0
20,084.8
20,406.2
20,712.3
21,023.0
21,338.3
27,100.0
27,330.0
27,576.0
28,403.2
29,283.7
30,200.3
331.0
343.0
360.0
378.0
398.0
416.0
185.3
200.1
213.6
227.8
242.3
257.3
750.0
780.0
820.0
863.0
907.0
954.0
793.5
837.1
887.4
940.6
1,001.8
1,071.9
Page 61
Vietnam - Select Commodities Production & Consumption - Continued
2012
2013f
2014f
2015f
2016f
2017f
2,000.0
2,026.0
2,100.0
2,168.7
2,217.5
2,266.4
1,980.0
2,007.7
2,057.9
2,113.3
2,164.3
2,210.6
24,800.0
23,450.0
24,500.0
23,520.0
24,225.6
24,952.4
1,665.0
1,824.8
1,987.3
2,211.8
2,450.7
2,715.4

Notes: f= BMI forecasts; Sources: USDA; General Statistics Office of Vietnam, BMI, FAPRI, Vietnam Coffee and Cocoa
Association.
Page 62
Commodities Price Analysis

Monthly Softs Update
We believe softs will continue to outperform grains in 2014, as we forecast higher prices over the year for
cocoa, palm oil, sugar and coffee. In comparison, we forecast lower or stable prices for grains over the
coming year.
Dry weather in Brazil since mid-January has pushed coffee and sugar prices sharply higher, putting
upside risks to our price forecasts. However, we expect both markets to remain in surplus for the 2014/15
season and believe an additional price spike is unlikely. Prices will remain highly volatile in the very near
term.
Encouraged by a technical break higher, we initiated a bullish May 2014 LIFFE cocoa view on January
31 (currently up by 0.43%) as the market is expected to remain in a structural deficit over the medium
term.
Softs Outperformance To Continue

S&P GSCI Grains Index & Select Commodities Prices, Rebased
Note: July 1 2013 = 100. Source: Bloomberg, BMI
Cocoa: Turning Bullish
We have entered a bullish view on May 2014 LIFFE cocoa in our commodities strategy table, as prices have
recently broken above multi-year resistance, and fundamental factors suggest the recent rally in prices has
Page 63
further room to run over the coming weeks. We believe the market will register large deficits over the
coming years as demand growth from key markets (especially Europe) improves. Moreover, supply growth
is unlikely to match this expansion owing to our view that the largest growers in West Africa will
face structural constraints. Prices have broken above resistance, coming in at GBP1,800/tonne, and are
expected to head towards GBP1,900-2,000/tonne in the coming months.
Heading Higher
Second-Month LIFFE Cocoa, GBP/tonne (monthly chart)
Sources: Bloomberg, BMI
Overall, we are forecasting LIFFE cocoa to record the largest year-on-year price increase in 2014 of all the
major soft commodities (we forecast prices to average roughly 17% higher in 2014, at GBP1,850/tonne).
Prices will continue to strengthen in 2015, averaging GBP2,000/tonne that year.
Coffee: Waiting On The Weather
We believe coffee prices will remain supported in the near term, as dry and hot weather in Brazil is posing
clear downside risks to production in the 2014/15 season. Much of the recent rally in coffee prices has been
fuelled by worries over dry weather in Minas Gerais, a key growing region in Brazil that is responsible for
Page 64
half of all Brazilian production. The region received little rain in the days leading up to mid-February, and
meteorologists expect dryness and heat to linger in the near term, posing a threat to Brazil's coffee
production in 2014/15. We currently forecast Brazilian production by increase by 8% on the last Brazilian
up-year (2012/13), to 54mn bags in 2014/15. While we expect supply to fall to 46mn bags (below the
lowest official estimate), a 4% y-o-y decrease despite the crop being in an up-year, we still expect the global
market to remain in a 4mn bag surplus, only moderately below the five-year average.
Brazilian Weather Swing Factor

Front-Month ICE Coffee, USc/lb (weekly chart) & RSI (below)
Source: Bloomberg, BMI
Page 65
The risks to our price forecasts remain firmly to the upside. Should the dry weather continue into March, we
will likely revise up our medium-term coffee price forecasts. For now, we continue to see prices averaging
higher in 2014 and 2015, at USc120/lb and USc130/lb respectively after bottoming at USc100/lb in 2013.
More Room To Grow

Front-Month ICE Coffee, USc/lb (LHS) & Net Speculative Long Positions (RHS)
Cotton: China And US Behind Easing Prices In 2014
Cotton prices are likely to remain supported in the coming months, as global supply remains tight. In its
latest World Supply And Demand Estimate (WASDE), the US Department of Agriculture revised down
slightly its estimates for the US's ending stocks, with the country recording a 24% decline in production in
2013/14. However, prices are unlikely to soar beyond the USc88.00/lb level. In fact, the rally in prices
dating from late November seems to be losing steam: there is a bearish divergence on the daily relative
strength index.
Page 66
Short-Term Tightness
Second-Month ICE Cotton, USc/lb (weekly chart)
Prices will head lower in H214, as we expect the global market will shift into a surplus in 2014/15, which
will weigh on prices. We forecast a strong rebound in production in 2014/15, as plantings will be supported
by favourable cotton prices relative to corn and by a return to normal weather in major producing
countries. The first planting intentions surveys in the US point at a recovery in sowings. Moreover, China
will end its market-distorting stockpiling policy for the 2014/15 crop and will release at least part of its
hefty stocks on the domestic market, which will lead to lower domestic prices and import demand from the
country that is traditionally the largest importer and consumer. We forecast prices to average lower over
2014, at USc80.00/lb, compared with USc83.36/lb in 2013. We see upside risks to this view owing to low
plantings in China, a result of farmers' uncertainty regarding the shift in government support.
Palm Oil: Near-Term Strength
We believe three-month palm oil prices are likely to remain supported in the near term, trading within the
MYR2,500-2,800/tonne range. Prices broke resistance at MYR2,700/tonne owing to supply concerns and
lower stocks in Malaysia, as well as a result of strong demand from India. However, we do not believe
Page 67
prices will record a significant rally beyond that level, as the global market remains relatively well
supplied. Moreover, palm oil has lost some competitiveness to alternative cooking oils, with soy oil prices
still hovering around multi-year lows.
Little Gains Ahead

Three-Month MDE Palm Oil, MYR/tonne (monthly chart)
We believe palm oil prices will ease into H214 with the start of the seasonal pickup in production. Further
gains in prices following strength in H114 will be capped by lacklustre demand growth over the year amid a
slowdown in China's economy and low demand from the EU. Overall, prices will rebound in 2014 and
average higher for the first time in three years, at MYR2,650/tonne. Prices are likely to continue on that
trajectory in 2015 and average MYR2,700/tonne as production expansion continues to slow in Indonesia
and Malaysia. The global surplus is forecast to decline to 810,000 tonnes in 2014/15, compared with 1.2mn
tonnes in 2013/14.
Page 68
Strong Demand
India - Total Palm Oil Imports ('000 tonnes)
Source: India's Solvent Extractors Association
Sugar: Upside Risks From Brazil
We see upside risks to sugar prices in the near term owing to the ongoing dryness in Brazil's main growing
regions. According to cane industry group UNICA, the drought will have an impact on 2014/15 sugar
output in the country. Should the dry weather continue into March, sugar prices could head significantly
higher.
The recent rally in prices has proved less spectacular for sugar than for coffee, as other sugar suppliers boast
large supplies. The Thai and Indian harvests are now in full swing, and both countries are expected to
record large supplies in 2013/14. In fact, India finally approved a raw sugar export subsidy in order to boost
shipments. In addition, Chinese import demand will be weak in the coming months, as the country is
carrying voluminous stocks.
Page 69
Bottoming Out
Front-Month ICE Sugar, USc/lb (monthly chart)
We believe sugar prices have now bottomed (at the USc15.00/lb level) and will average higher in the
coming years, at USc17.00/lb in 2014 and USc18.50/lb in 2015. We forecast lower global production
surpluses in 2014 and 2015 (at 2.6mn tonnes both years, compared with 3.5mn tonnes in 2013).
Table: Select Commodities - Performance & BMI Forecasts
Commodity
Barley
Unit Spot Price
YTD
(% chg)
1 Year
(% chg)
2013 Ave
YTD
(ave)
2014
(BMI ave)
2015
(BMI ave)
EUR/tonne
202
-2.4
-16.2
226
203
225
230
US$/cwt
20.32
8.8
17.3
18.08
20.03
16.00
15.50
GBP/tonne
1,858
7.4
32.7
1,576
1,794
1,850
2,000
USc/lb
153
37.9
11.5
126
125
120
130
USc/bushel
449
6.3
-35.5
578
433
425
425
Cotton
USc/lb
87.6
3.5
6.6
83.4
85.8
80.0
84.0
Feeder Cattle
USc/lb
172
2.9
19.9
151
169
na
na
Lean Hogs
USc/lb
97.2
13.8
17.1
89.4
86.8
na
na
Live Cattle
USc/lb
144
6.8
13.7
126
140
na
na
Class 3 Milk
Cocoa (London)
Coffee
Corn
Page 70
Select Commodities - Performance & BMI Forecasts - Continued
Commodity
Unit Spot Price
Palm Oil
YTD
(% chg)
1 Year
(% chg)
2013 Ave
YTD
(ave)
2014
(BMI ave)
2015
(BMI ave)
MYR/tonne
2,726
3.7
8.8
2,405
2,573
2,650
2,700
US$/cwt
15.81
15.4
8.2
15.47
15.55
14.00
13.70
USc/lb
40.3
3.8
-23.3
45.8
38.1
na
na
Soybean
USc/bushel
1,360
3.6
-7.5
1,407
1,308
1,300
1,250
Soymeal
US$/tonne
457
4.3
7.4
433
436
na
na
USc/lb
16.16
-1.5
-10.2
17.47
15.55
17.00
18.50
USc/bushel
612
1.1
-16.5
684
580
610
625
Rough Rice
Soy Oil
Sugar #11
Wheat
Note: Performance as of February 19 2014; Source: BMI, Bloomberg
Table: BMI Commodities Strategy
Entry
Entry Date Level
Gain/
(Loss)
Rationale
31-Jan-14
1,844
0.43%
Persistent market deficits on the back of improving global

demand and stagnating global supply growth.
09-Jan-14
126.25
4.75%
Chinese import growth to slow, supply to improve.
AGRICULTURE
Bullish May 2014 LIFFE
Cocoa
ENERGY
-
METALS
Bearish Iron Ore (SGX
third-month swap)
Note: Returns do not take into account roll yield, unless stated otherwise. Source: BMI, Bloomberg
Page 71
Monthly Grains Update
Grain prices will underperform softs in the coming quarters, benefiting from relatively strong supply.
Dry weather in Brazil presents upside risks to our price forecasts, but we anticipate only relatively
minor downgrades in supply for the ongoing 2013/14 season.
Wheat prices will fail to break key resistance in the short term owing to increased competition among
exporters.
Rice prices will face increased downside pressure in the short term, as the Thai rice purchasing
programme is expected to come to an end.
Corn: More Range Trading Ahead
In our December Monthly Grains Strategy, we suggested that corn prices would find support in the
USc400-425/bushel area, a view that has played out as of mid-February, and we continue to expect corn to
trade within a range of USc425-475/bushel in the coming months. With the northern hemisphere harvests
complete, attention will focus on South America, where we see downside risks to production due to hot and
dry weather in Brazil. We believe corn prices will remain in this trading range over the coming months, as
we expect a significant global market surplus of more than 50mn tonnes for the 2013/14 season, well above
official estimates.
Page 72
Sideways Trade To Come

Front-Month CBOT Corn, USc/bushel (weekly chart) & RSI (below)
Sources: BMI, Bloomberg
We expect only a minor increase in US corn consumption for the 2014 calendar year, and this forms the
basis for our view for a significant market surplus. We forecast US corn demand to increase by only 6%
year-on-year to 278mn tonnes in 2014, in line with our expectations for subdued livestock production
growth and declining ethanol production. By comparison, official forecasts have US consumption growth
closer to 13%. We believe eventual downgrades to official consumption forecasts will lead to a loosening of
Page 73
the corn market and forecast prices to average slightly below current levels at USc425/bushel in 2014 and
2015.
Optimistic Estimates
United States - Y-o-Y Growth In Feed Demand & Livestock Production
Note: Livestock production includes beef, pork, and broiler poultry, Source: USDA
Rice: Weakness In H214
We believe rice prices will come under increasing downside pressure over the medium term after remaining
supported in the months leading up to mid-February. Prices have remained strong largely because of poor
production in the US, one of the few global rice exporters and also the location of the benchmark CBOT
contract. We believe prices are likely to maintain multi-month support around US$15.50/cwt until Q314,
when the new Asian harvests come online. We expect a recovery in global production in 2014/15 after
2013/14's disappointing output.
Page 74
Supported For Now

Front-Month CBOT Rough Rice, US$/cwt (weekly chart) & RSI (Below)
We believe the end of the government-sponsored Thai rice purchasing scheme will ultimately lead to a
boost in exports and put considerable downside pressure on prices. Our long-held view that the government
would have no option but to scrap the scheme is finally playing out (see 'Rice Scheme Days
Numbered', June 10 2013), as the programme will not be extended beyond February. The end of the
programme is likely to see Thai exports (which have already started to pick up in recent months) increase.
Page 75
This underpins our forecast for prices to average US$14.00/cwt in 2014, well below the spot price of US
$15.80/cwt.
Pickup Imminent
Thailand - Rice Exports ('000 tonnes)
Source: BMI, Thai Rice Exporters Association
Soybean: Short-Term Upside Limited
Like corn, we see downside risks to the Brazilian soybean crop due to dry weather, but expect prices to hold
resistance around USc1,360/bushel. Brazilian soybean production has been only mildly affected by the
recent heat wave in Brazil thus far, but there remain downside risks to supply as some plantings have been
delayed, leading to reduced yields. Elsewhere in South America, however, supply prospects are relatively
strong, particularly in Argentina (the world's third largest producer), where we forecast supply to
approach record highs in 2013/14.
Page 76
Line In The Sand

