Vietnam packaging industry: investment prospects

Vietnam’s packaging industry is booming, with an expected growth rate of 15-20 percent and over 14,000 active enterprises. Despite several emerging challenges, the sector is adapting through innovation and sustainability efforts. Thanks to favorable economic conditions and favorable trade agreements, Vietnam’s packaging sector offers promising opportunities for growth and investment.

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Vietnam’s packaging market is witnessing rapid development, driven by rising demand across sectors such as food, healthcare, chemicals, industrial and agriculture. Both domestic and foreign companies are investing heavily in this sector, fostering healthy competition and a diversified product offering in terms of quality and price.

Despite challenges such as increasing competition and input costs, the industry is adapting through innovation and sustainability initiatives. Thanks to favorable conditions such as economic development, rising consumer demand and favorable trade agreements, Vietnam’s packaging sector is poised for further growth and offers a range of investment and development opportunities.

In this article, we provide an industry overview, key drivers, challenges, emerging trends and investment opportunities in Vietnam’s thriving packaging market.

Industry overview

The packaging industry, which is expected to grow by 15-20 percent in the coming years, is one of the sectors showing the highest growth dynamics in Vietnam, experts said at a press conference on February 29 to launch ProPak Vietnam 2024.

According to the Vietnam Packaging Association, there are approximately 14,000 enterprises operating in the packaging industry in Vietnam, of which approximately 9,200 focus on plastic packaging. Currently, there are more than 900 packaging factories in Vietnam, of which about 70 percent are located in the southern region, mainly in Ho Chi Minh City, Binh Duong and Dong Nai.

In fact, the packaging industry, like many others, is facing a number of challenges in the context of the global economic downturn. Industrial production recorded a slight decline, with the index of industrial production (IIP) falling by 0.4%. in the first eight months of 2023 compared to the previous year. Additionally, a survey by Vietnam Report showed that 25.7 percent of packaging companies saw a decline in revenue. In the first half of 2023, the import-export turnover of packaging products also decreased to 63.1%. last year’s level.

However, experts surveyed in this report are more optimistic, partly due to the gradual recovery of the global economy and spending. The study also highlights the significant impact of government policies, improved consumer financial situation and strategic initiatives in shaping the positive attitude of packaging companies towards future growth.

In its report on the Vietnam market, consulting firm Mordor Intelligence revealed that the paper packaging sector is poised for strong growth, forecasting a compound annual growth rate (CAGR) of 9.73% over 2024-2029. Paper packaging is increasingly used in various industries such as food, beverages, pharmaceuticals and e-commerce.

Moreover, other market research suggests that the Vietnamese metal packaging market is expected to register a CAGR of 3.81% over the same period. Moreover, the plastic packaging market in Vietnam is expected to grow from 10.07 million tons in 2023 to 15.09 million tons in 2028, achieving an impressive CAGR of 8.44%. Plastic packaging for the food and beverage (F&B) industry maintains a significant market share.

Growth factors

Vietnam’s packaging industry is poised for significant growth, driven by rapid economic and social progress, rapid growth in e-commerce and favorable free trade agreements (FTAs).

Economic and social development

Vietnam’s rapid economic and social development, in particular the growth of the middle class and rising per capita income, is significantly increasing demand for packaged F&B products, personal care products and pharmaceuticals, driving demand for packaging solutions.

E-commerce boom

Mordor Intelligence estimates the value of Vietnam’s e-commerce market at $14.70 billion in 2024 and is expected to reach $23.77 billion by 2029, growing at a CAGR of 10.09 percent.

E-commerce platforms such as Shopee, Lazada and Tiki are seeing a surge in online shopping, leading to greater demand for durable and aesthetic packaging that improves customer satisfaction and ensures products are safe during transit.

Free Trade Agreements (FTAs)

Vietnam’s strategic signing of 18 bilateral and multilateral free trade agreements, including EVFTA, CPTPP and RCEP, opens new markets and reduces import tariffs on packaging products. Most import duties in these markets are zero percent, with only a few items subject to taxes, and none exceeding 5 percent.

