ORIENTATIONS AND SOLUTIONS TO IMPROVE WINE IMPORT ACTIVITIES OF THANH DAT IMPORT EXPORT COLTD IN THE PERIOD 20172021

BACHELOR THESIS Major International Economics Topic ORIENTATIONS AND SOLUTIONS TO IMPROVE WINE IMPORT ACTIVITIES OF THANH DAT IMPORT EXPORT CO , LTD IN THE PERIOD 2017 2021 TABLE OF CONTENT INTRODUCTI.

BACHELOR THESIS

Major International Economics

Topic: ORIENTATIONS AND SOLUTIONS TO

IMPROVE WINE IMPORT ACTIVITIES OF THANH DAT IMPORT EXPORT CO., LTD IN THE PERIOD

2017-2021

TABLE OF CONTENT

ABBREVIATIONSAbbreviations Meaning

ASEAN Association of Southeast Asian Nations

AANZFTA ASEAN-Australia-New Zealand Free Trade Area

LIST OF FIGURES

EXECUTIVE SUMMARY

The thesis "ORIENTATIONS AND SOLUTIONS TO IMPROVE WINE IMPORT ACTIVITIES OF THANH DAT IMPORT EXPORT CO., LTD IN THE PERIOD 2017-2021" was written to find out the problems of wine

importating activities and propose some solutions to improve the importation ofwine at Thanh Dat company

The thesis is divided into three chapters In chapter 1, I provided an overview

of the Vietnamese imported wine market as well as an overview of the company,including the company's formation and development, functions and duties, services,organizational structure, and current business activities, including businessproducts, capital and assets of the company, workforce, customers, and partners Inchapter 2, I discussed the current state of alcohol importation at Thanh DatCompany, including a study of the company's wine import process as well as ananalysis of the results of the company's import activities over the last 5 years,including indicators such as wine import turnover over time, wine import turnover

by market, import turnover by wine type and import form, and a comparison of theperformance to the import plan set forth In addition, I looked at the company'sbusiness efficiency and competitiveness indices Then, determine the company'scurrent accomplishments and limits, as well as the sources of those deficiencies.With Chapter 3, I have come up with some ideas for the firm and somerecommendations for the government in order to enhance the company's importoperations after analyzing the present status of wine import activities at Thanh Datcompany

1 Rationale

Since the national program "Doi Moi" and the policy of opening up todevelop the market economy, our country has achieved many great achievements inmany fields, especially the economy, which has transformed our country from apoor and backward country becomes a country with a developed economy, people'sliving standards are increasingly improved and relations are expanded with manycountries in the world This has confirmed one thing, opening of internationaleconomic integration is a right step of the Government

Only when international economic integration is effective can we create anew position in the international market and limit unfair treatment Participating ininternational economic integration, we can take advantage of capital, advancedtechniques and technologies to meet the requirements of industrialization andmodernization of the country, besides creating favorable conditions for we areexpanding import and export markets, creating favorable conditions for productconsumption Opening the door for integration is therefore not only for ourbusinesses to reach out, but also for foreign enterprises to enter into production andbusiness in our country

In international economic integration, international trade is an activity fieldthat plays a key role in promoting the domestic economy to integrate with the worldeconomy In international trade, imports play an important role in promoting trade

as well as developing the national economy Importing helps to ensure timely,complete and synchronous demand for production materials for production, has astrong impact on the innovation of equipment and production technology so thatproduction level is improved, labor productivity is improved to catch up withadvanced countries in the world Besides, imports also help to timely supplementthe production needs and the domestic life is still unbalanced, contributing toimproving people's living standards Therefore, import activities in general andimport business activities in particular are very important

Established in 2003, Thanh Dat Import-Export Limited Liability Companywas established with the main function of trading in importing wines from manycountries around the world As one of the small and medium-sized companiesoperating in the field of importing goods, in the early days of establishment thecompany had to face many difficulties such as limited capital, competition withforeign companies and big companies or finding business partners,etc However,

with the constant efforts of all members of the company, the company has grown upday by day, gradually gaining the trust of customers and partners, expandedbusiness relationships and gained a strong foothold in the market.

Currently, the company is continuing to grow and further strengthen thepromotion of market research to promptly respond to the needs of consumers

Through the period of internship, learning and researching how it works atThanh Dat company combined with the knowledge I have learned, I have done a

thesis with the topic: "ORIENTATIONS AND SOLUTIONS TO IMPROVE WINE IMPORT ACTIVITIES OF THANH DAT IMPORT EXPORT CO., LTD IN THE PERIOD 2017-2021" This topic revolves around the problem of

wine importation and proposes some solutions to improve the importation of wine

at Thanh Dat company

2 Objectives

The topic is researched with the purpose of finding out the current status ofwine import activities at Thanh Dat company and offering some solutions toimprove that activity

Research tasks include:

- Firstly, Overview of the Vietnamese wine market and Thanh Dat Export Co., Ltd

Import Secondly, the actual situation of wine import activities at Thanh Dat Export Co., Ltd

Import Third, Orientation and some solutions to complete wine import activities atThanh Dat Import-Export Co., Ltd

5 Research structure

In addition to the introduction, conclusion, and references to the topic, thereare 3 main chapters:

Chapter 1: OVERVIEW OF VIETNAMESE WINE MARKET AND

THANH DAT IMPORT-EXPORT CO., LTD

Chapter 2: SITUATION OF WINE IMPORT ACTIVITIES AT THANH DATIMPORT EXPORT CO., LTD IN THE PERIOD 2017-2021

Chapter 3: ORIENTATIONS AND SOME SOLUTIONS TO COMPLETE WINE IMPORTING ACTIVITIES AT THANH DAT IMPORT-EXPORT CO., LTD

CHAPTER 1: OVERVIEW OF VIETNAMESE WINE MARKET AND THANH DAT IMPORT-EXPORT CO.,

LTD

1.1 OVERVIEW OF VIETNAMESE WINE MARKET

1.1.1 Introduction of Vietnamese wine market

In recent years, wine has gradually become a favorite drink of manyVietnamese people, especially businessmen, who do jobs that often come in contactwith customers because wine makes every conversation more natural and easier.That also helps the Vietnamese wine market as well as the world to thrive With apopulation of about 97.0 million people in 2020, Vietnam's total wine consumption

is relatively high, being the third largest wine market in the Association ofSoutheast Asian Nations (ASEAN), at 15.3 million liters in 2020