Front-Month CBOT Soybean, USc/bushel (weekly chart)
Looking ahead, we currently forecast prices to average below spot levels (currently trading around
USc1,350/bushel), mainly due to increased US plantings. After a record corn crop in 2013/14, corn prices
collapsed in H213, leaving the price ratio between soybean and corn (which generally compete for acreage)
significantly in soybean's favour. We therefore forecast a significant increase in US soybean production and
a decline in corn production in 2014/15. Consequently, we believe the soybean market will register a large
surplus in 2015, leading the stocks-to-use ratio to climb above the 10-year average in 2014 and 2015. This
Page 77
underpins our view for lower average soybean prices of USc1,300/bushel in 2014 and USc1,250/bushel in
2015.
Key For Plantings

Price Ratio: CBOT Soybean / CBOT Corn
Note: An increase in the ratio implies soybean outperformance; Source: Bloomberg, BMI
Wheat: Export Competition To Weigh On Prices
We believe benchmark CBOT wheat prices will fail to break above key resistance over the coming months,
as the market remains well supplied and concerns regarding US soil conditions subside. US wheat export
demand has been strong in recent months, as EU prices have remained elevated since H213, while US
prices collapsed over that time. In the weeks leading up to late February, prices also were bolstered by
concerns over deteriorating soil conditions due to extremely cold weather in several key US wheatgrowing states.
Page 78
Heading To Resistance
Front-Month CBOT Wheat, USc/bushel (weekly chart) & RSI (below)
However, we believe the concerns over soil conditions will ease, as most areas received at least moderate
snow cover. Moreover, the US is likely to face increased competition for export tenders in the coming
months: We expect EU prices to remain subdued, and the 2013/14 Russian export season is likely to ramp
up after a long delay. The Australian wheat crop is expected to reach a record high. This is likely to prevent
prices from breaking above multi-month resistance around USc640/bushel. Overall, we expect the global
Page 79
market to return to surplus for the 2013/14 season (which ends in June 2014), and see prices averaging
lower in 2014 at USc610/bushel. A smaller surplus for the 2014/15 season underpins our view that prices
will average slightly higher at USc625/bushel in 2015.
Greater Competition
Select Countries - Wheat Export Price (US$/tonne)
Source: Bloomberg
Table: Select Commodities - Performance & Forecasts
Unit
Spot Price
YTD
(% chg)
1 Year
(% chg)
2013 ave
YTD
(ave)
2014
(BMI ave)
2015
(BMI ave)
EUR/tonne
205
-0.8
-14.5
226
203
225
230
US$/cwt
20.5
9.8
19.5
18.08
20.05
16.00
15.50
GBP/tonne
1,839
6.3
31.5
1,576
1,795
1,850
2,000
USc/lb
176
58.7
24.6
126
128
120
130
USc/bushel
454
7.5
-35.2
578
434
425
425
Cotton
USc/lb
86.8
2.6
5.5
83.4
85.8
80.0
84.0
Feeder Cattle
USc/lb
171
2.7
21.6
151
169
na
na
Lean Hogs
USc/lb
97.2
13.8
17.1
89.4
87.1
na
na
Commodity
Barley
Class 3 Milk
Cocoa (London)
Coffee
Corn
Page 80
Select Commodities - Performance & Forecasts - Continued
Unit
Spot Price
YTD
(% chg)
1 Year
(% chg)
2013 ave
YTD
(ave)
2014
(BMI ave)
2015
(BMI ave)
USc/lb
144
6.9
14.9
126
141
na
na
MYR/tonne
2,747
4.5
9.5
2,405
2,578
2,650
2,700
US$/cwt
15.80
15.4
8.2
15.47
15.56
14.00
13.70
USc/lb
40.7
4.7
-21.9
45.8
38.2
na
na
Soybean
USc/bushel
1,359
3.5
-8.4
1,407
1,310
1,300
1,250
Soymeal
US$/tonne
452
3.2
4.2
433
437
na
na
USc/lb
16.44
0.2
-10.4
17.47
15.60
17.00
18.50
USc/bushel
620
2.4
-16.1
684
581
610
625
Commodity
Live Cattle
Palm Oil
Rough Rice
Soy Oil
Sugar #11
Wheat
Note: Spot prices as of February 20, 2014; Source: Bloomberg
Table: BMI Commodities Strategy
Entry Date Entry Level
Gain/(Loss)
Rationale
AGRICULTURE
Bullish May 2014 LIFFE
Cocoa
31-Jan-14
1844
-0.49%
Persistent market deficits due to improving

global demand and stagnating global supply
growth.
126.25
4.82%
Chinese import growth to slow, supply to

improve.
ENERGY
-
METALS
Bearish Iron Ore (SGX thirdmonth swap)
09-Jan-14
Note: Returns do not take into account roll yield, unless stated otherwise. Source: BMI, Bloomberg
Page 81
Upstream Analysis
Asia GM Outlook
BMI View: Although Asia is an agricultural powerhouse, the level of genetically modified (GM) crop
planting in the region is low. The adoption rate of GM crops will remain slow in the coming years, as many
countries are still at early stages of field trials, which usually take years to complete. That said, Asian
governments are slowly but surely opening up to receive GM seeds into their food crops. This could allow
seed companies to reap significant rewards in the region over the long term, both in China, which already
grows GM crops, and in frontier agricultural markets such as Bangladesh, Vietnam and Indonesia.
Despite possessing about 40% of total global agriculture land and close to half of the world's total
population, Asia only accounts for 10.8% of genetically modified (GM) planted area globally. Asia clearly
has potential to grow GM crops, with India, China, Pakistan, Australia, the Philippines and Myanmar the
main countries in Asia Pacific currently growing GM crops.
Asia Still A Minor Player

Select Regions - GM Crop Plantings In 2012 (% of global)
Source: BMI, ISAAA
Page 82
Asia's current resistance to GM seed use can be attributed to the significant negative sentiment regarding
GM food crops. In India and China, the total GM area only accounted for 5.3% and 3.5% of the respective
countries' total arable land as of 2011. Crops permitted by the Indian and Chinese governments for GM
planting are mainly for non-consumed and peripheral crops, such as cotton and some fruits and vegetables.
Furthermore, India is tightening its stance on GM dissemination. Since January 2013, the labelling on
packaged food containing ingredients derived from GM crops is mandatory, and the government shows no
sign of resuming the approval process for GM eggplant since it stated a moratorium in 2010. In another
example, Asia's strong negative reaction to the news that GM wheat - which is not approved for sale or
consumption - had been discovered in the US in June 2013 is a clear sign that many countries on the
continent are still reluctant to adopt GM food crops and are ready to swiftly stop shipments should GM
crops be detected.
Towards A Slow Adoption Of Diversified GM Crops?
The adoption rate of GM crops in the region will remain slow in the coming years, as many countries are
still at early stages of field trials, which usually take years to complete. However, Asian governments are
slowly but surely opening up to receive GM seeds into their food crops.
China has commercialised six GM plants since 1997, but almost all of these are not currently actively
planted because their biosafety certificates expired and were not renewed due to the lack of a commercial
market. Looking ahead, we believe that the country will have little choice but to adopt large GM plantings
for various crops, specifically rice and corn. China is already recording production deficits for corn and rice,
and given the lack of land and the country's appetite for meat amid rising incomes, we believe the corn
deficit is likely to widen in the coming years. China has been clearing new varieties of GM corn and
soybean lately, from Latin America and the US, suggesting a trend of growing acceptance towards
bioengineered seeds. In July 2013, it cleared new GM soybean varieties for import from Brazil. Chinesedeveloped GM varieties of corn and rice were granted biosafety certificates in 2009 and are still in the
process of seed variety registration, which typically lasts around five years. However, China's regulatory
infrastructure remains a strong obstacle to the fast commercialisation of a wider range of GM crops.
Inadequate protection for intellectual property rights, lack of transparency in regulation and tight control
over private sector research and development deter investment in the sector.
The ongoing uncertainty over China's approval of a genetically modified corn variety widely grown in the
US is an illustration of the country's cautious stance on GM. China has been rejecting corn cargoes from the
US that contained seed maker Syngenta's Agrisure Viptera variety, known as MIR 162, which has been
Page 83
awaiting Beijing's acceptance for more than two years. We believe China is enforcing its GM laws more
strictly - the country has been importing this GM variety since 2011 - in order to regulate its own corn
market by preventing cheap imports and further declines in domestic corn prices. We believe China is likely
to resort to this type of action in the future on an ad hoc basis. Overall however, imports of GM crops will
remain strong in the coming years given the country's growing dependence on imports.
Broadly Planted, When Allowed

Select Countries - GM Cotton Area Harvested In 2012 (% of total)
Source: BMI, ISAAA
Other countries are currently undergoing trials, and we continue to believe countries such as Vietnam,
Indonesia and Bangladesh will be the next to grant commercial distribution of GM crops. Throughout 2012,
Indonesia's government took additional steps to advance and simplify its agricultural biotechnology
policies, albeit at a relatively slower pace over the previous year. We expect the commercialisation of GM
feed enzymes, soybean, corn and sugar cane to come first.
Page 84
High Adoption Rate

India - GM Cotton Planted By State In 2012 (% of total)
Source: BMI, ISAAA
Indonesia has launched field trials for GM corn, sugar cane and potatoes, and Vietnam is field-testing corn.
Government approval is likely to come in the coming years, especially for GM corn, which Indonesia and
Vietnam already import from major GM growers in North America and Latin America. The move towards
GM in Vietnam progressed significantly in 2013, as the Ministry of Agriculture and Rural Development
created a legal framework and has given a green light to the development of food and feed GM crops in the
country. This is likely to accelerate the adoption of GM corn and rice in the country, and cultivation could
finally be permitted by 2015.
Page 85
Table: Philippines Corn Estimates
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013e
Corn
production
('000 onnes)
4,430
4,900
5,050
5,884
6,231
7,277
6,853
6,231
7,271
7,130
7,200
Total area ('000

ha)
2,410
2,527
2,442
2,571
2,648
2,661
2,684
2,499
2,545
2,470
2,498
Yield (tonnes/
ha)
1.9
2.1
2.2
2.4
2.5
2.6
2.6
2.6
2.7
2.8
2.8
GM corn area
('000 ha)
10.8
59.8
50.0
127.9
313.9
347.6
327.2
542.5
685.4
na
na
0.4
2.4
2.0
5.0
11.9
13.1
12.2
21.7
26.9
na
na
GM area
(% of total)
e = estimate; na = not available. Source: BMI, USDA, Philippine Bureau of Plant Industry
Oceania Reluctant To Spread GM Cultivation
GM crops in Australia can count on support from the federal government in order to expand. Currently, the
only GM food crops produced in the country are canola and cotton, but a variety of other GM foods can be
imported and used as an ingredient in packaged foods. However, individual Australian states are much more
cautious on GM and are slowing the adoption of GM crops. Various state governments have or had strict
moratoriums on the cultivation of GM crops, including New South Wales, Victoria and Western Australia.
The biotech debate is very important in Australia, and the ongoing heated controversy over Tasmania's
extension of its current 13-year moratorium on GM crops, which expires in 2014, highlights the stance of
Australians towards GM agriculture.
Meanwhile, New Zealand has heavy regulations and a cautious policy with regards to products derived from
biotechnology. A genetic engineered (GE) equine influenza vaccine is the only GE product approved for
use in New Zealand and its use is limited to trials for now.
South East Asia: Philippines The Leader; Thailand Still Reluctant
The Philippines remains a regional leader regarding GM adoption, as it is the only country in Asia to
plant GM corn. GM rice (a variety called Golden Rice), GM cotton, eggplant and abaca are now under
various stages of research and field trials. The adoption by Filipino farmers of GM corn for propagation
continues to be significant, which bodes well for the future adoption rate of other GM crops.
Page 86
Commercialisation is likely to have a knock-on effects in the region, as it could spur other countries to
become less reluctant to introduce GM crops.
Thailand is not likely to adopt GM crops in the coming years, as the government adopted in 2011 a policy
that aims to keep Thai rice free of GM organisms for the period 2011-2015. The process of approving field
trials for Thailand's first biotech crop corn remains stalled, mainly due to a lack of political will. However,
anti-GM activist groups claim that GM papaya seeds are widely distributed among Thai farmers and are
currently grown in several provinces.
Table: Select Countries - GM Crops Use In 2012
Rank*
Country
Area Of GM Crop (mn ha)
GM Crops
Brazil
36.6
Soybean, maize, cotton
Argentina
23.9
Soybean, maize, cotton
India
10.8
Cotton
China
4.0
Cotton, papaya, poplar, tomato, sweet

pepper
Pakistan
2.8
Cotton
South Africa
2.3
Maize, soybean, cotton
13
Australia
0.7
Cotton, canola
12
Philippines
0.8
Maize
14
Myanmar
0.3
Cotton
* World ranking, in terms of area planted to GM crop. Source: ISAAA, BMI
Page 87
Asia Fertiliser Outlook

