Tradition to Transformation: Vietnam’s Food & Beverage Revolution with AI and IoT

With the global spotlight fixated on Vietnam, the nation has undertaken significant efforts to maintain its competitiveness in economic advancement. With an impressive 8% annual GDP growth YoY and a noteworthy $36.61 billion in FDI for 2023, Vietnam is drawing considerable attention – and rightfully so. Amid various industries attracting investors, one that stands out is Vietnam’s food and beverage sector which accounts for 15% of the nations GDP. Despite revenue fluctuations in recent years, as illustrated below, the sector holds promising prospects, with the nation anticipating a growth rate of 7.46% from 2024 to 2028.

The impending growth is no mere coincidence; instead, it is largely attributed to Vietnam’s commitment to modernize its infrastructure within F&B. At the core of this transformation is Industry 4.0, a term encompassing the integration of digital technologies into manufacturing processes. There are two key components of Industry 4.0: artificial intelligence (AI) and the Internet of Things (IoT) within the F&B sector.

AI Development: Smart machines are making the difference.

The AI market in Vietnam is poised for consistent growth, with an anticipated CAGR rate of 4.88% and projecting a market volume of US$16.45 million between 2023 and 2028. Automated Palletizing and Warehousing Robots have become standouts within F&B AI. These machines operate ceaselessly, boosting production efficiency while reducing reliance on human labor. This development is especially advantageous for SMEs, given the planned 6% increase in Vietnam’s minimum wage in July 2024. Through the adoption of advanced technologies, businesses in Vietnam not only reduce operating costs but also position themselves on the global stage to attract more international partnerships, customers, and foreign direct investment. Despite the high integration costs of AI’s most advanced technologies, AI proves to be a forward-looking and worthwhile investment for companies in Vietnam.

IoT Implementation: Tech savvy systems

Alongside the rapid evolution of AI, IoT emerges as another dynamic frontier, projecting an annual growth of 14.83% and an expected revenue of US$13.11 billion by 2028. IoT sensor systems are firmly established as a pivotal technology in the F&B industry. These sensors provide real-time data on warehouse conditions, inventory tracking, and quality control. Moreover, IoT can detect production issues and offer preemptive solutions by collecting data on equipment, including vibration, temperature, and pressure. The IoT system then analyzes this data, identifying patterns to predict equipment failures, which can minimize downtime and costs associated with repairs.

Such insights alleviate stressors and empower F&B manufacturers with a deeper understanding of their production lines. Consequently, these manufacturers can redirect their focus towards other forward-looking strategic investments.

Tech advancements in an ASEAN context

Vietnam must keep its focus on industrial development. The nation currently lags behind many of its ASEAN peers as reported by the Global Competitiveness Index (GCI) S-Curve, which measures the “digital economy journey of nations through the relationship between GCI score and GDP.”

To continue growing, Vietnam must look past traditional F&B technologies and towards advanced technologies like precision, connected, and yield-optimized farming. And while, despite ranking in the lower half, outlooks for the nation are hopeful as the Food and Agriculture Organization recognizes that “Vietnam has laid a strong foundation for digital agriculture and the digital agriculture ecosystem is growing rapidly.”

Automation comes to life: Dan On Foods Facilities Tour

During Tractus’ trade mission with the NDTO, we had the privilege of visiting leading manufacturer of foodstuffs Dan On Foods’ 646,000 square foot My Phuoc 3 branch. The factory stands as a prime example of automation manufacturing in Vietnam.

At My Phuoc 3, we observed the collaboration between AI and IoT systems. An illustrative example is the facility’s utilization of AI-informed autonomous robots. These robots leverage IoT sensors to send products to a smart warehouse. The warehouse is equipped with Radio-Frequency Identification tags for automated inventory management, ensuring real-time tracking without manual intervention. These systems are interconnected through a Warehouse Management System, acting as the central control mechanism which integrates various machinery. These technologies work synergistically, automating the process to reduce human labor, minimize errors, and expedite the order fulfillment process.

F&B Automation is here to stay

Vietnam has expertly positioned itself in the Industry 4.0 landscape by embracing technologies that grow business. With this steadfast commitment to embracing the future of Industry 4.0, Vietnam will continue to grow its capacities in the technological landscape which serves as a testament to the bright future that lies ahead for the nation.

Navigating the intricacies of Vietnamese investment laws alongside rapid technological advancements demands a thorough grasp of the country’s dynamic landscape. Drawing on over 25 years of expertise, Tractus guides both public and private sector clients in devising effective market expansion and entry strategies. Unlock new avenues for growth and success for your business in Vietnam and beyond by reaching out to us today.

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Authored by

Hugh Goldstein is a research analyst based in Vietnam.