Currently, in 2020 there are more than 15 wine and other alcohol drinksproduction and bottling enterprises nationwide with annual output increasing byabout 12-13 million liters The Vietnamese wine market is also being targeted bymany French and Italian wine companies because this is the best wine consumptionmarket in Asia with a growth rate of 10% By 2024, Vietnam's alcohol consumption

is expected to reach 22.3 million liters, with per capita alcohol consumption forecast

to increase to 0.3 liters per adult Red wine dominates the wine market in Vietnam,accounting for about 76% of total wine consumption in 2020

According to the Vietnam General Statistics Office, in 2019, the total importturnover of wine reached 53.2 million USD In which, Italy, Chile and France arethe leading suppliers of wine in Vietnam market, followed by Spain, USA andAustralia, etc The number of wines coming from these countries is increasing everyyear

1.1.1.1 Vietnamese domestic wine production capacity:

According to the Vietnam Beverages Association, there are approximately 15wine producers operating in Vietnam with a total annual increasing capacity ofapproximately 12 to 13 million liters However, their market share is quite limited

in comparison to their foreign rivals who have built up brand awareness and have agood reputation for quality and consistency Vietnamese wineries such as Da LatWinery, which makes some of the best locally made wines, can only penetrate thelower market segment with prices ranging from U.S $3 to U.S $6 In addition, theshortage of raw materials is another problem that most local producers are facing

So far, the wine producers in Vietnam are mostly confined to a few regions likeLam Dong and Phan Rang provinces, and the grapes do not seem to be of a qualityfor making premium wines, according to some experts Recently Da Lat Winery had

to import grapes and wine inputs from France to produce better quality wine

In general, the domestic wine production capacity is still limited, unable tomeet the needs of domestic consumers Following are some typical wine productioncompanies of Vietnam:

- Hanoi Liquor Co Ltd (Halico)

Halico produces alcoholic drinks in Vietnam in both wine and spirits, but it isespecially strong in spirits In 2021 Halico produced just over 10 million liters ofwine and spirits and expected to produce 15 million liters of wine and spirits in

2022 The company is the largest spirits manufacturer in Vietnam, with its keybrands being Hanoi Lua Moi (New Rice), Hanoi Nep Moi (New Sticky Rice), andVodka Hanoi, a form of non-flavored vodka In 2021 Halico controlled almost 41percent of the spirits in Vietnam, largely due to the popularity of its flagship brand,Hanoi Lua Moi

The company has products in both still light grape wine and sparkling wine.However, its presence in wine remains low in this highly fragmented environment,and the company has not yet managed to accrue a quantifiable volume share inwine By investing in modern product line technology and diversifying its products,Halico is aiming to meet increasing customer demands and serve all segments inspirits and wine Halico will not only concentrate on its traditional market in theNorthern Vietnam, but also plans to expand to central provinces, southern areas,Laos and Cambodia markets Additionally, Halico exported its premium brands toKorea, Japan and Taiwan as well as entered the U.S market in the last few years

- Lam Dong Foodstuffs JSC (Ladofoods)

Ladofoods is in a good position to perform well over the forecast period,especially with the increasingly favorable image of red wine and its health benefits.The company is likely to also focus on its “traditional” spin to red wine, to add tothe unique positioning for its Dalat brand

The export market has yet to become a focus for the company – instead, it isset to intensify its promotional efforts for wine sales in the domestic market In July

2007, Ladofoods negotiated with French strategic alliance P&P Import & Export Co

to establish the Dalat France Wine JV in order to grow grapes as well as produceand trade wine in Vietnam

Ladofoods is mostly famous for its wine products, with specialties inproducing and trading varieties of Dalat red wines, Dalat white wines, Dalatstrawberry wine, Dalat mulberry wine, Dankia wine, Lemon liquor, Dalat whiskey,

Dalat rum, and Aviva wine coolers Its grape varietal is Cardinal, which is grown inNinh Thuan province The wine processing technology employed by Ladofoodscomes from Italy and Germany, thus its wine products meet international standards.All products from Ladofoods, including wine and non-alcoholic products such assoft drinks and spreads, are manufactured at its factory located in Dalat city Thewinery of Ladofoods had annual production capacity of three million liters in 2020,and the company aims to upgrade its capacity to five million liters per annum in

2025 In the alcoholic drinks category, Ladofoods concentrates mostly on wine Thecompany has a presence in both grape wine and local non-grape wine sectors,although its share of non-grape wine is very small Its key products include stillgrape wines, sparkling, strawberry, mulberry, and mixed-fruit wines Still grapewine, particularly still red wine, accounts for the largest amount of sales.Ladofoods’ products are mainly sold in Southern Vietnam, particularly in Ho ChiMinh City

- Thang Long Liquor Co

Thang Long Liquor Co is one of the largest producers (distributors) of wine

in Vietnam, falling behind Ladofoods in 2005 The company’s key brands includeThang Long fruit wine, Thang Long Still Grape Wine, Thang Long Dry Wine,Thang Long Sparkling Wine, and Thang Long Vodka All of Thang Long’s productsare manufactured locally, and the majority of its sales occur through off-tradeoutlets in Northern Vietnam Thang Long Liquor Co has a grape winemanufacturing factory in Ninh Thuan province It has also built a winery withannual production capacity that is expected to reach 10 million liters in 2025 inNinh Thuan province, for the production of cardinal, shiraz and saw-blanc grapevarietals Thang Long Liquor Company’s strongest presence is in NorthernVietnam, followed by the Central Vietnam The company’s share in South Vietnam

is rather low due to its weak distribution network and a lack of effective marketingactivities The widespread presence of local wine companies coupled with agrowing presence of Australian still red and white wine brands, such as Jacob Creekhave hindered the company’s development in the South Although its product typeswere continuously diversified and their prices were economically positioned (retailprices were just only from VND 27,000 to VND 50,000 per Thang Long product),its brands still face competition from counterfeit wines In order to improve itscompetitiveness, Thang Long has decided to invest more capital in productiontechnology, to ensure its product quality, to demonstrate care for the environment bysetting up a new winery in Ninh Thuan, and train farmers there to ensure the goodquality of shiraz and sauvignon blanc grape varietals It has also focused on

branding by launching some marketing campaigns aimed at health consciousconsumers for the company’s products made from tropical fruits.