This favorable trade environment allows packaging companies to leverage these opportunities to increase their market share. Additionally, as supply chain issues ease and logistics costs decline, Vietnam’s position in the global packaging market will be further strengthened.

Emerging challenges

Despite favorable growth conditions, the packaging market in Vietnam faces several challenges:

The packaging market is experiencing increasing competition from domestic and foreign companies across various product categories such as paper, plastic, metal foil and PET plastic bottles. Notably, major brands such as Tan Tien Plastic and Rang Dong Plastic dominate the PET bottle segment, while Tetra Pak from Sweden and Combibloc from Germany lead in paper packaging for the dairy industry due to advanced technological requirements.

In particular, when it comes to ancillary products such as cotton wool, as some Vietnamese companies may currently prefer to source from China due to better product quality, profitability from bulk orders and geographical proximity, foreign investors thinking about expanding in this sector should seriously consider setting up a unit manufacturing facility here. Vietnam offers various benefits such as a skilled workforce, a favorable business environment and a strategic location in Southeast Asia, making it an attractive investment destination despite prevailing sourcing preferences.

• Rising costs of input materials

Much of Vietnam’s packaging raw materials are imported, resulting in high and variable raw material costs. This dependence on imported materials poses a challenge to maintaining profitable production. Companies are actively seeking solutions to reduce these costs, including investing in local production of raw materials, implementing cost-saving technologies and increasing supply chain efficiency.

Key trends

Circular economy and sustainable development

The shift towards sustainable packaging solutions and a circular economy is visible among three key stakeholders: businesses, consumers and government.

A study in Vietnam found that 57.4 percent of consumers are willing to pay a premium for eco-friendly packaging, and 41.1 percent prioritize sustainability even with higher costs. Moreover, in accordance with the law, the government adopted the Environmental Protection Law 2020, requiring companies to implement Extended Producer Responsibility (EPR) from 2024.

In particular, companies are increasingly adopting environmentally friendly practices to meet the growing demand for sustainable products, focusing on reducing their carbon footprint and improving the recyclability of packaging. The Duy Tan Plastics Recycling factory, thanks to its innovative Bottle-to-Bottle technology, is at the forefront of this trend, recycling over 1.3 billion bottles domestically and exporting 4,200 tons abroad.

According to Marco Förster, director of ASEAN at Dezan Shira & Associates, Duy Tan’s success could result in the emergence of more PET recycling plants in Vietnam, driven by financial potential and growing demand spurred by ESG initiatives. This also creates ample opportunities for foreign companies to enter Vietnam’s thriving market.

Premium and comfortable products

There is a growing demand for premium packaging that combines high aesthetics with convenience, especially in the F&B industry. To meet this trend, companies are focusing on improving product quality and packaging design. For example, features such as resealable bags, easy-open lids and attractive graphics were used to enhance consumer appeal and functionality.

Technological progress

Vietnamese companies are using technological advances to improve the quality of their packaging, ensuring compliance with stringent hygiene and food safety standards. This strategic investment is crucial to maintaining competitiveness and compliance with international quality standards.

By implementing digital transformation strategies, packaging companies effectively optimize their operations, increase efficiency and strengthen their competitive advantage on the market. Using cutting-edge technologies such as automation, artificial intelligence and the Internet of Things (IoT), these companies are revolutionizing production processes, reducing waste and improving supply chain management. Moreover, the adoption of digital printing and smart packaging solutions is gaining momentum, offering new ways to connect with consumers and provide real-time product information.

The impact of free trade agreements

Free trade agreements such as EVFTA, CPTPP and RCEP reduce import tariffs, thereby increasing the global competitiveness of the Vietnamese packaging industry and providing new growth opportunities. These agreements also encourage the adoption of international standards and best practices, improving the overall quality and safety of Vietnamese packaging products.

Application

The packaging market in Vietnam is poised for further rapid growth, driven by economic development, rising consumer demand and favorable trade agreements. While challenges such as competition and input costs persist, the industry is adapting through technological innovation, sustainability initiatives and digital transformation.

With continued investment and government support, Vietnam’s packaging sector will thrive by offering diverse and high-quality solutions to meet the needs of various industries.