BMI View: We believe Asia will remain the world's largest consumer of all three fertiliser types, as we
expect the continent's agricultural production to increase in the coming years. The next challenge for
farmers will be soaring input costs and fertiliser efficiency. China and India are looking to diversify potash
procurement away from the Cantopex 'cartel' in favour of domestic and independent producers.
Fertiliser use in Asia has soared in recent years, especially in India, Pakistan and Malaysia, fuelled by
growth in food consumption and governmental support via generous subsidies, especially in South
Asian countries. China and India are the world's largest consumers of fertilisers. Overall, we expect the
consumption of fertilisers in the region to grow rapidly, driven by rising rural incomes, greater availability
of farm credit, contract farming and public/private awareness campaigns. Consequently, the region will
remain reliant on imports of these nutrients.
Mainly Grains
Select Countries - Use Of Fertilisers By Crop, 2008 (% of total)
Source: BMI, FAO
However, the region's dependence on imports of nitrogen might slowly decline and if planned facilities are
commissioned in time, according to the UN Food and Agriculture Organization (FAO). In fact, many
countries in the region, namely Brunei, Indonesia, Malaysia, Myanmar, the Philippines and Thailand, have
large proven natural gas resources, which are needed for urea production.
Page 88
Strong Demand Growth

Select Regions - Fertiliser Demand Growth (% chg 2011-2015)
Source: BMI, FAO
Further Fertiliser Demand Growth In Asia In 2014/15
After a disappointing year for global and Asian fertiliser demand in 2012/13, consumption is expected to
rebound in 2013/14, mainly driven by the recovery in demand in Asia. Although agricultural commodity
prices are currently at relatively low levels, they will remain attractive and stimulate fertiliser application, as
fertiliser prices are at multi-year lows. The International Fertilizer Industry Association (IFA) forecasts
global demand to rise by 2.0% year-on-year (y-o-y) to 179.5mn tonnes nutrients, with potash recording the
largest increase (2.6% y-o-y increase, to 28.7mn tonnes nutrients). Global demand for nitrogen and
phosphate is expected to grow by 1.8% y-o-y to 109.6mn and 41.1mn tonnes respectively in 2013/14.
Page 89
Asia-Driven Demand
Global - Fertiliser Demand Variation (in mn tonnes nutrients per year)
Source: IFA
Asia is leading the rebound in demand this season, and India is likely to outperform the other major
consumers of fertilisers in 2013/14 owing to a favourable monsoon, growth in crop production and elevated
domestic commodities prices. The rebound in fertiliser demand will be mainly led by nitrogen consumption,
as demand for phosphate and potash will be held back by the sustained reduction in subsidies for those
nutrients. In particular, India's government reduced fertiliser subsidies by 20% in 2012/13 and 18% in
2013/14 in an effort to shore up its growing fiscal deficit. Given the projected headwinds for India's
economy in the coming years, the government is unlikely to re-establish the subsidies. A new change or
reduction in the subsidy policy is unlikely to occur before upcoming parliamentary elections in April-May
2014.
Page 90
Low Fertiliser Prices Favour Application

LHC: Urea Prilled Black Sea/India Basmati Rice In Delhi Price Ratio; RHC: Urea Prilled Black Sea/
China Rice Price Ratio
Note: An increase in the ratio suggests fertiliser prices are outperforming rice prices. Source: Bloomberg, BMI
China is expected to maintain its fairly strong fertiliser demand growth in 2013/14. We expect strong
production growth in 2013/14 across various major crops in the country, which will encourage
fertiliser consumption. Domestic grains and oilseeds prices are resilient despite the sharp drop in
international quotes, which will push farmers to optimise plantings and application density in order to reap
the maximum benefits from those prices.
Table: Global Benchmark Fertiliser Prices (US$/tonne FOB, reported prices at the end of quarter)
Q411 Q112
Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Ytd
Urea Prilled (Black Sea)
460
410
450
390
380
385
320
310
310
360
Urea Granular (Middle East)
425
460
460
415
410
410
330
320
375
410
DAP (US Gulf Export)
600
517
570
570
502
510
481
380
370
475
MOP (Granular Potash, Vancouver)
460
520
520
520
520
425
425
425
425
295
Source: Bloomberg
Looking at the 2014/15 season, the IFA forecasts global fertiliser demand to grow for a second consecutive
year, by 2.7% y-o-y to 184.3mn tonnes, with potash consumption recording the strongest growth again.
Page 91
Asia is likely to remain a key driver of demand growth. In India and China, fertiliser prices relative to grains
prices remain attractive (see chart above). China's demand will continue to be favoured by the sustained
increase in fertiliser subsidies and grains procurement prices.
Growing Imports
Select Countries - Fertiliser Production Balance ('000 tonnes nutrients)
Source: IFA, BMI
Strongest Long-Term Demand Growth In China And India
Over the longer term, China and India are forecast to record the strongest demand growth for potash and
nitrogen, according to the IFA and FAO. Our view that agricultural production expansion will be
robust in these two countries is in line with this optimistic outlook. India will account for the largest share
of the world's consumption increase between 2011/12 and 2015/16: around 30% for the two fertilisers.
China is expected to account for 7% and 18% respectively of the increase in demand for nitrogen and
potash respectively, according to the IFA and FAO. Brazil, Indonesia and Russia will also account for a
large amount of future demand.
Page 92
Low Asian Production

Select Countries - Potash Production ('000 tonnes nutrients, LHS) & Reserves (mn tonnes nutrients,
RHS)
Source: BMI, US Geological Survey
India's Pesticide Boom Past Its Peak
The July 2013 fatal poisoning of 23 children in Bihar, India - the result of contaminated school lunches has highlighted the significant safety concerns linked to pesticide use in the country. High usage rates mean
the marginal benefit of increased pesticide and fertislier use in India is falling, and the profit boom for the
pesticide industry is likely to be behind us. Most companies operating in the sector also have a strong
presence in the fertiliser market, and we expect fertiliser sales growth to pick up at the expense of
pesticides, which will help to keep margins in the sector stable in the coming years. Operating margins for
the two largest fertiliser and pesticide companies (Godrej Industries and Deepak) have been trending
lower in recent years (see 'Pesticide Boom Largely Behind Us', August 12 2013).
Diversifying Production And Procurement To Avoid Cantopex
China and India are looking to diversify potash procurement away from the Cantopex group in favour of
domestic and independent producers that can offer more flexible terms and better prices. Both countries are
Page 93
increasingly looking to develop their domestic fertiliser industries and to make acquisitions overseas. In
China, because the country is the world's largest consumer of potash and produced only 39.2% of annual
demand in 2010 (China is self-sufficient in nitrogen), it is still very reliant on imports, especially from
North America. Recently, Chinese companies have signed various agreements to source potash from
independent producers. Chinese investors are also backing potash projects in the nascent producing country
of Laos.
Page 94
Downstream Analysis
Drink
Alcoholic Drinks
2014 alcoholic drinks volume sales growth: +5.9%; compound annual growth rate (CAGR) 2014 to 2018:
+4.5%.
2014 alcoholic drinks value (local currency) sales growth: +12.0%; CAGR to 2018: +8.7%.
2014 beer value (local currency) sales growth: +12.0%; CAGR to 2018: +8.7%.
2014 spirits value (local currency) sales growth: +11.0%; CAGR to 2018: +8.8%.
Alcoholic Drinks Sales

2011-2018
150M
100M
2018f
1,000
2017f
200M
2016f
2,000
2015f
250M
2014f
3,000
2013e
300M
2012e
4,000
Alcoholic Drinks Sales (mn litres) (LHS)

Alcoholic drink sales, VNDmn (RHS)
e/f = BMI estimate/forecast. Source: General Statistics Office, Company information, BMI
In line with improved economic prospects and increasing domestic demand we maintain a very strong
outlook for Vietnam's drinks industry. As it benefits from foreign investments and rising tourist arrivals,
beer will continue to dominate the alcoholic drinks segment, and demonstrate a compound annual growth
rate of 12% in local currency terms between 2014 and 2018.
Page 95
Generally speaking, favourable demographic shifts, rising affluence, strong economic growth and a fastgrowing tourist industry imply massive scope for alcoholic drinks consumption, with beer, in particular, set
to benefit. We expect premiumisation to pick up momentum in the Vietnamese alcoholic drinks sector, and
for value sales growth to outpace that of volume sales over our forecast period to 2018. The emergence of a
thriving tourist industry in Vietnam is also likely to bolster alcoholic drinks consumption given that tourists
typically have a greater penchant for higher-value consumer products.
Beer will continue to dominate the alcoholic drinks sector, accounting for the vast majority of volume sales,
and will thus also remain the main contributor to value sales. This is due to the strong interest the beer
sector has been attracting from both local and international brewers, with volume sales expected to
experience real growth of 24.9% to 2018. We also expect foreign brewers to take on a more prominent role
in driving beer sales growth in Vietnam as they seek to enter emerging markets. As foreign brewers
strengthen their competitive position, and as the local giants Habeco and Sabeco extend their presence
beyond their regional strongholds, sector dynamism will intensify rapidly.
APB's recent investment in the Vietnamese beer industry is a strong testament to the sector's potential. APB
will invest SGD90mn in expanding production at its Ho Chi Minh brewing joint venture by 50%. The
company will increase output at the facility, which is a 60:40 joint venture(JV) with Saigon Trading, to
2.8mn hectolitres a year; it will also add a second canning facility and expand its warehouse space.
Similarly, Japanese brewer Sapporo has announced that it intends to increase its beer production in
Vietnam fivefold in the period up to 2019. The company expects to produce 200,000 kilolitres of beer in the
country by 2019, from its projected 40,000 kilolitres in 2014.
Additionally, Japanese brewer Asahi Group Holdings has announced that it intends to extend its operations
across Asia through a series of acquisitions. Asahi President Naoki Izumiya said that the company had
already identified viable targets in Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Volume sales growth in the wine and spirits industries are also expected to be robust over our forecast
period to 2018, albeit developing from much lower bases. Both are fairly immature industries, having been
held back by an absence of multinational investment and by their relatively higher price tags. However,
prolific wealth accrual among Vietnamese consumers is fuelling shifts in consumption habits towards
higher-value alcoholic drink products, and this trend is particularly evident in the urban centres such as Ho
Chi Minh City, Hanoi and Danang.
Page 96
Exposure to Western cultures is also driving the local demand for spirits and wines. The biggest consumers
of wine and spirits in Vietnam used to be Western expatriates and tourists, but local consumers are
developing a strong appetite for these products in line with their rapidly growing affluence. The spread of
organised retail in the country acts as another impetus behind spirits and wine sales, facilitating consumer
reach to a greater variety of brands in supermarkets, hypermarkets and local wine stores.
Looking ahead, investments in the Vietnamese spirits and wine sub-sectors are expected to intensify as an
increasing number of investors recognise the higher margin growth opportunities on offer in these subsectors, and this is likely to instil further dynamism to drive volume sales.
Table: Alcoholic Drinks Volume/Value Sales - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
2,270.67
2,381.68
2,471.72
2,617.80
2,768.31
2,925.33
3,091.37
3,265.46
Alcoholic
drinks
sales,
litres, %
change yo-y
7.73
4.89
3.78
5.91
5.75
5.67
5.68
5.63
Alcoholic
drinks
sales,
litres per
capita
25.25
26.23
26.96
28.29
29.64
31.06
32.55
34.12
Alcoholic
drinks
sales,
litres mn
Alcoholic
drinks
sales,
VNDmn
Alcoholic
drinks
sales,
VND, %
change yo-y
134,781,991 154,419,478 170,811,147 191,317,021 212,947,900 236,294,061 261,948,642 290,265,180
27.72
14.57
10.62
12.00
11.31
10.96
10.86
10.81
Alcoholic
drinks
sales,
VND per
capita
1,499,010
1,700,734
1,863,128
2,067,220
2,280,282
2,508,668
2,758,466
3,033,182
Alcoholic
drinks
sales, US
$mn
6,524.86
7,398.00
8,172.78
9,303.04
10,474.56
11,689.05
13,097.43
14,659.86
Alcoholic
drinks
sales, US
$%
18.23
13.38
10.47
13.83
12.59
11.59
12.05
11.93
Page 97
Alcoholic Drinks Volume/Value Sales - Historical Data & Forecasts, 2011-2018 - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
72.57
81.48
89.14
100.52
112.16
124.10
137.92
153.19
2,251.49
2,362.01
2,451.32
2,596.22
2,745.30
2,900.79
3,065.22
3,237.59
Beer
sales,
litres, %
change yo-y
7.79
4.91
3.78
5.91
5.74
5.66
5.67
5.62
Beer
sales,
litres per
capita
25.04
26.01
26.74
28.05
29.40
30.80
32.28
33.83
change yo-y
Alcoholic
drinks
sales, US
$ per
capita
Beer
sales,
litres mn
Beer
sales,
VNDmn
Beer
sales,
VND, %
change yo-y
131,710,794 150,984,783 167,035,324 187,108,141 208,239,672 231,035,226 256,093,902 283,750,064
27.92
14.63
10.63
12.02
11.29
10.95
10.85
10.80
Beer
sales,
VND per
capita
1,464,853
1,662,905
1,821,943
2,021,742
2,229,866
2,452,836
2,696,812
2,965,101
Beer
sales US
$mn
6,376.18
7,233.45
7,992.12
9,098.38
10,242.97
11,428.90
12,804.70
14,330.81
Beer
sales, US
$, %
change yo-y
18.41
13.44
10.49
13.84
12.58
11.58
12.04
11.92
Beer
sales, US
$ per
capita
70.91
79.67
87.17
98.31
109.68
121.34
134.84
149.75
Wine
sales,
VNDmn
318,351.0
362,737.5
419,163.7
481,496.9
551,566.8
631,799.5
724,875.4
834,044.9
Wine
sales,
VND, %
28.22
13.94
15.56
14.87
14.55
14.55
14.73
15.06
Page 98
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
3,540.62
3,995.09
4,572.04
5,202.67
5,906.27
6,707.64
7,633.35
8,715.51
Wine
sales, US
$mn
15.41
17.38
20.06
23.41
27.13
31.25
36.24
42.12
Wine
sales, US
$, %
change yo-y
18.69
12.76
15.41
16.74
15.88
15.20
15.97
16.22
Wine
sales, US
$ per
capita
0.17
0.19
0.22
0.25
0.29
0.33
0.38
0.44
Spirits
sales,
litres mn
15.30
15.62
16.01
16.81
17.81
18.88
19.96
21.07
Spirits
sales,
litres, %
change yo-y
0.06
2.13
2.50
4.99
5.95
6.02
5.69
5.57
Spirits
sales,
litres per
capita
0.17
0.17
0.17
0.18
0.19
0.20
0.21
0.22
2,752,846
3,071,958
3,356,659
3,727,382
4,156,660
4,627,035
5,129,864
5,681,070
18.75
11.59
9.27
11.04
11.52
11.32
10.87
10.75
30,616.46
33,833.71
36,612.88
40,275.14
44,510.23
49,123.95
54,020.36
59,365.45
Spirits
sales, US
$mn
133.27
147.17
160.61
181.25
204.46
228.89
256.49
286.92
Spirits
sales, US
$, %
change yo-y
9.92
10.43
9.13
12.85
12.81
11.95
12.06
11.86
Spirits
sales, US
1.48
1.62
1.75
1.96
2.19
2.43
2.70
3.00
change yo-y
Wine
sales,
VND per
capita
Spirits
sales,
VNDmn
Spirits
sales,
VND, %
change yo-y
Spirits
sales,
VND per
capita
Page 99
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
$ per
capita
e/f = BMI estimate/forecast. Source: General Statistics Office, company information, trade press, BMI
Hot Drinks
2014 coffee value (local currency) sales growth: +13.0%; CAGR to 2018: +9.5%.
2014 tea value (local currency) sales growth: +11.3%; CAGR to 2018: +8.8%.
Hot Drinks
2011-2018
50M
40M
25M
2018f
2017f
2016f
2015f
2014f
2012
2011
0M
2013e
20M
Coffee sales, VNDmn (LHS)