1.1.1.2 Foreign wine import capacity of Vietnam:

The value of imports of wine to Vietnam totalled $ 16.5 million in 2020.Sales of foreign wine to Vietnam decreased by 44% in value terms compared to

2019 Imports of wine decreased by $ 12.9 million (the value of imports of wine toVietnam was equal to $29.5 million in 2019) Imports of wine accounted for0.006% of total import flow to Vietnam (in 2020, total imports to Vietnamamounted to $ 261 billion) The share of imported wine in total imports to Vietnamdecreased by 0.005%, compared to 2019 (it was 0.011% in 2019 and cumulativeimports to Vietnam were equal to $ 253 billion) Imports of wine to Vietnam in

2020 (imports of commodity group to Vietnam totalled $315 million in 2020) Theshare of purchases of wine in imports of commodity group to Vietnam went down

by 4.2% compared to 2019 (it was 9.44% in 2019, and imports of commodity group

to Vietnam accounted for $312 million)

Figure 1.1: Value of imported wine of Vietnam from 2015 to 2020 (USD)

Source: Trendeconomy.com

From the chart above, it can be seen that from 2015 to 2020, Vietnam’s wineimport value has decreased ( from 22,994,898 USD in 2015 to 16,536,051 USD in2020) It can be seen a slight decrease of 3% in 2016 compared to 2015, followed

by an increase by 2% in 2017.The year 2018 witnessed a significant growth in wineimport value with the growth rate was about 22% when compared to 2017 In 2019the wine import value continued to increase with growth rate was 7% However, in

2020 the value of imported wine experienced a dramatic reduce (from 29,510,209USD in 2019 to 16,536,015 USD in 2020) Due to the fact that in 2021 the worldeconomy faced many difficulties due to supply chain disruptions caused by theCovid-19 epidemic, Vietnam’s wine import scale decreased by 44%

Table 1.1: Vietnam's top imported wine market in 2020

(million USD) Market share (%)

In recent years, the legal procedures and import tax on wine have beengreatly reduced Therefore, there are more and more companies importing wine onthe Vietnamese market, which makes total imported wine volume constantlyincrease Wine importers are now more and more experienced in carrying outimport processes and have imported products at very competitive prices.

According to Best wine importer, there are some the most reputable wineimporters in Vietnam:

- The Warehouse

The Warehouse is one of the largest wine importers in the region and hasexpanded over the years from Vietnam to Cambodia and Myanmar The

company has one of the most extensive portfolios in Asia, with over 800wines from 14 countries (all major wine-growing regions are covered) TheWarehouse also hosts a diverse portfolio of spirits.

- T.K Distribution Corporation

T.K Distribution has been operating for almost 25 years, providing a mix ofsake and wines T.K is an exclusive importer for some prestigious winebrands and is working closely with top restaurants, hotels and resorts inVietnam

- Da Loc Fine Wines & Spirits

Da Loc was established in 1995 and is one of the oldest and best known wineand spirits importer in Vietnam During this period the company evolved tooffer over 700 wines and spirits from all over the world, from high endbrands to smaller, unique products The company operates mainly in Ho ChiMinh, Hanoi and Danang and partners with HORECA, as well assupermarkets and wholesales Chilean and French wines are very wellrepresented in Da Loc’s portfolio

- Vinifera

Vinifera started its import business in 2002 and offers wines and spirits (Gin,Absinthe, Cognac, Calvados) Wines are imported from the world’s mainregions Italy, France, Spain, Portugal, Chile, Argentina, USA, Australia,New Zealand and South Africa

- Sola Hung Thinh

Sola is a Vietnamese wine and spirits importer that has been operating in themarket for many years and focuses mostly on more affordable New Worldwines This doesn’t mean that its portfolio doesn’t include brands from themain wine regions

With the current growth of Vietnam's economy and the improvement ofpeople's living standards, the development of the wine industry will have a lot ofpotential to penetrate In the short term, with the impact of the covid epidemic, thesale of wine in Vietnam will be significantly reduced But recently, the epidemic hasbeen controlled, so the Vieeth Nam wine market will have a strong recovery anddevelopment

In the long-term, the Vietnamese market will become a lucrative source ofincome for domestic and foreign wine businesses to target when Vietnam is on theverge of outstanding development in many aspects People's life and culture alsochange and improve to adapt to the international Western cultures are also widelyspread to influence the thinking of Vietnamese people In addition, the mindset ofwomen in Vietnam has changed markedly and their demand for alcohol is higher

than that of men Therefore, the wine market, especially imported wine, willbecome extremely developed in the future.

1.1.2 Characteristics of the Vietnamese wine market

1.1.2.1 Drinking culture and wine consumption trends in Vietnam

According to a survey on beer drinking conducted by the Ho Chi Minh CityUniversity of Education, targeted at Vietnamese people, especially the young, most

of the respondents agreed that drinking alcoholic products is to well observe socialetiquette, exhibit a proper manner at work, and build and maintain socialnetworking and business relationships This mindset has existed in Vietnamesesociety for ages In addition, Vietnamese people are able to consume alcoholicproducts for any celebrations

The drinking culture also reflects on consumer behavior and understanding it

is vital A research conducted by Ipsos UU reveals crucial differences in alcoholicconsumption behaviors of people living in the three main regions of Vietnam.Northern Vietnam based consumers tend to be trend followers, pay strong attention

to packaging, especially for products that are gifted and have considerableknowledge of different brands Central Vietnam based consumers tend to bereserved, less willing to try new brands, and prefer local brands The absence of avariety of brands can be a key reason for this trend By contrast, people living inSouthern Vietnam are classified as easy-going consumers who are willing to trynew brands and are knowledgeable about different brands

