Vietnam’s cold storage industry is experiencing significant growth and is projected to reach USD 295 million by 2025, with an annual growth rate of 12% according to Cushman & Wakefield. However, the sector still has untapped potential. Currently, Vietnam has only 48 cold storage warehouses with a capacity of approximately 700,000 pallets, indicating a scarcity of suppliers. Moreover, only 8.2% of domestic food manufacturers utilize cold chain systems, while export manufacturers account for 66.7% in 2020.
Cold storage warehouses, an integral part of the cold chain, provide precise climatic conditions and maintenance to preserve items at suitable low temperatures. Cryogenic storage, refrigerated storage, and cooling storage are the main types of cold storage facilities, each offering different temperature ranges.
Food, beverages, pharmaceuticals, chemicals, plants, and flowers are examples of goods that require cold storage due to their susceptibility to spoilage at normal room temperatures. Third-party logistics companies, cold storage logistics specialists, and supermarket chains are typical tenants of cold storage warehouses.
In Vietnam, the cold storage sector can be divided into commercial cold storage and self-operated cold storage. Geographically, cold storage facilities are concentrated in clusters near industrial parks, rivers, and seaports. The Southern region, particularly Long An province, has a significant share of the country’s cold storage supplies due to its proximity to Ho Chi Minh City and the Mekong Delta’s agricultural production. The Northern region has also expanded its capacity, reaching 71,750 pallets in 2018 from 26,750 pallets in 2015.
The cold storage sector in Vietnam presents numerous opportunities. Import and export orders for medicines and vaccines, driven by the pandemic and advancements in pharmaceuticals, have contributed to the sector’s growth. The rapid expansion of e-commerce and food delivery is also influencing the cold storage market significantly. The increasing middle class with higher disposable incomes and improved export trade agreements are expected to boost demand for high-quality organic food and Vietnamese seafood, respectively.
However, the industry faces challenges that discourage potential investors. The initial investment required to build and maintain a cold storage warehouse is substantial, considering the specialized equipment, continuous inspections, and high electricity consumption. Construction time is also longer compared to conventional warehouses, and lease terms typically range from 15 to 20 years, further limiting supply.
Warehouse management for specific industries, such as agriculture, poses a challenge for cold storage operators. Dealing with the seasonality of agricultural products and optimizing space utilization while meeting fluctuating demands require effective planning and operations.
Investors can enter Vietnam’s cold storage industry through new investment projects or mergers and acquisitions. Early market entry offers higher capital returns. Despite the challenges, the high rental prices make investing in cold storage attractive. Converting existing warehouses into cold storage facilities can be a viable option for investors and property owners to leverage the difference in rental costs.
Although Vietnam’s cold storage industry is relatively new and fragmented compared to developed markets in the region, the rising demand and growing investments indicate its potential for expansion. Small business owners should consider seizing the opportunity to enter this sector to capitalize on its high growth potential and emerging market opportunities.
