Middle East conflict drives up input costs for the food and beverage industry, with price increases of 5-15% across some ingredients

The Middle East conflict is pushing up input costs for Vietnam’s food and beverage sector by 5-10%, with some ingredients rising as much as 15%, according to experts. The simultaneous increase across multiple cost categories is creating significant pressure for manufacturers.

Cost pressures driven by energy, logistics and agricultural inputs

At the Fi Vietnam 2026 press briefing on April 9, Ms. Ly Kim Chi, president of the Ho Chi Minh City Food and Beverage Association, said the conflict is raising costs across three main pillars: energy, logistics, and agricultural inputs.

She noted that higher crude oil and gas costs are increasing production expenses and the cost of plastic packaging and aluminum. At the same time, disruptions to international shipping routes have lifted freight charges, raising prices of key imported inputs—including sugar, vegetable oils, cereals, and additives—by about 5-10%.

Fertilizer prices have also surged in the Middle East context, contributing to a ripple effect across agricultural commodities. Ms. Chi said around 50-60% of a sector’s input materials have increased in price, covering both imported and domestic inputs.

Supply access tightens as freight and cold storage become harder

Beyond higher costs, companies are also facing challenges in securing supplies. A manager at a Ho Chi Minh City firm importing spices and dairy ingredients said global supply is not tight, but shipping to Vietnam has become increasingly difficult since the conflict began.

The executive cited higher freight rates and a shortage of cold containers, leading to delays for many orders. They added that while the company is trying to maintain selling prices, margins are being eroded as input costs rise 7-15% depending on the item, and that if the situation continues, price-adjustment pressure may be difficult to avoid.

Retail prices lag as firms draw down inventories

Industry observations show that despite sharp input-cost increases, retail prices for many essential items at supermarkets have not risen in line. Ms. Chi attributed this to the practice of large companies holding raw-material inventories for 3 to 6 months, which helps maintain prices in the short term.

She said many businesses are willing to narrow margins, including selling at break-even or taking losses on some items, to maintain supply and stabilize the market. However, she warned that the room to sustain prices is shrinking as stockpiles decline, and that retail price pressures may become more visible if energy and logistics costs remain elevated.

Outlook: demand support, but SMEs face structural challenges

From an international perspective, Rose Chitanuwat, ASEAN project director at Informa Markets, said the sector still has room to grow despite higher global costs, supported by essential consumption demand. She pointed to Vietnam’s market strength and tourism advantage, noting that international visitors have remained high even amid global instability.

“Tourists to Vietnam still need to eat, so the food and beverage sector remains stable and indispensable,” she said.

Ms. Chitanuwat also highlighted a major challenge: most firms are small and medium-sized enterprises (SMEs). While large groups typically have robust quality-control systems, many smaller businesses—particularly those linked to street food—may struggle to ensure food safety, which affects consumer and international tourist trust.

She further noted opportunities to expand into new markets such as Halal, described as a rapidly growing segment globally. To do so, firms would need to meet international standards and invest more in products, processes, and certifications.

Recommended responses: optimize costs and move toward value-added

Experts said companies cannot rely on price competition as costs rise. Instead, they should optimize costs and enhance value-added. Assoc. Prof. Dr. Hoang Kim Anh, a member of the Standing Committee of the Vietnam Academy of Agricultural Sciences and Technology, recommended that firms use domestic raw materials to reduce import dependence and improve production processes to reduce waste and raise operating efficiency.

He added that in the long term, the sustainable approach is to invest in downstream processing to add value rather than exporting raw materials.

Sector data: production and exports continue to grow

Despite ongoing cost pressures, the food and beverage market continues to expand. Data cited at the briefing show the industrial production index for the first two months rose 13.2%. Exports in Q1 reached 16.69 billion USD, up 5.9% and the highest in six years, indicating the sector remains on a growth path despite fluctuations.