In the past, wine was used mainly in hotels, restaurants, bars and a smallcommunity of foreigners in Vietnam In the past, the price for a bottle of wine wasvery high compared to the general income of Vietnamese people, so beer was themost widely used alcoholic beverage at that time However, with the rising income

of the Vietnamese, along with the reduced cost of wine production, wine has movedfrom parts of Europe through Free Trade Agreements to distributors and retailers inVietnam (according to Fitch Solutions)

Currently, with the increase in income, a growing middle class has beencreated in Vietnam Since 2010, the average disposable income of each household

in Vietnam has increased by about 9.9% per year, according to Fitch Solutions In

2020, average disposable income is about 113.6 million VND

Figure 1.3: Rising Income Levels Creating A large Middle Class

Source: National sources, Fitch Solutions

Although currently heavily affected by the Covid-19 epidemic, withVietnam's development momentum, this growth trend will continue until 2024,(according to Fitch Solutions) From the increase in income, Vietnamese familiesgradually tend to look for alcoholic beverages with more expensive prices, morecomplex taste than using those with moderate prices before such as beer Theirwillingness to pay more to enjoy higher quality alcoholic beverages has created agreat opportunity for the import of foreign wine into Vietnam

Nowadays, Vietnam is not a country with a large amount of wineconsumption, people here often choose beer because it is cheaper and moreaffordable Averagely, one person in Vietnam consumes only 0.2 liters of wine peryear However, with a population of more than 97 million people, the total amount

of wine consumption is relatively large Vietnam is a large wine consuming market(15.3 million liters in 2020), ranking third only after Thailand (103.3 million liters)and Malaysia (26.7 million liters) in the ASEAN

Figure 1.4: Estimate and forecast Vietnam's wine comsumption trend from

2018 to 2024

Source: National sources, Fitch Solutions

Currently, red wine is still the main consumption trend of Vietnamese people,accounting for approximately 76% of wine consumption in 2020, which is followed

by white wine (18%), sparkling wine (2.3%), fortified wine (2.9%) Vietnamesepeople prefer imported wine to domestic wine It is easy to realize this, more andmore imported products are brought into Vietnam with different prices, along withthe people's economic life is increasing day by day, the preference for foreign goodsover domestically produced goods is an evident Wine is no exception People arewilling to spend a larger amount of money to be able to use wine products of brandsfrom other countries People do not believe in domestic wine products, and the taste

of Vietnamese wine cannot be compared with wine empires in the world

Wine is mainly consumed in big cities and provinces, for places where life isstill undeveloped, they tend to use homemade wine, medicinal wine, they have notbeen exposed to the taste of wine

1.1.2.2 Wine prices and competition in the Vietnamese wine market

The Vietnamese market has opened and witnessed a boom for a long time,along with tastes and preferences of Vietnamese consumers increasingly acceptingfood and beverages from remote regions such as Europe From 2017 to 2020, totalfood and beverages sales in Vietnam increase each year by an average of 11.3%.From 2010 to now, imported wine has increased steadily each year by about 10%.(source: Cekindo)

Since joining WTO and ASEAN, Vietnam has slightly reduced tariff barriers

on wine imports In order to further improve its long-term relationship with tradingpartners, Vietnam is gradually reducing tariff barriers for wine exporters fromAustralia (Australia) and other European countries For example, The ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) is an Agreement thatpromotes trade between wine partners from Australia and Vietnam With thereduction of tariff barriers, more and more potential opportunities are created for theimport of alcohol and alcohol products From there, creating a new demand in linewith the current income and tastes of Vietnamese people (source: Cekindo)

The wine industry in Vietnam is still underdeveloped and not as competitive

as in other major markets The wines are only sold in luxury places mainly and thesuppliers are mainly imported from abroad According to the Beer and BeverageAssociation, Vietnam currently has 15 wine business enterprises in the form ofimport - bottling and a few manufacturers and mainly companies that import wholebottles Given the huge potential of the market, the prosperity of the current salesforce, especially the demand for quality and public confidence, the imported winemarket will be very developed in the next few years

While there have been recent positive developments related to regulatorychanges, such as the end of the airline import ban and the reduction of the importtax on spirits, Vietnam still applies a series of policies to protect householdsincrease operating costs in the wine industry Some of the main taxes thatbusinesses wishing to import alcohol will be subject to include:

- 50% customs duty on cost, insurance and freight (CIF)

- 35%-65% special consumption tax

- 10% value added tax (VAT)

Despite the difficulties, Vietnam offers exciting opportunities for thoseinvolved in the wine industry There is much room for growth and the growingpublic interest in wine Consumption of alcoholic beverages is a daily routine formany Vietnamese and with the nation's growing consumer class, the number ofavailable consumers in the coming years will be substantial

1.1.2.3 Legal regulations in the import of wine:

Currently, the government has issued Decree No 105/2017/ND-CP onalcohol business, in which, some points wine businesses should note as follows:Trading in alcohol is on the list of industries and trades with conditional businessinvestment Organizations and individuals producing industrial alcohol, producingalcohol manually for the purpose of trading, distributing alcohol, wholesale andretail alcohol, and sell alcohol for on-site consumption must obtain a license asprescribed in the Decree No 105/2017/ND-CP Organizations and individuals that

manually produce alcohol for sale to enterprises that have a license to produceindustrial alcohol for re-processing must register with the commune-level People'sCommittees.

Wine produced for domestic consumption and imported wine must bestamped and labeled according to regulations, except for cases where the wine isproduced manually for sale to an enterprise with an industrial alcohol productionlicense for reprocessing

To be eligible to trade and distribute alcohol, businesses need to meet thefollowing conditions:

- Being an enterprise established in accordance with law

- Having the lawful right to use a warehouse or a warehouse system with atotal usable floor area of 150 m2 or more

- Wines expected to be traded must satisfy food safety conditions asprescribed

- Having an alcohol distribution system in the area of 02 or more provinces; ineach province, there must be at least 01 alcohol wholesaler

- There is a written introduction or a contract in principle of the alcoholproducer, other alcohol distributor or overseas alcohol supplier

- Ensure full compliance with requirements on fire prevention and fighting andenvironmental protection as prescribed

There are some general provisions for wine importers:

- Enterprises with a liquor distribution license are allowed to import alcoholand must take responsibility for the quality and food safety of importedalcohol In case of importing semi-finished alcohol, the enterprise may onlysell it to an enterprise with an industrial alcohol production license

