Unlocking Growth in the Animal-Based Agri-Food Value Chain in Vietnam: ​Insights and Strategies – PwC

Strategic Analysis of Vietnam’s Agri-Food Sector and the Sustainable Development Goals

Economic Significance and Alignment with SDG 8

Vietnam’s animal-based agri-food sector, valued at approximately one-third of the nation’s US$100 billion food and beverage market, is a critical driver for SDG 8 (Decent Work and Economic Growth). The industry’s scale provides significant employment and contributes to national economic vitality. However, the competitive landscape, featuring a mix of foreign and domestic corporations, necessitates a strategic shift towards sustainable practices to ensure long-term, inclusive growth rather than short-term, volatile gains. Fostering collaboration between these entities is crucial for achieving SDG 17 (Partnerships for the Goals).

Key Industry Challenges and SDG Implications

The sector faces several challenges that directly impact its ability to contribute to the Sustainable Development Goals. A business-as-usual approach is insufficient to address these interconnected issues.

• Profitability and Production Inefficiencies: Extreme variations in gross margins, from 5% to over 35%, indicate systemic inefficiencies. This volatility undermines stable economic contributions (SDG 8) and points to unsustainable production patterns that conflict with the principles of SDG 12 (Responsible Consumption and Production).
• Dependence on Imported Raw Materials: A heavy reliance on imports creates supply chain vulnerabilities, threatening food security (SDG 2: Zero Hunger) and increasing the carbon footprint of the entire value chain, which runs counter to climate action goals (SDG 13).
• Fragmented Distribution Networks: Inefficient logistics contribute to food loss and waste, directly hindering progress on target 12.3 of SDG 12. This fragmentation also poses a challenge to building resilient infrastructure as outlined in SDG 9 (Industry, Innovation and Infrastructure).
• Rising Demand for Traceability and Safety: Growing consumer awareness aligns with global sustainability trends. Meeting these demands is essential for ensuring public health (SDG 3: Good Health and Well-being) and establishing the transparent supply chains required by SDG 12.

A Framework for Sustainable Growth Aligned with the SDGs

To build resilience and unlock profitable, sustainable growth, companies must adopt a strategic framework centered on operational excellence and targeted growth, with the SDGs as a guiding principle.

1. Integrate Operational Excellence with SDG 12: Shift focus from pure cost-cutting to resource efficiency. This involves minimizing waste, reducing energy consumption, and optimizing water usage throughout the production process, thereby improving profitability while advancing SDG 12.
2. Align Growth Strategies with SDG 2 and SDG 8: Pursue targeted growth in value-added segments that promote food security and create higher-quality employment. This strategy supports the development of a more resilient national food system (SDG 2) and fosters sustained, inclusive economic growth (SDG 8).
3. Build Resilient and Transparent Supply Chains: Invest in technology and partnerships to enhance traceability and reduce reliance on imports. This strengthens food safety (SDG 3), promotes responsible sourcing (SDG 12), and builds the resilient infrastructure needed to support a modern, sustainable economy (SDG 9).

Sustainable Development Goals (SDGs) Addressed

• SDG 2: Zero Hunger

  The article focuses on Vietnam’s “animal-based agri-food sector,” which is central to food production. It discusses challenges within the value chain, such as “fragmented distribution” and the need for “resilience,” which are critical for ensuring stable and sustainable food systems.

• SDG 8: Decent Work and Economic Growth

  The text highlights the sector as a “cornerstone of the economy,” representing a “US$100 billion food and beverage market.” The discussion on improving “profitability,” achieving “profitable growth,” and enhancing “operational excellence” directly relates to promoting sustained, inclusive, and sustainable economic growth.

• SDG 9: Industry, Innovation and Infrastructure

  The analysis of the “value chain, spanning from feed production to retail” and its challenges, including “fragmented distribution” and “reliance on imported raw materials,” points to the need for building resilient infrastructure and promoting sustainable industrialization within the agri-food industry.

• SDG 12: Responsible Consumption and Production

  The article mentions “rising demands for traceability and safety” in the food sector. This directly connects to ensuring sustainable consumption and production patterns, as traceability is a key mechanism for verifying the safety and sustainability of products throughout the supply chain.

Specific SDG Targets Identified

1. Target 2.4: Ensure sustainable food production systems and implement resilient agricultural practices.

   The article’s call for companies to move beyond a “‘business-as-usual’ approach” to “build resilience and unlock profitable growth” directly supports the goal of creating more resilient and sustainable food production systems in the face of market “volatility.”

2. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.

   The text points out that gross margins are low in “highly commoditized segments” but higher in “more value-added areas.” The recommendation for a “clear strategy focused on operational excellence and targeted growth” aligns with the objective of increasing economic productivity through strategic improvements and moving up the value chain.

3. Target 9.3: Increase the access of small-scale industrial and other enterprises… to financial services… and their integration into value chains and markets.

   The mention of a “fragmented distribution” system within the value chain implies a lack of integration for various players, which often includes smaller enterprises. Addressing this fragmentation is essential for improving their market access and integration.

4. Target 12.6: Encourage companies… to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

   The article directly addresses companies, including “powerful foreign firms and large domestic players,” and argues that “sustainable success requires a clear strategy.” The rising demand for “traceability and safety” is a market driver pushing companies to adopt and report on these sustainable practices.

Indicators for Measuring Progress

1. Profitability and Gross Margins

   The article explicitly mentions that “Gross margins vary dramatically—from as low as 5%… to over 35%.” This can serve as a direct indicator for measuring economic performance and progress towards Target 8.2, reflecting the economic productivity and value-added capacity of different segments within the sector.

2. Dependence on Imported Materials

   The challenge of “reliance on imported raw materials” is highlighted. A reduction in this reliance over time could be an indicator for Target 12.2 (sustainable management and efficient use of natural resources), showing a move towards a more self-sufficient and potentially sustainable domestic value chain.

3. Implementation of Traceability Systems

   The “rising demands for traceability and safety” are noted as a key industry challenge. The rate of adoption of traceability systems by companies in the agri-food sector can be used as a qualitative and quantitative indicator to measure progress towards Target 12.6, reflecting the integration of sustainable and transparent practices.

Summary Table of SDGs, Targets, and Indicators

Source: pwc.com