Vietnamese Packaging Industry: Exploring Potential to Conquer the Challenging Market
In 2024, the Packaging Industry must adhere to the effective regulations on circular economy, managing products after they become waste.
In which, enterprises will be required to implement the Extended Producer Responsibility (EPR) model, ensuring environmental hygiene and sustainable development in the management of post-consumer waste belonging to the producer.
Businesses in the industry are increasingly applying sustainable development strategies and environmental protection. Image: Vietnam Report.
The cost reduction pressure on packaging manufacturers.
At present, the production capacity of common paper packaging exceeds domestic demand, with businesses operating at only about 60% of capacity, and packaging output may increase further in the coming years.
As the potential output significantly exceeds the actual production, manufacturers are struggling to find outlets for their products in a saturated market. This is partly due to reduced consumer demand for goods, leading to a decrease in the demand for packaging. The increasing pressure to reduce costs further intensifies competition among packaging manufacturers. Consequently, issues related to the international market, distribution channels, exchange rate fluctuations, and more become more concerning for businesses.
In fact, the Packaging industry, like many others, faces a series of challenges in the context of the global economic downturn affecting the sector. This is evident in the industrial production index (IIP), with a general estimate of a 0.4% decrease in the first eight months of 2023 compared to the same period last year, while in 2022, it increased by 9.2% compared to the same period in 2021.
Meanwhile, according to a survey by Vietnam Report in August 2023, 25.7% of Packaging businesses reported a decrease in revenue compared to the same period last year. Import and export activities of packaging items have also experienced a significant decline. In the first six months of 2023, the total export-import turnover of packaging (calculated for two groups HS.3923 and HS.4819) reached USD 1.07 billion, only equivalent to 63.1% of the same period last year. Specifically, the export and import turnover were approximately 77.4% and 36.6%, respectively, compared to the same period.
Manufacturers are struggling to find outlets for their products in a saturated market. Photo: Vietnam Report
Along with the government’s management policies, despite the reduced interest rates for loans from banks and stable inflation, the weakened overall demand, lack of liquidity, and credit issues still hinder the growth potential of businesses. Poor debt repayment capacity due to deteriorating financial conditions also limits businesses’ access to new sources of capital in the current situation.
Export Potential to Challenging Markets
In this stage, the export potential relies on favorable conditions from free trade agreements (FTAs). Currently, Vietnam has signed 16 bilateral and multilateral FTAs, creating advantages for international trade, and the export of packaging also benefits from this. The export of packaging to 27 countries with a value exceeding USD 10 million accounts for 96.4% of the value of packaging exports. Most of these countries are members of at least one FTA that Vietnam is a part of.
Import duties into these markets for packaging products are mostly around 0.0%, with a small portion of items still subject to taxes but none exceeding 5.0%. Packaging businesses can leverage these opportunities from FTAs to expand their market share—a long-term strategy for enterprises. Vietnam’s position in the international packaging market is further enhanced as issues related to the supply chain are gradually easing, and difficulties in input material costs are reduced due to decreased logistics expenses.
In addition to the external factors brought by FTAs, internal factors such as production capacity, operational risk management, especially supply chain risk management, play a crucial role in leveraging export potential and maintaining the competitiveness of Vietnam’s packaging industry. Therefore, businesses need to be flexible in supplying products suitable for foreign markets, stabilize production, and take advantage of the benefits from FTAs to introduce packaging products to many challenging markets.
Sustainable development according to environmental protection laws
According to the economic forecast for Vietnam in the last months of 2023, experts participating in the survey by Vietnam Report are more optimistic compared to the early months of the year, partly due to the global economy gradually recovering and increased disbursement of public investment. Additionally, the macroeconomic situation is stable, with notable features such as low-interest rates and controlled inflation. The government has implemented demand-stimulating policies, including a 2% reduction in value-added tax to boost consumer demand.
Accordingly, the packaging industry is unlikely to see breakthrough growth in the remaining months of this year, but a slight recovery scenario is possible as the IIP has shown an upward trend since mid-Q2. In order to adapt to the current economic situation, packaging companies are prioritizing short-term solutions such as Expanding the market (66.7%) and diversifying raw material suppliers (80.3%).
In the long term, the central solution implemented by businesses is to strengthen financial risk management measures, price fluctuations, and the quality of raw material sources, with a selection rate of 100%. Additionally, the strategy of sustainable development and environmental protection is increasingly being applied by industry enterprises, especially in accordance with the provisions of the 2020 Environmental Protection Law. By January 2024, businesses will be required to implement the Extended Producer Responsibility (EPR) model. With the government’s support in developing essential logistics infrastructure, ensuring efficient and timely transportation of goods plays a crucial and necessary role.
In addition, reducing import taxes on raw materials is essential in promoting the Packaging industry in Vietnam. This helps reduce production costs, promote investment, encourage innovation, improve product quality, expand export opportunities, and support using environmentally friendly materials. Since then, reducing import taxes on raw materials has brought vital benefits to the Packaging industry and stimulated its sustainable development. This solution also agrees with our country’s commitments to FTAs, gradually removing tariff barriers and integrating more profoundly into the international economy.
Source Vietnam Report
Operating under the motto of “Pioneering Quality,” Hoang Vuong consistently aims for sustainable and environmentally friendly packaging solutions. We proudly hold the following certifications:
- FSC Certification: FSC-C187470
- GMI Certification
- G7 Certification
- ISO 9001:2015
With over 13 years of experience in the paper packaging industry and a solid brand reputation, Hoang Vuong is a leading private paper packaging enterprise in Vietnam, partnering with numerous major brands locally and internationally. We accompany your company on the journey of innovation, seeking differentiation through continuous improvement. Your success is both an achievement and motivation for us to continue innovating and maintaining professionalism.
- Address: 10/6C Street 10, Binh Hung Hoa A Ward, Binh Tan District, Ho Chi Minh City
- Mobile: 0908.863.965 (Mr. Le Hong Son)
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