- An enterprise with an industrial alcohol production license is allowed toimport or entrust the import of semi-finished alcohol for the production offinished alcohol

- Except for the case specified in Article 31 of this Decree, imported alcoholmust satisfy the following regulations: Goods must be labeled with alcoholstamps according to the provisions of Article 6 of this Decree; Must begranted by a competent Vietnamese state agency the receipt of theannouncement of regulation conformity or the written certification ofpublication of conformity with food safety regulations (for alcohol withouttechnical regulations) before imported and must meet state inspectionregulations on food safety for imported food

- Alcohol can only be imported into Vietnam through international bordergates

- Enterprises, including those that have not yet been issued with an industrialliquor production license or a liquor distribution license, may import alcohol

to carry out the procedures for the issuance of a Certificate of Receipt ofAnnouncement of Regulation Conformity or Certificate of Conformity foodsafety regulations with a total capacity of no more than 03 liters on a winelabel Imported alcohol in this case is not marketed

When importing foreign wine to Vietnam, it have to pay some kinds of taxes:

- Special Consumption Tax

Special Consumption Tax is a tax levied on organizations and individualsthat produce and import goods and provide services, which are required bythe State to regulate consumption Special consumption tax is an indirect taxand the tax rate is usually very high, so it has the ability to affect the use ofincome for consumption by the population

Goods and services that need to be regulated for consumption are specified

by the State in the list of goods and services subject to excise tax and maychange from time to time The basis for calculating excise tax is the taxableprice and tax rate The State collects excise tax at a percentage (%)calculated on the taxable exchange rate of taxable goods and services

Table 1.2: Special consumption tax on imported wine

Kind of wine

Tax(%)

a) Wine from 20 degrees or more

From January 1, 2016 to the end of December 31, 2016 55

From January 1, 2017 to the end of December 31, 2017 60

Based on the 2019 Preferential Import-Export Tariff Schedule, importedwine has a tax rate of 50%.

- Value-added tax on imported goods

Like other imported goods, imported wine into Vietnam are subject to 10%VAT

1.2 OVERVIEW OF THANH DAT IMPORT-EXPORT CO., LTD

1.2.1 The foundation and development of Thanh Dat import-export Co., Ltd

Thanh Dat Import-Export Co., Ltd was established and operated under thecompany law passed by the National Assembly of the Socialist Republic of Vietnam

on May 19, 2003 Thanh Dat Import-Export Co., Ltd was granted the establishmentlicense by the People's Committee of Quang Ninh province, and was granted abusiness registration certificate by the Quang Ninh Department of Planning andInvestment with the following characteristics:

Name of the company: Thanh Dat Export-Import Limited Liability CompanyAbbreviations: Thanh Dat Co.,Ltd

Legal representative: Mr Lưu Xuân Khôi

Location: Km 4, Hai Yen Ward, Mong Cai City, Quang Ninh Province

However, after 7 years of operation since its establishment in 2003, thecompany has made remarkable progress Business activities have graduallystabilized, the company has a loyal customer base, reliable business partners, andthe company's reputation is increasingly enhanced Currently, the company is on the

way to development and growing stronger with a variety of wine products with richand diverse designs.

1.2.2 Function and mission of the company

Currently, the company's main function is to trade and distribute importedalcohol products The market that the company provides is mainly in Hanoi andsome neighboring provinces Besides, the company is also constantly researching tocapture new needs in the market to find ways to satisfy those needs

Along with the above function, Thanh Dat Import-export company liability limitedalso has to perform the following tasks:

- Conduct business in accordance with the lines of business stated in thebusiness license

- Develop, organize the implementation of business plans and other relatedplans to meet the requirements and tasks of the company

- Implement commitments in foreign trade and economic contracts

- Implement staff policies, asset management regime, labor, and salary, usereasonable division of labor, train and foster the company's employees toconstantly improve their professional skills culture, professional skills

- Comply with the State's regulations on company protection, environmentalprotection, protection of historical and cultural relics, national scenic spots,social order, and safety

- Open accounting books and record books according to the provisions of theOrdinance on Accounting Statistics and subject to inspection by tax andfinancial authorities

- Pay taxes and perform other obligations as prescribed by law

1.2.3 The organisational structure of the company

Thanh Dat Import-Export Co., Ltd is a small-scale company, so theorganization of the company's operating apparatus is relatively simple

After a period of participation in the market, the scale of the company hasbeen expanded more and more, the company has also created jobs for more than 20employees, contributing to reducing the unemployment rate in our country andcontributing to the growth of the economy In the future, the company will expand,even more, making positive contributions to theoverall development of the country

The organizational structure of the company is shown in the followingdiagram:

Import-Export DepartmentBusiness DepartmentStores and Warehouses

Vice Director Of Business Vice Director Of Finance

- Responsible for foreign affairs

- Being the person who decides the guidelines, policies, and strategic goals ofthe company

- Directly sign import-export contracts

- Approve all decisions applied within the company

- Supervising and checking all production, business, and investment activities

of the company

- Be the proponent of business strategies, develop product consumptionmarkets

- Decide on financial expenses

- Supervising the entire operating system of the company

- The director has the right to recruit or dismiss employees who do not meetproduction and business needs and has the right to force the dismissal ofemployees who violate the company's rules and regulations on the operation

1.2.3.2 Vice director

Supporting the director are two deputy directors, the deputy director incharge of business and the deputy director in charge of finance

- Vice director of business: Responsible to the director for all businessactivities in the company; Receive the company's business plan target; Organize theimplementation and completion of the delivery company's plan and at the same timeensure the plan of external sources to get the highest profit; Manage, operate, andtrain staff; Building quarterly and annual production and business plans andensuring profits for the company; Reporting the company's business results to thedirector.