Tea sales, VNDmn (RHS)
e/f = BMI estimate/forecast. Source: UN Industrial Commodity Statistics Database, UN Comtrade, BMI
Vietnam's sturdy economic growth over the next few years will continue to fuel demand for higher value
food and beverage products such as coffee. Vietnam's massive youth population, for whom visiting cafs
and drinking coffee is a growing lifestyle choice, is another major positive factor. As this group of young,
aspirant consumers enters the workforce, the accordant rise in incomes will serve to further buoy the
Page 100
demand for higher-value coffee products. The tea sector is also set to experience strong growth over our
five-year forecast period, buoyed by rising incomes and increasing domestic demand.
These dynamics will continue to attract the sights of multinational coffee producers, in turn imbuing the
sector with greater dynamism over our forecast period. As a case in point, Masan Consumer in 2011
acquired a 50.1% stake, valued at around VND1.07trn (US$51mn), in Vietnamese coffee producer
Vinacafe Bien Hoa Joint-Stock Company. By acquiring a controlling stake in Vinacafe, Masan clearly
was looking to put itself in a strong position to leverage on the exciting demand dynamics in the
Vietnamese coffee sector.
Also looking to capitalise on Vietnam's coffee potential, Nestl plans to increase its coffee sourcing from
local farmers in Vietnam, and in 2011 committed to a new coffee factory in the country. The US$270mn
factory was to be constructed in the south east province of Dong Nai and was to produce Nescaf-branded
products for the domestic and international markets from 2013.
Philippine food major Jollibee Foods Corporation announced in early 2012 that it was to acquire a 50%
interest in SuperFoods Group, which will give it a 49% stake in SF Vung Tau Joint Stock Company in
Vietnam and a 60% share in Blue Sky Holdings in Hong Kong. The acquisition of a majority interest in the
SuperFoods Group could expedite Jollibee's international push, given the former's reach across the coffee
markets of Macau, Hong Kong and Vietnam.
In early 2013, US coffee chain Starbucks announced that it would debut in Vietnam's capital, Ho Chi Minh
City, in February 2014 as it continues to develop its Asia Pacific business, where it has seen great success
over the past few years.
Table: Hot Drinks Value Sales - Historical Data & Forecasts, 2011-2018
2011
Coffee sales,
VNDmn
Coffee sales,VND,
% change y-o-y
Coffee sales,VND
per capita
Coffee sales, US
$mn
Coffee sales, US$,
% change y-o-y
2012
2013e
2014f
2015f
2016f
2017f
2018f
17,170,322 19,922,371 22,765,944 25,714,239 29,012,709 32,647,042 36,427,915 40,559,652

29.27
16.03
14.27
12.95
12.83
12.53
11.58
11.34
190,963.93 219,419.59 248,320.38 277,847.71 310,673.05 346,604.59 383,606.46 423,835.95

831.22
954.45
1,089.28
1,250.39
1,427.09
1,614.99
1,821.40
2,048.47
19.66
14.82
14.13
14.79
14.13
13.17
12.78
12.47
Page 101
Hot Drinks Value Sales - Historical Data & Forecasts, 2011-2018 - Continued
Coffee sales, US$

per capita
Tea sales, VNDmn

Tea sales, VND, %
change y-o-y
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
9.24
10.51
11.88
13.51
15.28
17.15
19.18
21.41
18,710,475 21,115,334 23,508,113 26,160,602 29,111,494 33,047,389 35,514,716 39,940,374

25.41
12.85
11.33
11.28
11.28
13.52
7.47
12.46
Tea sales, VND per

capita
208,093.12 232,558.57 256,415.61 282,670.76 311,730.86 350,854.97 373,989.96 417,364.68
Tea sales, US$mn
905.78
1,011.60
1,124.79
1,272.09
1,431.95
1,634.80
1,775.74
2,017.19
Tea sales US$ %

change y-o-y
16.09
11.68
11.19
13.10
12.57
14.17
8.62
13.60
Tea sales US$ per

capita
10.07
11.14
12.27
13.75
15.33
17.36
18.70
21.08
Soft Drinks
2014 soft drinks value (local currency) sales growth: +10.5%; CAGR to 2018: +7.5%.
2014 carbonated soft drinks value (local currency) sales growth: +12.7%; CAGR to 2018: +9.6%.
Page 102
Soft Drinks
2011-2018
4,000
125M
100M
2,000
2018f
2017f
2016f
2015f
50M
2014f
2012
2011
2013e
75M
Soft drink sales (mn litres) (LHS)

Soft drink sales, VNDmn (RHS)
e/f = BMI estimate/forecast. Source: Company information, Trade press, BMI
We are witnessing a rapid emergence of competition in the Vietnamese soft drinks market. The
opportunities provided by an emerging middle class in Vietnam are firmly within the sights of domestic
drinks producers such as PepsiCo Vietnam, Tan Hiep Phat and Coca-Cola Beverages Vietnam, and the
companies' aggressive initiatives in terms of product innovation, portfolio expansion and advertising will
only instil greater dynamism into the sector.
The maturation of a massive youth population and rising consumer affluence are translating into a
burgeoning appetite for soft drinks. As consumers move up the income ladder over the coming years, an
accelerating premiumisation momentum in the sector means that value sales are expected to increase more
dynamically over our forecast period.
An intensifying influx of sector investments will provide another major impetus to drive industry growth. In
particular, we expect domestic soft drinks manufacturers to ramp up their initiatives in terms of product
innovation, portfolio expansion and marketing. In terms of portfolio expansion, local soft drink
manufacturers are gradually calibrating their portfolio towards healthier and functional beverages such as
fruit juices and ready-to-drink teas, as they look to tap into a growing health awareness trend in the country.
Page 103
Reflecting a shift of consumer preferences towards healthier beverages, PepsiCo Vietnam and Coca-Cola
Beverages Vietnam have been losing market share in recent years due to declining sales of carbonates,
according to anecdotal reports. However, with the health awareness trend expected to remain well
entrenched over the coming years, we expect more domestic soft drinks manufacturers such as PepsiCo
Vietnam and Coca-Cola Beverages Vietnam to expand their non-carbonates offerings. As a case in point,
Big C recently introduced its private label fruit juice range Casino Bio to cater to the burgeoning domestic
demand for health and functional beverages.
As competition intensifies in the Vietnamese soft drinks market, domestic producers are also looking to
differentiate themselves through branding and marketing initiatives. Coca-Cola Beverages Vietnam and Tan
Hiep Phat have executed some of the biggest advertising campaigns in Vietnam through various formats
such as print advertisements, television and the internet. These initiatives have not only bolstered consumer
awareness of the different soft drinks brands but have also encouraged greater soft drinks consumption in
the country.
Moreover, domestic soft drinks manufacturers will continue to engage in product innovation by offering
different bottle formats and sizes in an attempt to cater to the varying consumer tastes and preferences. For
instance, Coca-Cola Beverages Vietnam and PepsiCo Vietnam produce their soft drinks in varying sizes,
and this has facilitated their reach to the end-consumer market. As more companies hop on the product
innovation bandwagon, this will bring about greater dynamism in the sector and further fuel sales growth.
Table: Soft Drinks Value/Volume Sales - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Soft drink
sales, litres
mn
1820.11
1937.14
2044.14
2208.74
2382.40
2569.98
2755.33
2969.08
Soft drink
sales, litres,
% change
y-o-y
7.41
6.43
5.52
8.05
7.86
7.87
7.21
7.76
Soft drink
sales, litres
per capita
20.24
21.34
22.30
23.87
25.51
27.28
29.02
31.03
58,936,203
68,557,713
75,572,321
83,484,322
91,207,122
21.69
16.33
10.23
10.47
9.25
Soft drink
sales
VNDmn
Soft drink
sales, VND,
% change
y-o-y
99,566,244 109,131,706 119,924,341
9.16
9.61
9.89
Page 104
Soft Drinks Value/Volume Sales - Historical Data & Forecasts, 2011-2018 - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
Soft drink
sales, VND
per capita
663,755.8
855,353.4
Soft drink
sales, US
$mn
2,853.13
3,284.50
3,615.90
4,059.53
4,486.33
4,925.36
5,456.59
6,056.78
Soft drink
sales, US$,
% change
y-o-y
12.65
15.12
10.09
12.27
10.51
9.79
10.79
11.00
Soft drink
sales, US$
per capita
31.73
36.17
39.44
43.86
48.04
52.29
57.46
63.29
Carbonated
soft drink
sales,
VNDmn
8,959,932
10,240,965
11,567,863
13,041,047
14,690,702
16,522,106
18,461,358
20,603,242
Carbonated
soft drink
sales, VND,
% change
y-o-y
27.69
14.30
12.96
12.74
12.65
12.47
11.74
11.60
Carbonated
soft drink
sales, VND
per capita
99,650.07
112,791.22
126,176.90
140,911.24
157,310.55
175,410.62
194,408.50
215,297.58
Carbonated
soft drink
sales, US
$mn
433.75
490.63
553.49
634.14
722.61
817.32
923.07
1,040.57
Carbonated
soft drink
sales, US$,
% change
y-o-y
18.20
13.11
12.81
14.57
13.95
13.11
12.94
12.73
Carbonated
soft drink
sales, US$
per capita
4.82
5.40
6.04
6.85
7.74
8.68
9.72
10.87
964,814.4 1,137,581.1 1,302,407.9 1,302,408.9 1,302,409.9 1,302,410.9
e/f = BMI estimate/forecast. Source: Company information, trade press, BMI
Page 105
Mass Grocery Retail
2014 MGR sales (local currency) growth: +13.3%; compound annual growth rate (CAGR) 2014 to 2018:
+9.9%.
2014 supermarket sales (local currency) growth: +13.9%; CAGR to 2018: +10.2%.
2014 hypermarket sales (local currency) growth: +13.7%; CAGR to 2018: +10.1%.
2014 convenience store sales (local currency) growth: +10.3%; CAGR to 2018: +8.3%.
Reflecting the long-term potential of the Vietnamese mass grocery retail (MGR) sector, we forecast real
growth of 60.0% for overall MGR sales in local currency terms between 2014 and 2018. This growth
forecast makes Vietnam one of the most attractive propositions in the Asia Pacific region. Owing to the
higher profitability per store for supermarkets and hypermarkets, these formats will continue to garner the
bulk of investment attention. Vietnamese consumers are most familiar with the standard supermarket
format, and are increasingly showing a penchant for hypermarkets owing to their popular combination of
food and non-food items.
We estimate Vietnam's MGR sales grew by 10.9% in 2013, slowing from growth in 2011 and 2012. The
slowdown in 2013 can be attributed to the global headwinds of a potential hard landing in China, economic
uncertainties in the US and sovereign debt concerns in the eurozone, which all weighed on consumer
confidence that was already dented by rising unemployment in the manufacturing sector. However, we
expect stronger growth to return this year, with us forecasting 13.3% in 2014.
Retail Fundamentals Remain Strong In Longer Term
Favourable demographics and robust economic growth largely underpin our optimism regarding the
Vietnamese MGR growth story. According to our estimates, Vietnam's population is roughly 90mn and is
forecast to grow over the forecast period to 2022. More importantly, Vietnam has a youthful demographic
profile, implying attractive opportunities in the mass market.
Vietnam's rapid economic development also is likely to assist the emergence of a new consumer class - in
major urban centres at least - that has an interest, and can afford to participate, in modern consumption
methods such as mass grocery retailing. GDP per capita in Vietnam is forecast to more than double over our
10-year forecast period. This rise in purchasing power will only trigger a swathe of consumer spending
across the country's retail scene.
Page 106
Vietnam Unlikely To Reach Full Retail Potential In Near Term
Although Vietnam is equipped with the aforementioned elements that are necessary to support strong
growth in mass grocery retailing, the country is unlikely to reach the full potential of its retail growth story
in the near future. Organised retail accounts for only 15% of overall grocery sales in Vietnam, highlighting
the prevalence of mom-and-pop shops. The relative immaturity of the Vietnamese MGR sector can be
partly attributed to the country's restrictive business climate. Vietnam remains a risky place to do business,
with the lack of transparency of laws and regulations, as well as restrictions on foreign investment, deterring
less-hardy retailers from setting up shop in the country. The lack of an established transport infrastructure
further complicates distribution efforts for MGR operators.
Foreign Interest Picking Up
Despite the challenges, foreign interest in the Vietnamese MGR sector will very probably continue to grow
steadily over the coming years given the sector's hugely untapped potential. We believe that the bulk of
multinational investment in the near future is likely to come from bigger retail names such as Aeon and
Groupe Casino, which are eager to expand their emerging market footprint and have the financial capacity
to deploy the necessary distribution infrastructure in the sector. After receiving the regulatory permit from
the Vietnamese government, Japanese retailer Aeon plans to develop around 20 retail and trade centres
nationwide by 2020, which will house both local and foreign MGR operators.
Interest from less-hardy foreign investors will also pick up, in our view, although such investment will
largely take the form of joint ventures as foreign retailers leverage on the local market expertise and
financial strength of their local counterparts. As a case in point, South Korean MGR player E-Mart recently
reached an agreement with U&I Investment Corporation, to establish a joint venture (JV) in Vietnam with
the aim of setting up retail stores in the country. Similarly, Singapore MGR operator NTUC FairPrice and
Vietnam's Saigon Union of Trading Co-operatives are looking to establish a chain of hypermarkets in
Vietnam through their local JV.
The latest multinational reported to be entering the market, as of summer 2013, is French retailer Auchan
which, according to local sources, is set to inject US$500mn in the next decade.
Page 107
Supermarket And Hypermarket Sectors The Outperformers
While the supermarket and hypermarket sub-sectors will feature most prominently on investors' radars, the
convenience retail sector can be expected to increasingly attract interest from retailers. Accordingly, the
demand for convenience with the pay-off of higher prices is not yet on the agenda for most consumers.
However, with purchasing power on the rise, this will bring the concept of convenience retailing more
within reach of the average consumer.
If there can be a downside in the case of such an impressive retail growth forecast, it comes in the form of
Vietnam's majority rural population, which drags down food consumption in the market to unattractive
levels. The risk for retailers is that as soon as the country's major cities start to become saturated with
business opportunities, few other communities exist that can currently support modern retail development.
Even the low prices offered by discounters would be unlikely to attract buyers in rural communities, for
whom self-sufficiency and wet markets remain the sole methods of consumption. However, this point is still
a long way off. Retailers will invest in Vietnam in line with their own need to expand, confident of the
country's economic development and growing consumer base.
Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2011-2018
2012
2013e
Supermarkets
(VNDbn)
65,373.55
73,643.31
82,028.05
93,457.02 106,475.86 120,406.89 135,536.54 151,791.74
Hypermarkets
(VNDbn)
26,270.31
29,714.35
33,253.78
37,806.08
42,771.37
48,227.53
54,275.67
61,023.41
Convenience
Stores (VNDbn)
19,828.26
21,664.35
23,301.52
25,705.44
28,409.65
31,389.82
34,673.20
38,289.61
Total mass
grocery retail
sector (VNDbn)
2014f
2015f
2016f
2017f
2018f
2011
111,472.12 125,022.01 138,583.35 156,968.54 177,656.88 200,024.24 224,485.41 251,104.76
Total mass
grocery retail
sector growth,
VND, (y-o-y)
13.9
12.16
10.85
13.27
13.18
12.59
12.23
11.86
Supermarkets (US
$bn)
3.16
3.53
3.92
4.54
5.24
5.96
6.78
7.67
Hypermarkets
(US$bn)
1.27
1.42
1.59
1.84
2.10
2.39
2.71
3.08
Convenience
Stores (US$bn)
0.96
1.04
1.11
1.25
1.40
1.55
1.73
1.93
Page 108
Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2011-2018 - Continued
Total mass
grocery retail
sector (US$bn)
5.40
5.99
6.63
7.63
8.74
9.89
11.22
12.68
e/f= BMI estimate/forecast. Source: Company information, Trade press, BMI
Table: Grocery Retail Sales By Format (%)
2012e
2022f
Organised/MGR
15
28
Non-organised/Independent
85
72
e/f= estimate/forecast. Source: BMI
Page 109
Food
Food Consumption
2014 total food consumption (local currency) growth: +19.2%; compound annual growth rate (CAGR)
2014 to 2018: +15.5%.
2014 per capita food consumption (local currency) growth: +18.1%; CAGR to 2018: +14.7%.
Food Consumption
2011-2018
1,500,000
15M
1,000,000
10M
2018f
2017f
2016f
2015f
2014f
0M
2013e
0
2012
5M
2011
500,000
Food consumption VNDbn (LHS)

