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Vietnam’s food & beverage sector is expected to see less pressure on profit margins from 2H2023

• On Feb 27th, the price index of agriculture & livestock commodities was 103.4 USD (+0.4 %MoM; -1.5 %YoY), driven by lower production costs and weak global demand, helping to improve the gross margin of Vietnam F&B companies. We predict that the margin improvement effect will be more visible from 2H2023 because almost all F&B producers locked raw material contracts in the beginning of 2022 and Q4 2022, resulting in high-priced inventory in 1H2023.
• We expect that Vietnam’s F&B industry also saved costs through the decline of logistic costs which is a result of sluggish demand in the global economy. On Feb 24th, the Baltic Dry Index (BDI) was 883 points (+22.5% MoM; -59.6% YoY).
• Vietnam’s F&B companies also enjoy the benefits from higher top-line, supported by stable sales volume and higher average selling prices (ASP). According to Kantar Worldpanel, in 2022, the ASP of Vietnam FMCG products grew each quarters. We believe that this effect will make 2023 ASP of these products trade at a higher level than a year ago. As a result, net profit of F&B companies will show a positive growth in 2023.