- Vice Director of Finance: Research on corporate law, circular decreesrelated to business lines; Develop and propose salary regulations to be appliedthroughout the company; Mastering the corporate income tax, VAT, domesticinvestment promotion law, and relevant documents on financial management issued

by the state to apply to the company; Advise the director on capital management inthe company; Evaluate quarterly and annual profit and loss statement; Check thebalance sheet prepared by the accounting department; Develop and implement themain regimes such as salary, social policies, and other policies for employees

1.2.3.3 Accountant Department

The chief accountant is the assistant to the director in performing thefinancial and accounting work of the company and is responsible for the opening ofbooks in accordance with the Ordinance on Accounting Statistics The chiefaccountant is under the direct direction of the director and assists the director indirecting the implementation of all accounting work and reporting on the company'sperformance in accordance with state regulations

The chief accountant is responsible to the director, synthesizes productionand business data, reports on the analysis of economic activities in the companymonthly, quarterly, and prepares a statement of financial needs for the director tohandle The chief accountant is entitled to check the prices of purchased goods Toparticipate in meetings of leaders to discuss business, accounting, finance,commendation, and bonus work Under the chief accountant, there are also twoaccountants in charge of recording and reflecting daily business operations,responsible for the accuracy and truthfulness of daily data

1.2.3.4 Import-Export Department

Most of the company's business products are imported, so the import-exportdepartment plays an important role in creating input sources for the company TheImport-Export Department has the following main functions:

- Searching for partners, researching domestic and foreign markets to developplans and organize the implementation of import-export business plans andother related plans of the company

- Advise the director in foreign relations, import and export policies,Vietnamese and international laws on this business

- Help the director prepare contract procedures, international payments, andother foreign trade activities

- Perform import-export business contracts and when authorized to signcontracts in this field

- Help the director to receive guests, negotiate, transact, sign contracts withforeign customers

1.2.3.5 Business Department

The company's sales department consists of 6 employees, who are assigned

to be in charge of each specific market segment Sales staff are responsible forselling goods and providing services through direct transactions with customers inthe market area they are in charge of On the basis of the general business plans setout by the Board of Directors every year (quarterly), the sales department will makespecific plans and methods of implementation, divide the sales volume and targetrevenue that each employee must complete Each employee of the sales departmentmust carry out all necessary market activities to be able to achieve the goal ofsearching for sales leads (mainly distribution agents, stores) Negotiate and signcontracts, perform customer care activities, organize goods distribution and otherrelated activities

Operational results of the sales department are reported to the board ofdirectors on a monthly and quarterly basis The business report of this period will bethe basis for making business plans and import plans for the next period

1.2.3.6 Stores and warehouses

The product introduction store is located on the first floor of the company.The store has the function of introducing, wholesaling, and retailing the company'salcohol products, understanding market needs, consumer needs to advise business

as well as receive information about the market to supply the company

Warehouse is to ensure that sales can take place continuously withoutinterruption, to promptly respond to customer needs, and facilitate smoothcirculation of goods The warehouse performs the receipt, delivery, inventory, andpreservation of the goods that the company does business with This is where theintermediary connects the company with its suppliers and customers Theemployees at the warehouse are responsible for regularly providing the status ofexport, import, and inventory in different periods to the director, ensuring that thedocuments and books are accurate, in the correct quantity and quality as required.Report any deviations for handling to ensure good business performance

The marketing staffs are responsible for researching, investigating, andcollecting daily information in the market, processing and organizing thatinformation to come up with effective measures to help the company and itsmanagement make decisions suitable determination These employees are alsoresponsible for saling to help the company expand the market, organizing theimplementation of programs to promote the brands and goods that the business doesbusiness, implementing promotions, customer conferences to create goodreciprocal relationships with customers and ensure accountability

1.2.4 Overview of the company's business activities

1.2.4.1 Features of the company's products

According to the business registration license, Thanh Dat Import-Export Co.,Ltd is allowed to trade in import and export of consumer goods, of which thecompany's current main business is imported wine products This is one of the itemsthat are classified as special consumption goods and this item is also mainly aimed

at mainly serving the needs of men

In Vietnam today, if we compare the market share of foreign alcohol withdomestic wine, foreign wine has a higher market share of about 80% becauseaccording to the general psychology, Vietnamese people prefer to use foreign wines,

especially foreign wines, which are chosen by consumers as gifts during theholidays, so the demand for foreign wine is increasing.

On the other hand, with the increasing trend in living standards and income,consumers will tend to use high-quality wines that can satisfy their own needs andthey will also choose wines that they enjoy and good for their health Therefore, inthe future, foreign wines will be more and more popular, especially imported wines

1.2.4.2 Capital and assets of the company

Capital of Thanh Dat Import-Export Co., Ltd is mainly formed from twobasic sources, which are self-additional sources from annual profits and borrowingsfrom credit institutions, other agencies and organizations As of December 2021, thetotal working capital and fixed capital of the company is VND 6,764,000,000 inwhich working capital is VND 5,526,000,000 including mainly value of goods,cash, bank deposits and some other assets accounted for 81.7% of total capital Inaddition to working capital, which accounts for the majority of the company's totalbusiness capital, fixed capital is also an indispensable condition when conductingbusiness, including: shops, offices, transportation and handling equipment officeequipment

1.2.4.3 The company's workforce

Over time of the business process, the number of employees in the Companyhas also continuously increased:

Table 1.3: The company's workforce

Source: Report of the company's business results over the years

Looking at the table above, we can see that along with the increase inbusiness size, the total number of employees with long-term and short-termcontracts with the company tends to increase In 2019, the company had a total of

15 employees, in 2020 the company had to employ a total of 18 employees, anincrease of 15% Not stopping at that number, because in 2021 the company'sbusiness activities achieved relatively good results, the company expanded its scale

more, therefore, the total number of employees jumped to 22 employees, anincrease of 22.3% compared to 2020.