Food consumption, VND per capita (RHS)
e/f = BMI estimate/forecast. Source: General Statistics Office, BMI
Improvements in Vietnam's macroeconomic fundamentals suggest that its food sector will remain one of the
most attractive investment opportunities in the region over the forecast period. Between 2014 and 2018 food
consumption is projected to expand at a thoroughly impressive compound annual growth rate of 15.5%,
posting an impressive 105.1% overall increase in local currency terms. An attractive demographic profile,
rapid urbanisation and rapid expansion of country's mass grocery retail sector will fuel this growth over the
longer term.
Currently, income levels in Vietnam are a long way behind those enjoyed in developed economies, and
consumer purchases remain largely centred on food staples and daily necessities. However, as incomes start
Page 110
to accelerate off a low base on the back of sturdy economic growth, consumer tastes and preferences are
expected to calibrate towards the higher-value food and beverage segments, which will be very likely to
guarantee a receptive and growing audience for branded food and beverage products in the medium term.
The massive potential provided by the burgeoning middle class in Vietnam is already attracting the sights of
major consumer-facing players in the country. Private equity firm Kohlberg Kravis Roberts &
Co (KKR), in early 2011, acquired a 10% stake in Masan Consumer, the largest producer of condiments
including fish, soy and chilli sauce and the second biggest producer of instant noodles in Vietnam. This
underlines its confidence in the opportunities available in the mass-market segment. In early 2013, KKR
doubled its investment in Masan.
In particular, we expect functional food products to garner stronger appeal among Vietnamese consumers
over the coming years. Given the nutritional health benefits of functional foods, these products have
witnessed strong demand in Vietnam over the past few years in line with a growing shift towards health
awareness. In 2000, the functional food market comprised only a dozen imported functional food products.
By 2005-2006, domestically produced functional foods accounted for 33% of the entire food market, and in
2008 this figure had doubled, underlining the burgeoning demand for functional food products.
The ongoing expansion of the mass grocery retail industry will also drive up per capita food consumption
levels, provided goods sold through such outlets remain competitively priced. Ultimately, food consumption
growth will be driven by the government's ability to harness rural spending power and by modern retailers'
ability to find a model that stirs consumer interest, without forgetting that price will remain the major
purchasing determinant.
Page 111
Table: Food Consumption Indicators - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
396,467.8
441,791.9
504,206.3
601,208.9
725,087.1
11.19
11.43
14.13
19.24
20.60
4,409,413
4,865,776
5,499,648
6,496,188
7,764,357
Food
consumption
per capita,
VND, % chg yo-y
10.12
10.35
13.03
18.12
19.52
19.00
18.26
17.91
Food
consumption
(US$bn)
19.19
21.17
24.12
29.23
35.67
43.05
51.88
62.27
Food
consumption,
US$, %
change y-o-y
2.92
10.28
13.98
21.18
22.00
20.70
20.50
20.02
Food
consumption
per capita (US
$)
213.46
233.11
263.14
315.89
381.92
457.05
546.29
650.65
Food
consumption
(VNDbn)
Food
consumption,
VND, % chg yo-y
Food
consumption
per capita
(VND)
2016f
2017f
2018f
870,250.0 1,037,539.7 1,232,851.5
20.02
19.22
18.82
9,239,203 10,925,877 12,882,920
e/f = BMI estimate/forecast. Source: General Statistics Office of Vietnam, BMI
Page 112
Canned Food
2014 canned food value sales (local currency) growth: +10.7%; CAGR to 2018: +7.4%.
Canned food sales are forecast to experience strong growth in Vietnam, in line with increasing urbanisation
and growing affluence among consumers. Between 2014 and 2018 we forecast volume growth of 23.4%,
and value growth of 42.8%. Indeed, demand for higher-value products such as canned foods is expected to
pick up on the back of rising disposable incomes.
Vietnamese consumers are experiencing a growing awareness of hygiene concerns and food origin as their
living standards improve and as numerous health scares lead to increased caution. This will further
encourage consumers to purchase processed foods over fresh produce, and strong investment in this sector
from both domestic and international operators will be very likely to help to fuel sales growth. Meanwhile,
city workers are increasingly cutting back on restaurant meals and opting for canned and processed foods in
order to save money, with major retailers such as Saigon Co-op reporting a recent spike in sales.
Table: Canned Food Volume/Value Sales - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
9,621.76
10,062.31
10,441.09
11,081.23
11,762.98
12,132.74
13,126.33
13,668.20
Canned food sales,

units, % change y-o-y
3.83
4.58
3.76
6.13
6.15
3.14
8.19
4.13
Canned food sales, kg

per capita
0.11
0.11
0.11
0.12
0.13
0.13
0.14
0.14
Canned food sales,

tonnes
Canned food sales,

VNDmn
Canned food sales,
VND, % change y-o-y
415,096.74 452,677.81 488,939.89 540,989.81 601,715.86 646,811.32 725,333.81 772,535.30

12.49
9.05
8.01
10.65
11.22
7.49
12.14
6.51
Canned food sales,

VND per capita
4,616.60
4,985.67
5,333.13
5,845.51
6,443.28
6,867.02
7,638.17
8,072.76
Canned food sales,

US$mn
20.10
21.69
23.39
26.31
29.60
32.00
36.27
39.02
Canned food sales,

US$, % change y-o-y
4.13
7.92
7.87
12.45
12.51
8.11
13.35
7.58
Canned food sales,

US$ per capita
0.22
0.24
0.26
0.28
0.32
0.34
0.38
0.41
Page 113
Confectionery
2014 confectionary value (local currency) sales growth: +10.7%; CAGR to 2018: +7.9%.
2014 chocolate value (local currency) sales growth: +11.9%; CAGR to 2018: +9.9%.
2014 sugar confectionary (local currency) sales growth: +9.6%; CAGR to 2018: +6.8%.
Confectionery Sales
2011-2018
225,000
50M
200,000
25M
2018f
2017f
2016f
2015f
150,000
2014f
2012
2011
0M
2013e
175,000
Confectionery sales, VNDmn (LHS)

Confectionery sales, tonnes (RHS)
The longer-term outlook for the Vietnamese confectionery market is positive. Factors such as rising
purchasing power, favourable demographics, growing health awareness and continued investments in the
sector will support confectionery demand, especially with regard to chocolate.
Rising Disposable Incomes: Rapid wealth accrual is likely to translate into a greater discretionary
appetite for premium confectionery products. As an increasing number of domestic confectioners expand
their upmarket product ranges, this is likely to bolster value sales growth over the coming years.
A Massive Youthful Population: 51.9% of the Vietnamese population is estimated to be younger than
30, and the maturation of this demographic group means that there are dynamic opportunities in the mass
market. Moreover, this demographic group is generally more receptive to Western cultures, which will
give an impetus to confectionery demand.
Growing Health Awareness: Health awareness is prompting shifts of consumption habits towards
functional and healthy confectionery products. Capitalising on the growing trend, domestic confectioners
Page 114
such as Tan Tan Food & Foodstuff and Vina Mit are expanding their functional product offerings.
These products typically carry higher price tags, and their rising demand is likely to translate into higher
value sales in the sector.
Continued Sector Investments: Sustained competition levels in the Vietnamese confectionery sector
ensure that dynamism in the market is unlikely to cool off any time soon. Nabati Indonesia, a leading
Indonesian biscuit producer, recently announced plans to start distributing its biscuit products in Vietnam
- a testament to the attractiveness of the sector. Meanwhile, domestic confectioners such as Kinh Do are
expected to continue to invest in broadening their product ranges and expanding their distribution
channels.
Table: Confectionery Value/Volume Sales - Historical Data & Forecasts, 2011-2018
2011
Confectionery sales,
tonnes
2012
2013e
2014f
2015f
2016f
2017f
2018f
164,815.74 167,979.82 173,192.25 181,310.47 190,617.32 199,339.80 210,528.96 220,143.75
tonnes, % change y-oy
2.83
1.92
3.10
4.69
5.13
4.58
5.61
4.57
kg per capita
1.83
1.85
1.89
1.96
2.04
2.12
2.22
2.30
Confectionery sales
VNDmn
VND, % change y-o-y
VND per capita
20,109,914 22,411,420 24,641,932 27,266,415 30,150,945 33,014,226 36,491,849 39,884,680

