Technology key to Vietnam consumer deals - AVCJ Forum

"Technology is becoming so pervasive across every segment as consumption grows," said David Gowdey, a managing partner at Jungle Ventures. "E-commerce in Vietnam was worth $400 million three years ago, $2.8 billion last year, and it is projected to reach $15 billion within six years. The underlying infrastructure required to support that level of growth is huge."

He pointed to logistics and warehousing and the demands e-commerce places on a predominantly traditional set of service providers tasked with storing, breaking down and shipping goods. "It is difficult to get to that level of scale without using technology," Gowdey noted.

Google and Temasek Holdings' latest Southeast internet economy report estimates that Vietnam will be generating revenue of $33 billion in 2025 – up from $9 billion last year – across four key segments: online travel, online media, ride-hailing, and e-commerce. Combined with strong economic growth, rising household incomes, a mobile-first culture, and a relatively young population, it makes for a compelling investment thesis.

For Fosun Group, interest in Vietnam is largely predicated on trends playing out in a similar way to China. The company's investments in China are structured as consumer-oriented platforms across areas such as healthcare, travel, retail and financial services. There is often a technology element woven into these businesses.

"Technology is an enabler of scalability and sustainability. It's not just the technology itself but the efficiency it brings to consumers," said Rebekah Woo, managing director for maternal, infant and family investments at Fosun. "We are creating products and services for a wide audience and because it's on a technology platform, anyone with a mobile phone can access them."

The company's consumer-technology assets include BabyTree, a parent-focused social networking platform, and Baihe Jiayuan, an online dating network. The same themes are expected to become prevalent in China. "If you look at the statistics, the reality is that in terms of population, consumption and GDP growth, Vietnam is growing faster than China, but it hasn't got the same size and scale," Woo said. "However, five to 10 years from now, consumption is going to be huge."

This is already apparent in M&A activity. Nguyen Cong Ai, a Vietnam-based partner with KPMG, observed that investment used to focus on retail, consumer products, and other mass-market consumer plays. Now he is seeing more deals in healthcare services and education – areas in which consumers are willing to pay a premium for quality.

"Consumers in Vietnam are very discerning, very informed and they want to avoid the food scandals that have happened in China," said Melissa Kang, founder and managing partner at Jupiter Impact Partners. "I am surprised by how quickly this has happened. The regulators have raised the bar and improved enforcement of standards."

Kang, an impact investor, was referring specifically to food safety and rising demand for products that are traceable. But Gowdey also highlighted food safety as a bellwether of broader changes in consumer habits and the greater emphasis being placed on product quality and the consumer experience around that.

What remains to be seen is whether foreign or domestic brands are best placed to take advantage of this transition. "Some markets are culturally more attuned to domestic brands, but then you go somewhere like the Philippines and there is an affinity for foreign brands," Gowdey said. "It has been interesting to watch the emergence of foreign brands in Vietnam. District one [in Ho Chi Minh City] doesn't reflect the whole country, but the foreign presence is greater than five years ago."

Technology will likely play a key role in this battle as well given the rise of social media. "It's a combination of technology, platforms and community knowledge," said Wu, highlighting the role of online influencers on consumer activity. "These are not just pop stars but day-to-day influencers that help people make better choices about what they use, what they wear."

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• Topics
• Southeast Asia
• Consumer
• Technology
• Expansion
• Early-stage
• Vietnam
• Jungle Ventures
• Fosun Group
• AVCJ Events