Table 1.4: The structure of the labor force

Source: Report of the company's business results over the years

Not only has the number of employees in the company increased, but thestructure of the labor force has also changed significantly, especially with theincrease of the type of workers with university degrees Looking at the above table,

in 2019 the company has 15.3% employees with university degrees, in 2020 thistype of labor accounts for 16.7%, up 9.2% compared to 2019 and by 2021, it hasincreased to 18.9 % increased by 13.3% compared to 2020 This possitive change isalso partly due to the company's policy to attract qualified workers, and thecompany has used the fund and bonuses relatively well to encourage employees towork more efficiently However, this increase in the number of workers withuniversity degrees is still not high, so there are still some difficulties in the process

of organizing business activities

1.2.4.4 Characteristics of customers and partners

1.2.4.4.1 Company's customers

The company's customers are now mainly concentrated in Hanoi, accountingfor more than 50% of the company's customers In addition, the company also has anumber of customers in other provinces such as: old Ha Tay, Thai Nguyen, QuangNinh, Hai Phong The company's headquarters is located in Quang Ninh province,

so the company's sales work is easily dispersed, not centralized, making it difficult

to manage the sales network However, the biggest disadvantage currently fromcustomers affecting the company's sales is the delay in payment of goods, which hascaused a relatively large amount of capital of the company to be lost stagnationeverywhere, suggesting that the company should take timely measures to overcomethis situation

1.2.4.4.2 Suppliers

Currently, the company's business products are imported mainly fromvarious countries such as France, Thailand, Scotland, the United States in whichmainly imported French wine products because French wine is very popular withdomestic consumers The company's imported alcohol products are sourced fromcountries with developed industries, so the products imported from these countriesare of very good quality

The company's imported wine products are quite diverse and reasonablypriced, suitable for a wide range of customers from middle-income people to high-income people The company is currently actively exploring new markets with newproducts to meet the increasingly diverse consumer needs of customers

Step 1: Market research •• Domestic Internationalmarket market research research

Step 2: Importing planning

Step 3: Negotiating and signing import contracts

• Negotiating transaction

• By phone

• Via fax or mail

• Signing contract

Step 4: Contract execution

CHAPTER 2: SITUATION OF WINE IMPORT ACTIVITIES AT THANH DAT IMPORT EXPORT

CO., LTD IN THE PERIOD 2017-2021

2.1 THE PROCESS OF IMPORTING WINE AT THANH DAT EXPORT CO., LTD

IMPORT-The wine importing process of Thanh Dat Import-Export Co., Ltd has fourmain steps, which usually lasts for 3-6 months The import process of Thanh DatImport-Export Co., Ltd is done through the following steps:

Figure 2.6: The import process of Thanh Dat Import-Export Co., Ltd

2.1.1 Market research

Market research is the starting point to determine the business strategy of theenterprise To be successful in the market requires any business to conduct marketexploration and penetration, which is a necessary first job for every business whenstarting a business, doing business business or want to expand and develop thebusiness

Aware of the prerequisite importance of this work, even though its scale isnot large, since its inception, Thanh Dat Import-Export Co., Ltd has identified andselected a number of staff specializing in research and development Marketresearch and exploration (both domestic and foreign markets) in order to discovernew needs, find new customers for the business and collect information on thebusiness environment, especially business information about competitors Allinformation about competitors must be reflected in a timely manner so that themanagement can have strategies to deal with fluctuations in the market Marketresearch is organized by the import-export department in conjunction with thecompany's sales department and stores.

2.1.1.1 Domestic market research

Researching the domestic market is a step that Thanh Dat Import-Export Co.,Ltd pays great attention to because the domestic market is the main output of thecompany's imported goods The company has specific research methods for eachcustomer group as well as each potential market, the company also has a marketresearch team that works relatively effectively Research shows that the Vietnamesewine market is currently very active, especially with the increasing trend of foreignalcohol consumption, which increases the interest of many businesses in thisproduct, leading to higher and higher competitiveness advantages With suchdomestic market characteristics, the company conducts specific research ondemand, price and competitors

Through the current state of the market research process, in general, thecompany's research on domestic market research is relatively well conducted,analyzing demand, price, and competitors on the basis of fact-finding as well asclear reasoning The company has clearly identified the factors affecting domesticdemand, thereby making forecasts that are close to reality and have specific plans inimport activities However, with a small scale, the company's ability to penetratenew markets is still limited, so many potential markets are ignored

2.1.1.2 International market research

International market research is conducted by the company in a number ofmarkets where the company has many partners providing products and goods forthe company The purpose of international market research for import activities is toknow about prices, payment terms, supply volumes, delivery times, and incentivesfrom the government of the exporting country, etc This factor will directly affectthe stability of the business process and the company's reputation with customers

When Thanh Dat Import-Export Co., Ltd researches international markets, itoften uses two methods: direct and indirect research Due to limited funding, directresearch often provides accurate information about the market but is rarely used.Currently, the company mainly uses indirect research through books and magazines,through external economic information centers or through self-advertisinginformation of partners This form of market research allows the company to reducecosts, but the results are not high due to the lack of practicality From the process ofinternational market research, Thanh Dat company has conducted transactions withmany partners in a number of markets such as France, Poland, USA, Scotland, etc.

Through the process of international market research, it is found that thecompany has achieved certain achievements, reflected in the efficiency of importactivities, the company has penetrated into the international market and theproportion of imports has increased continuously over the years However, whenresearching international markets, the company mainly uses indirect research, so theinformation obtained is incomplete, which causes many disadvantages whennegotiating with partners and difficulties in finding the right information and themost profitable supplier for the company

2.1.2 Import planning

After receiving the report on market research, the company's managementwill conduct a detailed business plan such as how much is the quantity of importedgoods? With what price? Which market to enter? Advantages and disadvantages?

In the step of making a business plan, Thanh Dat Import-Export Co., Ltd hasbuilt in detail, the proposed plan has high reliability and makes the negotiationprocess more favorable, avoiding the case that the market highly depends onsuppliers and buyers are easily pressured by suppliers

2.1.3 Negotiating and signing import contracts

2.1.3.1 Negotiating transaction

After the business plan is made and approved, the company will negotiate and sign an import contract The company implements the negotiation process in two forms:

Firstly, negotiating transactions by mail: Thanh Dat Import-Export Co., Ltd

is a small company, so the form of negotiation transaction by mail is mainly used,because it’s not only to save costs but also to create favorable conditions for boththe company and the partner companies, who are exporters, have time to considerand think to make the best decisions However, this method has the disadvantage

that it takes a long time to receive information from partners due to long maildelivery times, so the company may lose better trading opportunities The companywill also be confused in guessing the partners' intentions In order to overcome theabove shortcomings, the company has paid great attention to the content of the letterand constantly trained good staff so that the negotiation is the most profitable.

