Businesses seek clear path into lucrative US market

Update: 31-08-2018 | 11:44:29

The US is home to a consumer market with great potential for Vietnamese businesses, but to penetrate this fastidious market, Vietnamese businesses will need to improve their operations and offerings to meet the required standards.

In the first half of the year, Vietnam’s total export turnover to the US soared 10% to US$21 billion against the same period last year, accounting for 19% of the country’s total export turnover, according to statistics from the Ministry of Industry and Trade.

Notably, Vietnam’s exports to the US grew at a rate of 20% per year for several years but there remain challenges for Vietnamese businesses when exporting to the market.

Mr Nguyen Thang Vuong, from the European and American Markets under the Ministry of Industry and Trade said the export capacity of Vietnamese businesses remains weak, while the US is a competitive market with high costs, longer transport times, and a complicated system of trading laws.

Increasing technical barriers on food safety and protection of domestic production is another hindrance.

Mr Dao Tran Nhan, former Counselor of the Vietnam Trade Office in the US, said the FDA Food Safety Modernization Act (FSMA) is the biggest obstacle for export businesses, which needs to be surmounted to gain access to the demanding market.

The Act has placed the burden of responsibility for food safety and hygiene and supervision on the shoulders of importers and manufacturers. One of the strict requirements set by the FSMA is to formulate a food safety and hygiene program at production facilities. Businesses must establish the program when they begin to produce goods, as the US will trace the origin of their products before entry to the market.

Under the program, the American side requests that Vietnamese staff have good qualifications, a strong command of English and the necessary level of experience to implement the program as required by the US Food and Drug Administration (FDA). When exporting food and drinks, businesses need to anticipate that a US delegation will carry out surprise inspections of their production facilities and factories, Mr Nhan noted.

Many countries share the view that the fastest way to penetrate the US market is through retail channels.

For example, the US retail giant Walmart has sales amounting to nearly US$500 billion per year with 140,000 types of goods and 11,500 stores in 28 countries, while The Kroger Company has 2,796 stores in 35statesacross the US with sales reaching US$115 billion per year.

Mr Nhan pointed out that there is no simple process to gaining shelf space at Walmart or Kroger and the plan to export through US supermarkets in Vietnam is not feasible as almost all of the US’ biggest retailers have no presence in Vietnam.

One of the criteria for Walmart to open a store in a country is that its market has at least 100 million people. At present, Walmart is targeting mass markets such as China and India.

Mr Nhan said the plan to sell goods directly through major supermarkets in the US is unlikely to be successful. There are about 1,000 companies lining up to offer their goods on sale at Walmart every day. He advised businesses to gain access to the US market through representative offices and branches of giant retail groups in Vietnam.

At present, Walmart and Target have established branches in HCM City, he said, noting that such retail groups often pay greater attention to issues such as salary, working hours, welfare, environmental protection and, training activities for workers.

For example, retail giants set up standards and regulations for suppliers such as the design of emergency exit doors, interior paths, and greenery in factories.

Inspections are conducted by the retailers after every six months to check if the products have met the requirements for export to their supermarkets.

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Businesses seek clear path into lucrative US market

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