22.20
11.44
9.95
10.65
10.58
9.50
10.53
9.30
223,657.33 246,833.31 268,782.78 294,619.31 322,861.48 350,502.89 384,279.72 416,782.70
US$mn
973.53
1,073.70
1,179.04
1,325.87
1,483.08
1,633.15
1,824.59
2,014.38
US$, % change y-o-y
13.11
10.29
9.81
12.45
11.86
10.12
11.72
10.40
Confectionary sales,
US$ per capita
10.83
11.83
12.86
14.33
15.88
17.34
19.21
21.05
46,763.90
47,448.65
48,722.86
51,541.38
54,879.33
58,612.36
63,326.46
67,948.24
Chocolate sales,
tonnes, % change y-oy
1.92
1.46
2.69
5.78
6.48
6.80
8.04
7.30
Chocolate sales, kg
per capita
0.52
0.52
0.53
0.56
0.59
0.62
0.67
0.71
3,340,752
3,703,892
4,054,379
4,536,173
5,083,520
5,700,780
6,461,089
7,272,341
Chocolate sales VND,

% change y-o-y
20.96
10.87
9.46
11.88
12.07
12.14
13.34
12.56
Chocolate sales VND

per capita
37,155.00
40,793.67
44,223.30
49,014.30
54,435.21
60,523.61
68,038.91
75,993.74
Chocolate sales,
tonnes
Chocolate sales,
VNDmn
Page 115
Confectionery Value/Volume Sales - Historical Data & Forecasts, 2011-2018 - Continued
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
161.73
177.45
193.99
220.58
250.05
282.01
323.05
367.29
Chocolate sales, US$,

% change y-o-y
11.97
9.72
9.32
13.71
13.36
12.78
14.56
13.69
Chocolate sales, US$

per capita
1.80
1.95
2.12
2.38
2.68
2.99
3.40
3.84
Chocolate sales US
$mn
Sugar confectionery
sales, VNDmn
Sugar confectionary
sales, VND, % change
y-o-y
Sugar confectionary
sales, VND per capita
Sugar confectionery
sales US$mn
15,709,150 17,530,067 19,324,607 21,185,318 23,136,033 25,077,466 27,255,472 29,381,901
22.56
11.59
10.24
9.63
9.21
8.39
8.69
7.80
174,713.15 193,071.41 210,783.87 228,911.78 247,744.60 266,240.51 287,015.47 307,031.87

760.49
839.84
924.62
1,030.16
1,138.02
1,240.54
1,362.77
1,483.93
Sugar confectionary
sales, US$, % change
y-o-y
13.45
10.43
10.10
11.41
10.47
9.01
9.85
8.89
Sugar confectionary
sales, US$ per capita
8.46
9.25
10.09
11.13
12.19
13.17
14.35
15.51
6,129.08
6,230.61
6,269.18
7,250.90
8,612.57
9,496.01
11,235.85
12,467.62
Gum sales, tonnes, %

change y-o-y
1.75
1.66
0.62
15.66
18.78
10.26
18.32
10.96
Gum sales, kg per

capita
0.07
0.07
0.07
0.08
0.09
0.10
0.12
0.13
1,060,011
1,177,461
1,262,944
1,544,923
1,931,391
2,235,979
2,775,288
3,230,437
20.75
11.08
7.26
22.33
25.02
15.77
24.12
16.40
11,789.18
12,968.24
13,775.62
16,693.22
20,681.67
23,738.77
29,225.35
33,757.08
Gum sales US$mn
51.32
56.41
60.43
75.12
95.00
110.61
138.76
163.15
Gum sales US$, %

change y-o-y
11.77
9.93
7.12
24.32
26.46
16.43
25.45
17.58
Gum sales US$ per

capita
0.57
0.62
0.66
0.81
1.02
1.17
1.46
1.70
Gum sales, tonnes
Gum sales VNDmn

Gum sales, VNDmn, %
change y-o-y
Gum sales, VND per
capita
Page 116
Pasta
The Vietnamese pasta market is underdeveloped, although the product has become more recognisable in
view of Westernisation of lifestyles, particularly in urban areas. Around half of the retail market is
dominated by Barilla, with other prominent importers including Italpasta and Pasta Zara.
However, the market for instant noodles is well established, with the market supplied by a mixture of
locally made (by companies such as Masan Consumer and Acecook Vietnam JSC) and imported products.
Goods are receiving strong marketing and advertising support, especially as the more challenging economic
times have prioritised non-discretionary spending. Instant noodles are expected to remain very popular, on
account of their affordability, versatility as a cooking ingredient, wide-ranging availability and convenience.
Table: Pasta Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
25,401.54
28,189.69
31,220.68
34,739.13
38,752.37
38,752.37
42,808.98
42,808.98
14.01
10.98
10.75
11.27
11.55
0.00
10.47
0.00
18,484.38
22,059.82
25,865.49
30,164.19
34,975.21
35,784.64
40,666.02
41,502.54
Uncooked
pasta sales,
tonnes, %
change y-o-y
25.63
19.34
17.25
16.62
15.95
2.31
13.64
2.06
Uncooked
pasta sales,
kg per capita
0.21
0.24
0.28
0.33
0.37
0.38
0.43
0.43
Uncooked
pasta exports,
tonnes
8,334.24
7,787.87
7,241.50
6,695.13
6,148.76
5,602.39
5,056.03
4,509.66
Uncooked
pasta exports,
tonnes, %
change y-o-y
-6.15
-6.56
-7.02
-7.54
-8.16
-8.89
-9.75
-10.81
Uncooked
pasta imports,
tonnes
1,417.07
1,658.00
1,886.31
2,120.19
2,371.60
2,634.67
2,913.07
3,203.22
Uncooked
pasta imports,
tonnes, %
change y-o-y
7.94
17.00
13.77
12.40
11.86
11.09
10.57
9.96
Uncooked
pasta
production,
tonnes
Uncooked
pasta
production,
tonnes, %
change y-o-y
Uncooked
pasta sales,
tonnes
Page 117
Pasta Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018 - Continued
Uncooked
pasta
balance,
tonnes
Uncooked
pasta
balance,
tonnes, %
change y-o-y
Prepared
pasta
production,
tonnes
Prepared
pasta
production,
tonnes, %
change y-o-y
Prepared
pasta sales,
tonnes
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
6,917.17
6,129.87
5,355.19
4,574.94
3,777.16
2,967.73
2,142.96
1,306.44
-8.60
-11.38
-12.64
-14.57
-17.44
-21.43
-27.79
-39.04
597,893.96 640,105.91 685,994.47 739,263.20 800,022.78 866,912.83 935,331.18
1,008,534.8
7
8.58
7.06
7.17
7.77
8.22
8.36
7.89
7.83
542,121.95 579,415.25 623,223.13 674,439.49 732,951.00 797,282.32 862,793.46 932,792.23
Prepared
pasta sales,
tonnes, %
change y-o-y
8.87
6.88
7.56
8.22
8.68
8.78
8.22
8.11
Prepared
pasta sales,
kg per capita
6.03
6.38
6.80
7.29
7.85
8.46
9.09
9.75
Prepared
pasta exports,
tonnes
58,214.34
63,317.05
65,572.16
67,803.22
70,243.35
73,003.07
76,122.96
79,549.56
Prepared
pasta exports,
tonnes, %
change y-o-y
5.74
8.77
3.56
3.40
3.60
3.93
4.27
4.50
Prepared
pasta imports,
tonnes
2,442.33
2,626.40
2,800.82
2,979.50
3,171.57
3,372.55
3,585.24
3,806.91
Prepared
pasta imports,
tonnes, %
change y-o-y
3.37
7.54
6.64
6.38
6.45
6.34
6.31
6.18
55,772.01
60,690.65
62,771.34
64,823.72
67,071.78
69,630.52
72,537.72
75,742.65
Prepared
pasta
balance,
tonnes
Page 118
Pasta Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018 - Continued
Prepared
pasta
balance,
tonnes, %
change y-o-y
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
5.85
8.82
3.43
3.27
3.47
3.81
4.18
4.42
e/f = BMI estimate/forecast. Source: United Nations, BMI
Dairy
The Vietnamese dairy sector has experienced very strong growth in recent years. Key drivers of this growth
have been increasing urbanisation and rising incomes, supported by a shift in consumer eating habits. Huge
multinational companies have, in particular, managed to sway consumer preferences with their considerable
advertising and promotional power. At the same time, the government is pouring investment in to the dairy
industry, with a view to producing 3.4bn litres of fresh milk by 2025, which would generate export revenues
of some US$200mn.
The local demand for dairy products is met by a combination of locally produced goods, which accounts for
20% of consumption, according to the US Department of Agriculture, and imports from countries including
New Zealand, the US and Australia. Vietnam Dairy Products Co (Vinamilk) is one of the key players in
the sector. Indeed, reflecting the promise of the Vietnamese dairy sector, Vinamilk aims to become one of
the largest 50 dairy firms in the world. The company is also expanding internationally, as Vietnam is in a
geographically strong place to take advantage of the growing Asian dairy story. Other prominent dairy
producers include Dutch Lady, Hanoimilk and Anco.
Page 119
Table: Dairy Volume Sales, Production & Trade - Historical Data & Forecasts, 2011-2018
2011
Processed liquid milk
production, tonnes
2013e
2014f
2015f
2016f
2017f
2018f
355,519.3 389,246.2 425,910.8 468,472.0 517,018.3 570,462.8 625,128.4 683,617.4
Processed liquid milk

production, tonnes, %
change y-o-y
Processed liquid milk sales,
tonnes
2012
20.74
9.49
9.42
9.99
10.36
10.34
9.58
9.36
190,395.0 201,348.0 210,765.4 226,680.7 243,630.6 261,404.5 280,020.4 299,495.0

tonnes, % change y-o-y
4.87
5.75
4.68
7.55
7.48
7.30
7.12
6.95

kg per capita
2.12
2.22
2.30
2.45
2.61
2.78
2.95
3.13
Butter sales, tonnes
12,385.38 13,200.10 13,900.60 15,084.45 16,345.25 17,667.34 19,052.07 20,500.67
Butter sales, tonnes, %

change y-o-y
5.60
6.58
5.31
8.52
8.36
8.09
7.84
7.60
Butter sales, kg per capita
0.14
0.15
0.15
0.16
0.18
0.19
0.20
0.21
4,615.81
4,931.55
5,203.03
5,661.82
6,150.44
6,662.82
7,199.46
7,760.86
Cheese sales, tonnes, %

change y-o-y
5.84
6.84
5.50
8.82
8.63
8.33
8.05
7.80
Cheese sales, kg per capita
0.05
0.05
0.06
0.06
0.07
0.07
0.08
0.08
Cheese sales, tonnes
Ice cream production,

tonnes
25,191.39 27,531.60 30,075.65 33,028.85 36,397.33 40,105.69 43,898.78 47,957.16
Ice cream production,

tonnes, % change y-o-y
11.61
9.29
9.24
9.82
10.20
10.19
9.46
9.24
e/f = BMI estimate/forecast. Source: United Nations, BMI
Page 120
Regional Overview
BMI View: The agricultural products trade in the Asia Pacific region is set to soar in the coming years as
demand grows rapidly on the back of population and income growth and changing consumption habits.
More specifically, trade among Asia Pacific countries is likely to intensify, especially in the livestock, sugar
and dairy markets. The region boasts large producing countries with established companies that can
provide countries in deficit with the needed products. Investment within the region as well as in Africa will
also gather steam in the coming years.
1. Government Support For Production On The Rise
Asia is slowly ramping up its agricultural production support policies as countries aim to reach or maintain
self-sufficiency in key commodities. We believe this trend will continue in the coming years as farmers
battle with rising input costs. China and South East Asian countries will continue to ramp up their already
generous support programmes, while Japan and South Korea will decrease their support levels. Episodic
macroeconomic headwinds, which could hit governments' fiscal positions, might delay the increase of this
support. This is the case for India and Indonesia in particular.
Page 121
Three Profiles
Select Countries - Agricultural Producer Support Estimate (% of total gross farm receipts)
Note: The producer support estimate is an indicator measured by the OECD of the gross transfers from consumers and taxpayers
to support agricultural producers. Source: OECD, BMI
2. Asia's Up-And-Coming Ethanol Sector
Asia is one of the most dynamic continents in terms of production and use of ethanol. Buoyed by supportive
government policies and strict mandates, Thailand and the Philippines are at the forefront of the region.
Meanwhile, India and other South and South East Asian countries have faced mandate and logistics issues.
Problems such as feedstock, production under-capacity, lack of investment in operations, and the political
environment hinder progress towards fulfilling these mandates. In North Asia, overall reluctance to use
food-based ethanol and limited production is likely to cap consumption growth in the medium term. China
is the largest consumer of ethanol in the region and relatively self-sufficient, but severe constraints to
production growth are threatening the sector's medium-term outlook. Japan would need to ramp up imports
should it implement an ambitious fuel ethanol consumption plan.
Page 122
Table: Select Countries - Biofuel Blending Mandates & Programmes
Official Ethanol
Blending
Mandate
Ethanol
Actual Blend
Biodiesel Mandate
Biodiesel Actual Ethanol Mandate, Goal

Blend
Australia
E6 in New South
Wales
2.50%
B5 in New South
Wales
3-4%
E5 mandate nationally has

recently been presented to
the Australian Federal
Parliament
China
E10 in 10
provinces*
8-12%
none
none
E15 by 2020
India
E5
2-3%
none
none
Moving to E10 as soon as

production is in place, and
ultimately has set a goal of
E20 by 2017
Indonesia
E3 (depending on
industries)
B10 (depending on
industries)
4-5%
E15 and B20 by 2025
Japan
na
0.10%
na
0%
Replacing fossil fuels with