Second, negotiating transactions via fax and phone: In many cases, time willnot allow the use of mail transactions, that is when the company needs to sign acontract in a short time to promptly import the necessary goods, then the companywill have to negotiating transactions via fax or phone In this way, the company willshorten the transaction time, quickly come to an agreement and sign a contract withthe partners Besides the advantages of this form of being quick, easy, and timely,this form also has disadvantages such as limited transaction time because of veryhigh international fax and telephone charges, which causes transaction costs toincrease, leading to an increase in product prices, affecting the company's profits Inaddition, negotiation over the phone is very easy to be misunderstood due to the use

of foreign languages in negotiation, with the fast time, there will be no time toconsider and think, just a little mistake will lead to disputes or difficult settlementprocess because of oral transactions, nothing as evidence for settlement agreements

2.1.3.2 Sign an import contract

After negotiating with foreign partners, the company will sign an importcontract In the process of signing the contract, the company also has certainexperiences and is always cautious, strictly and legally implemented, and ensuresbenefits for both parties After the contract is signed, the legal relationship isestablished and the parties are obliged to strictly perform the commitments stated inthe contract

2.1.4 Contract execution

To perform the import contract, Thanh Dat Import-Export Co., Ltd conductsthe following steps:

- Apply for an import license from the Ministry of Trade

- Open L/C at Vietnam Bank for Industry and Trade with the conditions stated

in the import contract: Buy cargo insurance Since most alcohol products arepackaged in fragile glass bottles, buying cargo insurance will prevent thecompany from being damaged in transit

- Do customs procedures: In the difficult customs procedure that the companyencounters, the company must be responsible for declaring and applying thetax code to the goods, then it takes time for the customs officers to

recalculate the tax rate In addition, some customs officers also work inbureaucracy without a high sense of responsibility and are less agile, whichtakes a lot of time, which makes customs clearance procedures less efficient.

- Receive goods

- Check imported goods

- Make payment procedures

- Complaints and complaint handling

In the past time, most of the import contracts of the company have takenplace very smoothly, so disputes and lawsuits rarely happen, which createsconfidence for the company to continue to develop in the coming time

2.2 ACTUAL SITUATION OF WINE IMPORTATION OF THANH DAT IMPORT-EXPORT CO., LTD IN THE PERIOD OF 2017-2021

2.2.1 Scale of import

In recent years, the wine import activities at Thanh Dat Company haveundergone many significant changes, the wine import turnover has continuouslyincreased over the years This increase is due to the company's constant innovation

in the way it works, as well as research to find out potential markets, analyze to findout its weaknesses and strengths to find suitable solutions for the company to grow.Besides, the expansion of the company's business activities to new markets and withnew partners, this proves that the company is increasingly asserting its position inthe market, creating trust with customers and partners

Table 2.3: The company's import turnover in the period 2017-2021

Year Import turnover

(USD)

The increase and decrease compared

to the previous yearValue (USD) Ratio (%)

Source: Report of the company's business results over the years

From the table 2.1, it can be seen that the company's wine import turnoverhas continuously increased over the years with an average growth rate of17.33%/year, specifically in 2020 import turnover increased by 23.34% compared

to the previous year It can be seen an increase of 14.15% in 2019 compared to

2018, in 2020 an increase of 23.34% compared to 2019 Particularly in 2021, thegrowth rate of alcohol import turnover is lower than in previous years Due to thefact that in 2021 the world economy faced many difficulties due to supply chaindisruptions caused by the Covid-19 epidemic, import turnover will only increaseslightly compared to previous years, in 2021 import turnover will only increase by14.29% compared to that of the year 2020

The reason for the growth in imports is primarily due to the expansion ofbusiness activities into new markets along with accumulated experience over manyyears and reputable partners to supply alcohol to the company The import volume

of the company is increasing, besides, the accession to the World TradeOrganization (WTO) forces Vietnam to cut import tax, making the import tax onalcohol reduce from 80% to 65%, which also contributed to increasing thecompany's alcohol import turnover over time

The increase in import turnover at the company in the past time is a greatmotivation for the company to continue to further improve its business activities,contributing to creating jobs for many people who contribute to the growth anddevelopment of the country

Figure 2.7: The company's import scale in the period 2017-2021

Source: Report of the company's business results over the years

Looking at the chart 2.2, we can clearly see the trend of increasing wine imports of the company over the past time, within 5 years from 2017 to 2021, the import turnover of the company has nearly doubled (from 98,214 USD in 2017 to

$188,235 in 2021) this is a good sign for the company's development

Every year, the company will base on the data on the growth of domesticconsumption, the development trend of the domestic and international markets andthe growth in import turnover to propose an appropriate import plan in thefollowing years

2.2.2 Structure of import turnover

2.2.2.1 Import turnover by kinds of wine

There are many varieties of wine, each made from different grapes with avariety of processing styles Based on winemaking, there are four basic types ofwine:

- Red wine: Red wine is one of the most popular wines Red wine is madefrom black grapes, the taste of the wine will gradually change from bone-dry tosweet.

- White Wine: White wine will be made from green grapes, however, forsome white wines, it is also made from black grapes Unlike red wine, white winehas a lighter and more characteristic concentration, in addition, instead of just theflavor of grapes, it also has flavors of other fruits such as apples, pears, etc

- Rose Wine: Rose Wine is a wine also made from black grapes, but unlikered and white wine, the grapes are cleaned before aging Sometimes Rose Wine is acombination of white and red wines It is that combination that creates a wine with afull range of characteristic acrid and sweet flavors

- Sparkling Wine: This is a wine that is aerated before bottling, the gas beingaerated is usually carbon dioxide The taste of sparkling wine is also very rich fromacrid to sweet

During the whole operation, Thanh Dat Import-Export Co., Ltd onlyimported 3 main types of wine These are red wine, white wine and a small amount

of rose wine These wines are all well researched by the company and have beentrusted by reputable suppliers for many years The table below will show the importresults by kinds of wine from 2017 to 2021:

Table 2.4: Import turnover by kinds of wine of the company 2017-2021

Value(USD)

Ratio(%)

Value(USD)

Ratio(%)

Value(USD)

Ratio(%)

Value(USD)

Ratio(%)