500,000 kls (oil basis) of
biofuels for the
transportation sector by
2017
Malaysia
na
0%
B5
5%
Moving towards B10 blend,

no date given
Philippines
E10
6-7%
B5 (from end 2013)
3-5%
B20 AND E20 by 2030
South Korea na
na
B2-2.5
na
na
Thailand
E10
10%
B5
4-6%
B7 mandate in 2014
Vietnam
na
na
na
na
E5 by end 2014
Note: na = not available/applicable; 'E' refers to ethanol blending mandate and 'B' to biodiesel blending mandates; *10
Provinces in China: Heilongjiang, Jilin, Liaoning, Anhui, Henan, Guangxi, Hubei, Hebei, Shandong and Jiangsu. Source:
BMI, USDA, EIA
3. Asia's Foray Into African Farming: Early And Troubled Days
Despite media coverage about China's 'land grabs' in Africa, the country and the broader
region remain a minor player in terms of agricultural investment in the African continent. Investment will
intensify in the coming years, driven by supportive policies from African governments and the need to
secure land. It will also come from a larger number of countries, as Singapore, Malaysia and Vietnam join
India and China in their land acquisition efforts. So far, the bulk of investment is still in projects that are in
early stages of development and are not yet operational. This highlights the challenges in acquiring
land and growing crops in African countries.
Page 123
Diversified Players
Agriculture Investment In Africa By Country Of Origin (LHC) & Destination (% of total hectares
acquired by Asian countries in Africa)
Source: BMI, GRAIN, IISD
4. Little To Expect For Now From New Biodiesel Mandates
With its ballooning current account deficit partly a result of oil imports, Indonesia is trying to accelerate its
palm-oil-based biodiesel programme. Malaysia is eager to follow suit given the depressed palm oil prices
and impact on its export earnings. We believe the countries' intention to boost domestic biofuel demand will
have only mild positive effects for the local palm oil industry and palm oil prices, as the enactment of
ambitious mandates will prove difficult. The Indonesian biodiesel sector is likely to outperform Malaysia's
given lower production costs and a larger domestic market.
Page 124
Stable For Now

S&P GSCI Grains & Livestock Indexes, Front-Month CBOT Rough Rice (LHS) & EM Asia Food CPI
(RHS), % chg y-o-y
Note: The EM Asia Food CPI is a simple average of the constituent countries' food CPI. It includes China, India, Indonesia,
Malaysia, Pakistan, Philippines, South Korea, Sri Lanka, Taiwan, Thailand, Bangladesh and Vietnam. Source: BMI, Bloomberg.
5. Diverging Trends For Asian Food Price Inflation
After more than a year of food price disinflation between August 2011 and August 2012,
food consumer price inflation (CPI) in Asia reaccelerated slightly in 2013, driven by the rally in grains
prices in H212 and elevated rice prices. However, food prices in the region would have been on a
downtrend since March 2013 if India and Indonesia were excluded, as food price inflation in these two
countries came in strong in recent months. We expect food price inflation in emerging Asian countries to
remain broadly stable following a slight and temporary reacceleration at the end of 2013. Skyrocketing
basic food prices in India, Indonesia and Pakistan will continue to support the regional food price index.
Meanwhile, other emerging countries in Asia will maintain low food price inflation, as rice prices retreat
below current levels and grain prices remain relatively low.
Page 125
Rising Income
China - GDP Per Capita (US$, LHS) & Real GDP Growth, GDP Per Capita Growth (% y-o-y, RHS)
f = BMI forecasts. Source: National Bureau of Statistics, BMI
6. China Imports: Dawn Of An Agricultural Import Spree
Although China will remain fairly self-sufficient in most agricultural commodities owing to active official
support for agriculture production, the country's share of international trade will continue to climb for
selected commodities such as soybean, corn, sugar and meat. We expect China to record growing
imbalances between production and consumption of selected commodities, as urbanisation and rising
purchasing power are leading to a dietary pattern change from traditional food grain products to more meat
and sugar.
Page 126
Competitive Landscape
Table: Major Agribusiness Companies (US$mn)
Company
Sub-Sector
Viet Nam Dairy Products JSC

(Vinamilk)
Dairy
Kinh Do Corp
Market
Reven Fiscal Capitalisati Employe
ue
Y/E
on
es
1472.8
12/20
13
5490.6
5389
Food Manufacturing (confectionery &

snacks)
217.1
12/20
13
456.7
6789
Vinacafe Bien Hoa JSC
Coffee & Food Manufacturing
109.4
12/20
13
187.7
749
Hung Vuong
Seafood
368.5
12/20
12
162.1
6060
Societe De Bourbon Tay Ninh
Sugar & Real Estate
105.6
12/20
13
85.0
512
Tuong An Vegetable Oil JSC
Edible Oils & Fats
204.2
12/20
13
40.8
746
Lam Son Sugar
Sugar & Alcohol
86.4
12/20
13
28.0
890
Minh Phu Seafood
Seafood
528.8
12/20
13
87.5
10616
Southern Seed
Crop Seeds
28.9
12/20
13
33.3
396
Viet Thang Feed JSC
Animal Feed
190.3
12/20
13
37.8
602
Last updated March 5 2014. Source: BMI, Bloomberg
Page 127
Company Profile
Vinamilk
Company Overview
Vietnam Dairy Products Joint Stock Company (Vinamilk) is the market leader in Vietnam's dairy
industry. It produces more than 200 dairy products for domestic sale and for export. The company was
founded in 1993 as a state-owned enterprise. The state's share was recently reduced to 50% to qualify for
listing on the stock market. Vinamilk controls an estimated 75% of the high-growth Vietnamese dairy
market. It exports to 26 countries, including Iraq, Cambodia and the Philippines.
SWOT Analysis
Strengths
Leading dairy producer in Vietnam in a high-growth market, enjoying a well-known brand and dominant
market share in various dairy segments (liquid milk, yoghurt, condensed milk).
Extensive distribution network.
Diverse product range and constant product innovation.
Soaring demand for both primary and processed dairy products in the fast-growing local economy.
Strong financial fundamentals (no debt, good margins)
Weaknesses
Reliant on international supply from New Zealand for raw materials, making the company vulnerable to
international milk supply and prices as well as to foreign exchange fluctuations.
Reliant on Vietnam for sales, with a vast low-income rural population. Vinamilk faces a limited market
for fresh dairy if the Vietnamese market disappoints.
Opportunities
Gradual integration in the Association of Southeast Asian Nations (ASEAN) region could allow the
company to grow exports and benefit from lower production costs via processing plants in countries
within the region.
Experience in the emerging Vietnamese market is likely to increase Vinamilk's chances of success when
exporting to other emerging South East Asian markets.
Vinamilk's recent investments in domestic capacity expansions and in New Zealand's Miraka will allow it
to ease current supply shortages.
Page 128
Threat
Growing competition in the South East Asian dairy sectors coming from Western brands. Vinamilk will
have to keep up its expansionary activities in order to secure its market share.
Given the fact that dairy products are related to customers' health and especially children's health, a food
safety or product quality scare could easily harm earnings.
Good Product Diversification

Vinamilk - Revenue By Origin (LHC) & Products (RHC), 2012, % Of Total
Source: BMI, Vinamilk, Bloomberg
Company Core View
Over to next three-to-six months, we believe Vinamilk's share price will underperform the Ho Chi
Minh Stock Index (VNI), given the subdued outlook for the company's margins in the coming quarters,
and our constructive view for the VNI. This view is reinforced by Vinamilk's beta, which stands at 0.8,
making the company a defensive stock. The company is likely to see its margins recover in the second half
of 2014, due to easing international milk prices and firm demand for dairy products in Vietnam.
Latest Results
Vinamilk recorded disappointing results in Q413 (October-December) and FY13, mainly due to weaker
demand and increasing input costs. Although revenue continued to record double-digit growth (15.9% in
Page 129
Q413 to VND8,174bn and 16.5% in FY13 to VND30,949bn), the pace of expansion slew down. The
company's revenue grew by 32.7% on average annually between FY08 and FY12. Cost of goods sold grew
by 13.0% y-o-y in FY13. Net income declined in Q413, by 10.8% y-o-y to VND1,470bn and net income
growth slew down significantly in FY13, as it came in at VND6,534bn, up by a mild 12.3% y-o-y
(compared with the five year average of 45.3% annually). Margins continued on their downtrend in Q413,
as global milk prices reached multi years highs. Profit margins came in at 18.0%, down 5.4 percentage
points y-o-y.
Lower Growth
Vinamilk - Revenue Growth, % y-o-y (RHS) & Select Income, VNDmn (LHS)
Source: BMI, Vinamilk
Export sales (up by almost 20% y-o-y) performed better than domestic sales (up by approximately 15% y-oy), which were mostly driven by demand for powdered milk and Vinamilk's newly introduced value-added
and premium products in the domestic market. Export sales now account for 14% of total sales (as of
Q413), compared with 8.5% a year ago.
We believe Vinamilk will maintain healthy growth rates in the coming quarters owing to steady GDP
growth in Vietnam, which will support domestic dairy sales. BMI's Country Risk Team forecast GDP to
Page 130
grow by 5.9% and 6.4% in 2014 and 2015 respectively, compared with 5.6% on average in the past three
years. Exports momentum will also remain strong, as Vinamilk's capacity expands. However, margins are
likely to continue to stagnate if not fall slightly. Indeed, the impact on margins on changes in milk products
is usually felt with a two quarters lag on margins (see chart), and global milk (and milk powder prices, the
input for Vinamilk, which imports the powder mainly from New Zealand) have remained elevated in Q413
and since the start of 2014.
Skyrocketing Milk Prices Weighing On Margins

Vinamilk - Margins (%)
Source: Vinamilk
We expect margins to recover from H214, as we see milk prices averaging significantly lower in 2014 and
2015 as dairy herds are recovering in the US and Australia and increasing quickly in New Zealand.
Moreover, we expect value added dairy product prices to remain stable and enable margins for dairy
processors to recover (see 'Turning More Positive On US And EU Dairy Processors' February 14 and 'Milk
To Average US$16.00/cwt In 2014' November 28, 2013).
Page 131
More Headwinds In Near Term

Vinamilk Gross Margin (LHS, %, 2 quarters lag) & Average Whole Milk Powder Prices (RHS, US$/
tonne)
Source: BMI, Vinamilk, JP Morgan, Global Dairy Trade
Company Strategy
We see long-term growth potential for Vinamilk given the strong growth potential for dairy consumption in
Vietnam and the region, the company's investment in supply chain and capacity expansion, and its
strong financial position. The company is well positioned to benefit from the industry's growth, as it has a
well-known brand (a recent survey by Kantar Worldpanel indicates Vinamilk's products are consumed by
94% of households in Vietnam) and a large distribution network. We believe Vinamilk's strategy of
developing mainly in the domestic market, and more specifically in value-added segments, will be to its
benefit. Vinamilk boasts large market shares in key domestic markets for which we forecast strong
consumption growth in the coming years. For example, Vinamilk has a 40% market share in Vietnam's
liquid milk segment, for which we forecast consumption to expand by 36.1% between 2013 and 2018, to
272,400 tonnes, on the back of increased urbanisation, Westernisation and the ongoing spread of organised
retail networks. Moreover, Vinamilk plans to scale up its production and market share in the powdered milk
segment (which currently only accounts for 20% of its total sales in Vietnam), for which we believe demand
will rise by 24.5% over the coming five years.
Page 132
Vinamilk On Top
Select Companies - Operating (LHC) & Profit (RHC) Margins, %
Note: FY13 for Vinamilk and Modern Dairies. 2013 YTD (Q113-Q313) for others. Source: Bloomberg
With new downstream projects coming online soon (a second powdered milk factory and a liquid milk
factory completed in FY13), the company is now heavily investing in upstream capacity and plans to spend
VND1,555bn (US$73mn) in 2013-2015. Vinamilk, which sources 25% of its raw milk from small-scale
farms in Vietnam, is ramping up its cow farming business and aims to source 40% of its raw milk needs
from internally owned farms by 2016.
We also highlight Vinamilk's export growth potential. Exports (mainly to Iraq, Cambodia, the Philippines,
Thailand and Australia) accounted for 14% of total revenue as of FY13, compared with 10% in FY07.
Exports are likely to see sustained growth in the coming years, as they will benefit from access to new
markets such as the US, and the full implementation of the ASEAN Economic Community in the coming
years. Although the current 2015 timeline for integration looks unlikely, we do expect closer commercial
and financial ties with lower import tariffs across the region in the coming years. Vinamilk is trying to
capitalise on loser investment regulations in the region. It announced in January 2014 the creation of
Angkor Dairy in Cambodia, and plans to start building a factory in the country in FY14 in order to save
costs.
Page 133
Positive Picture
Vinamilk - Free Cash Flow (VNDmn)
Source: Vinamilk
Strong Margins And Low Debt Levels
Vinamilk enjoys the strongest margins relative to its peers (despite the recent decline in margins), thanks to
its ability to control expenses and maintain a very low level of debt. Operating and profit margins have been
on an uptrend lately at a time when global milk prices have been historically high. Profit margins reached
21.1% in FY13, significantly higher than the Asia dairy industry average of 5.9%. Moreover, Vinamilk's
liquidity, efficiency and solvency ratios are generally higher than its peers.
Vinamilk also regularly records positive and growing free cash flows despite having invested heavily in
FY13. This bodes well for the company's future expansion plans.
We therefore believe Vinamilk will remain an outperformer in the industry over the long term due to its
efficiency, cost control and emphasis on high-growth demand markets.
Page 134
Improved Performance Ahead

Vinamilk, Ho Chi Minh Index (VNI), Nestl India & Inner Mongolia Yili, Rebased
Note: January 2 2013 = 100. Source: BMI, Bloomberg
Valuation
Vinamilk's 12-month trailing price/earnings ratio (PE) decreased slightly since December 2013 and is now
standing at a nine months low of 18.0x. However, this is still elevated historically, as in January 2013 PE
was at 14.5x. This is also higher than the VNI PE of 14.0x, but significantly below its competitors' average
of 38.7x (the average is pushed higher by Bright Dairy and Nestl India).
Page 135
Heading Up
Vinamilk - Share Price, VND (daily chart) & RSI (below)
Share Price Analysis
We believe Vinamilk's share price could record some weakness in the near term, as margins will continue to
be hampered by elevated milk prices. The share price could break below support coming at VND139,000.
However, the share price is likely to recover from H214 with the improvement in performance. It will
Page 136
eventually break above resistance coming at VND142,000. An upside break at this level would be bullish
for the share price.
Table: Vinamilk's Financial Highlights, 2007-2013
2007
2008
2009
2010
2011
2012
2013
6,538
8,209
10,614
15,753
21,627
26,562
30,949
Revenues Growth
4.7
25.6
29.3
48.4
37.3
22.8
16.5
Operating Income*
633
1,248
2,340
3,347
4,317
6,206
7,295
Operating Margin
9.7
15.2
22.0
21.2
20.0
23.4
23.6
Net Income*
963
1,250
2,376
3,616
4,218
5,819
6,534
Profit Margin
14.7
15.2
22.4
23.0
19.5
21.9
21.1
Net Debt/EBITDA
-1.1
-0.4
-1.1
-0.5
-0.8
-0.8
-0.8
na
1,559
4,632
4,556
5,145
6,981
7,839
Revenues*
EPS
* In VNDbn; margins in %; na = not available. Sources: BMI, Bloomberg
Page 137
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is
the total population of a country a key variable in consumer demand, but an understanding of the
demographic profile is key to understanding issues ranging from future population trends to productivity
growth and government spending requirements.
The accompanying charts detail Vietnam's population pyramid for 2013, the change in the structure of the
population between 2013 and 2050 and the total population between 1990 and 2050, as well as life
expectancy. The tables show key datapoints from all of these charts, in addition to important metrics
including the dependency ratio and the urban/rural split.
Population Pyramid
2013 (LHS) And 2013 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Page 138
Population Indicators
Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050
Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 ('000)
1990
1995
2000
2005
2010
2013e
2015f
2020f
68,910
76,020
80,888
84,948
89,047
91,680
93,387
97,057
0-4 years
9,315
9,323
7,128
6,898
7,229
7,152
7,012
6,575
5-9 years
8,606
9,212
9,253
7,023
6,791
7,052
7,181
6,968
10-14 years
7,857
8,541
9,162
9,117
6,899
6,619
6,757
7,147
15-19 years
7,359
7,788
8,492
9,050
9,011
7,686
6,866
6,726
20-24 years
6,644
7,222
7,673
8,333
8,874
9,148
8,936
6,802
25-29 years
6,006
6,470
7,065
7,471
8,112
8,528
8,772
8,837
30-34 years
5,138
5,890
6,352
6,910
7,286
7,703
8,022
8,680
35-39 years
3,888
5,065
5,803
6,242
6,763
7,011
7,208
7,940
40-44 years
2,463
3,826
4,994
5,719
6,147
6,472
6,685
7,127
45-49 years
2,017
2,409
3,753
4,935
5,648
5,894
6,054
6,589
50-54 years
1,968
1,959
2,346
3,700
4,855
5,306
5,521
5,926
55-59 years
2,046
1,891
1,885
2,237
3,542
4,278
4,677
5,330
60-64 years
1,669
1,934
1,790
1,734
2,068
2,795
3,352
4,444
65-69 years
1,412
1,522
1,771
1,610
1,562
1,673
1,906
3,104
70-74 years
1,028
1,216
1,322
1,530
1,399
1,360
1,379
1,695
Total
Page 139
Vietnam's Population By Age Group, 1990-2020 ('000) - Continued
1990
1995
2000
2005
2010
2013e
2015f
2020f
75-79 years
752
819
984
1,080
1,263
1,219
1,167
1,160
80-84 years
430
536
597
732
815
919
964
900
85-89 years
224
261
336
385
483
517
546
654
90-94 years
71
108
132
177
210
245
268
306
95-99 years
16
25
41
53
74
83
89
115
100+ years
12
17
21
24
30
e/f = BMI estimate/forecast. Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 (% of total)
1990
1995
2000
2005
2010
2013e
2015f
2020f
0-4 years
13.52
12.26
8.81
8.12
8.12
7.80
7.51
6.77
5-9 years
12.49
12.12
11.44
8.27
7.63
7.69
7.69
7.18
10-14 years
11.40
11.23
11.33
10.73
7.75
7.22
7.24
7.36
15-19 years
10.68
10.25
10.50
10.65
10.12
8.38
7.35
6.93
20-24 years
9.64
9.50
9.49
9.81
9.97
9.98
9.57
7.01
25-29 years
8.72
8.51
8.73
8.79
9.11
9.30
9.39
9.11
30-34 years
7.46
7.75
7.85
8.13
8.18
8.40
8.59
8.94
35-39 years
5.64
6.66
7.17
7.35
7.60
7.65
7.72
8.18
40-44 years
3.57
5.03
6.17
6.73
6.90
7.06
7.16
7.34
45-49 years
2.93
3.17
4.64
5.81
6.34
6.43
6.48
6.79
50-54 years
2.86
2.58
2.90
4.36
5.45
5.79
5.91
6.11
55-59 years
2.97
2.49
2.33
2.63
3.98
4.67
5.01
5.49
60-64 years
2.42
2.54
2.21
2.04
2.32
3.05
3.59
4.58
65-69 years
2.05
2.00
2.19
1.89
1.75
1.83
2.04
3.20
70-74 years
1.49
1.60
1.63
1.80
1.57
1.48
1.48
1.75
75-79 years
1.09
1.08
1.22
1.27
1.42
1.33
1.25
1.19
80-84 years
0.62
0.70
0.74
0.86
0.91
1.00
1.03
0.93
85-89 years
0.32
0.34
0.42
0.45
0.54
0.56
0.58
0.67
90-94 years
0.10
0.14
0.16
0.21
0.24
0.27
0.29
0.32
95-99 years
0.02
0.03
0.05
0.06
0.08
0.09
0.10
0.12
Page 140
Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued
100+ years
1990
1995
2000
2005
2010
2013e
2015f
2020f
0.00
0.00
0.01
0.01
0.02
0.02
0.03
0.03
Table: Vietnam's Key Population Ratios, 1990-2020
Dependent ratio, % of total working age

Dependent population, total, '000
1990
1995
2000
2005
2010 2013e
75.8
71.0
61.3
50.8
42.9
41.4
2015f
2020f
41.3
41.9
29,712 31,567 30,734 28,617 26,741 26,860 27,293 28,655
Active population, % of total
56.9
Active population, total, '000
58.5
62.0
66.3
70.0
70.7
70.8
70.5
39,198 44,453 50,154 56,331 62,306 64,820 66,094 68,402
Youth population, % of total working age
65.8
Youth population, total, '000
60.9
50.9
40.9
33.6
32.1
31.7
30.2
25,778 27,076 25,544 23,038 20,918 20,822 20,950 20,690
Pensionable population, % of total working age

Pensionable population, total, '000
10.0
10.1
10.3
9.9
9.3
9.3
9.6
11.6
3,934
4,491
5,190
5,579
5,823
6,037
6,343
7,965
Table: Vietnam's Rural And Urban Population, 1990-2020
1990
1995
2000
2005
2010
2013e
2015f
2020f
Urban population, % of total
20.3
22.2
24.4
27.3
30.4
32.3
33.6
36.9
Rural population, % of total
79.7
77.8
75.6
72.7
69.6
67.7
66.4
63.1
Urban population, total, '000
13,958
16,867
19,716
23,175
27,064
29,632
31,384
35,771
Rural population, total, '000
54,952
59,153
61,172
61,773
61,983
62,048
62,003
61,286
Page 141
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry is the use of vector autoregressions. Vector autoregressions allow
us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
BMI mainly uses ordinary least squares estimators; in order to avoid relying on subjective views and
encourage the use of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear
model, but simple non-linear models, such as the log-linear model, are used when necessary. During periods
of 'industry shock' - for example, if poor weather conditions impede agricultural output - dummy variables
are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account
Testing the directional movement and magnitude of coefficients
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
All results are assessed to alleviate issues related to auto-correlation and multicollinearity
Page 142
BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
Within the Agribusiness industry, issues that might result in human intervention could include but are not
exclusive to:
Technology development that might influence future output levels (for example greater use of
biotechnology);
Dramatic changes in local production levels due to public or private sector investment;
The regulatory environment and specific areas of legislation, such as import and export tariffs and farm
subsidies;
Changes in lifestyles and general societal trends;
The formation of bilateral and multilateral trading agreements, and political factors.
The following two examples show the demand (consumption) and the supply (production) of rice. Note that
the explanatory variables for both are quite similar, but the underlying economic theory is different.
Example of rice consumption model:
(Rice Consumption)t = 0 + 1*(Real Private Consumption Per Capita)t + 2*(Inflation)t + 3*(Real

Lending Rate)t + 4*(Population)t + 5*(Government Expenditure)t + 6*(Food Consumption)t-1 + t
Where:
are parameters for this function.
Real private consumption per capita has a positive relationship with rice consumption, if rice is a normal
good in a particular country. If rice is an inferior good in a country, the relationship is negative. So the
sign of 1 is determined by a specific product within a specific country.
When inflation is high, people with rational expectations will consume today rather than wait for
tomorrow's high price to come. Higher rice demand in year t due to higher inflation in that year leads to
an assumed positive sign of 2.
Page 143
The relationship between real lending rate and rice consumption is expected to be negative. When real
lending rates increase, disposable incomes, especially for those with mortgage burdens, etc, will decrease.
So the sign of 3 is expected to be negative.
Of course, other things being equal, growth in rice consumption can also be caused by growth in
population. Consequently, positive sign of 4 is expected.
Government expenditure typically causes total disposable incomes to rise. So the sign of 5 is expected to
be positive.
Human behaviour has a trend: A high level of food consumption in previous years means there is very
likely to be a high level of food consumption the next year. So the positive sign of 6 is expected.
is the error/residual term.
Example of rice production model:

(Rice Production)t = 0 + 1*(Real GDP Per Capita)t + 2*(Inflation)t + 3*(Real Lending Rate)t +
4*(Rural Population)t + 5*(Government Expenditure)t + 6*(Food Production)t-1 + t
Where:
The same as above: the relationship between real GDP per capita and rice production depends on whether
rice is normal or inferior good in that country.
If high inflation is caused by food prices increasing, farmers will be more profitable. Then they will
supply more agricultural product (eg rice) to increase their marginal (extra) profit, although this is
tempered by the rising cost of other inputs in line with inflation.
There is a global move towards corporate farming, away from small holdings, in order to achieve greater
agricultural productivity. Corporate farming means more investment in the modes of production, ie
agricultural machinery. Higher real lending rates discourage investment, which in turn reduce production.
BMI assumes only the rural population has a positive effect on agricultural product supply.
With supportive government policy, other things being equal, rice production is expected to go
up. Government expenditure is likely to play some role in supporting agribusiness.
Again, previous food production positively affects this year's prediction.
Page 144

BMI Vietnam Agribusiness Report Q2 2014

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

BMI Vietnam Agribusiness Report Q2 2014

Uploaded by

Copyright:

Available Formats

Q2 2014

Vietnam Agribusiness Report Q2

Part of BMIs Industry Report & Forecasts Series

Business Monitor International

2014 Business Monitor International

Vietnam Agribusiness Report Q2 2014

Industry Forecast .............................................................................................................. 13

Livestock Outlook .................................................................................................................................... 23

Coffee Outlook ........................................................................................................................................ 34

Rice Outlook ........................................................................................................................................... 43

Grains Outlook ....................................................................................................................................... 51

Featured Analysis .............................................................................................................. 56

Commodities Price Analysis ............................................................................................. 63

Monthly Grains Update ............................................................................................................................ 72

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Upstream Analysis ............................................................................................................ 82

Asia Fertiliser Outlook ............................................................................................................................. 88

Downstream Analysis ....................................................................................................... 95

Hot Drinks .......................................................................................................................................... 100

Soft Drinks .......................................................................................................................................... 102

Mass Grocery Retail .............................................................................................................................. 106

Food ................................................................................................................................................... 110

Canned Food ...................................................................................................................................... 113

Confectionery ...................................................................................................................................... 114

Pasta ................................................................................................................................................. 117

Dairy ................................................................................................................................................. 119

Regional Overview .......................................................................................................... 121

Competitive Landscape .................................................................................................. 127

Company Profile .............................................................................................................. 128

Demographic Forecast ................................................................................................... 138

Methodology .................................................................................................................... 142

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Business Monitor International

Vietnam Agribusiness Report Q2 2014

BMI Industry View

Rice The King Commodity

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Agricultural productivity has improved considerably since the opening up of the

Transportation and production infrastructure is often poor, making getting crops to

Business Monitor International

Vietnam Agribusiness Report Q2 2014

SWOT Analysis - Continued

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Vietnam remains one of the world's most corrupt countries. According to

Vietnam is increasingly attracting investment from key Asian economies, such as

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Business Monitor International

Vietnam Agribusiness Report Q2 2014

Table: Vietnam Butter Production, 2013-2018

Butter Consumption, '000 tonnes

e/f = BMI estimates/forecasts. Sources: FAPRI, BMI.

Table: Vietnam Cheese Consumption, 2013-2018

Cheese Consumption, '000 tonnes

e/f = BMI estimates/forecasts. Sources: FAPRI, BMI.

Table: Vietnam Milk Production & Consumption, 2013-2018