Seemed Simple but Far From Easy: Common Misconceptions When Investing in the FMCG Sector

Jun 27

In recent years, Vietnam’s fast-moving consumer goods (FMCG) sector has shown impressive growth. With a young population, high consumer demand, and the booming e-commerce market, this sector has become a magnet for foreign investors. However, behind the profit figures lie numerous legal landmines that many investors stumble into simply by overlooking critical details.

At DEDICA, we've assisted many foreign investors in the packaged consumer goods industry through some truly “head-scratching” legal challenges. Most of these obstacles stem from seemingly “minor” issues that carry significant legal consequences when ignored.

Legal Barriers Often Overlooked by Foreign Investors

Many foreign investors enter the Vietnamese market believing they’ve “completed all legal paperwork,” only to be halted at the first production step. Why? Because they missed specific legal obligations unique to the packaged consumer goods industry—a highly regulated field overseen by multiple agencies. These can include licensing requirements, product testing, food safety, hygiene, environment, and more. Even a small omission can halt operations—and these barriers usually don’t appear in the initial investment documentation—they only reveal themselves once production begins.

Lack of Understanding of Conditional Industries and Ancillary Permits

Many investors think getting an Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) is enough to start production. In reality, the consumer goods sector—especially food, cosmetics, chemicals—is subject to conditional business restrictions. Companies also need to:

Apply for sub-permits such as the Food Safety & Hygiene Certificate, Quality Standard Declaration, Product Notification Receipt, etc.
Comply with Vietnamese labeling requirements under current law.
Conduct periodic or batch-specific product testing depending on the product type.

Failing to complete or delaying any of these steps not only incurs administrative penalties but risks business suspension and product recall.

OEM/Contract Manufacturing Agreements: A Legal Trap Without Process Control

Many investors begin with contract manufacturing or OEM arrangements to test the market. But if the contract lacks precision, they can face issues like:

Loss of product quality control, leading to consumer disputes.
No clear agreement on ownership of formulas, trademarks, or packaging—allowing partners to replicate and sell independently.
Undefined legal liability if products violate regulations or get recalled by authorities.

How to Mitigate Risks When Investing in Vietnam’s Packaged Consumer Goods Sector

Foreign investors often turn to DEDICA when they realize they’ve “taken a wrong step,” sometimes after operating for some time and discovering gaps in their legal framework. To avoid that pitfall, a structured investment strategy must be established from the outset with legal compliance as its foundation. Risk mitigation isn’t just about reactive damage control—it’s about proactive planning from entity setup, factory, staffing, to intellectual property protection and compliance with industry-specific regulations. With a solid legal base, businesses both minimize losses and easily scale once the market is ready.

Start with a “Legal-Ready Mindset”—It’s More Than Just Administrative Paperwork

First and foremost, DEDICA advises all FDI clients to view legal setup as a core business strategy, not a mere formality. A robust and compliant legal system guides companies to:

Save time and costs in the long run.
Prevent unexpected disputes and penalties.
Build credibility with partners and authorities.

At DEDICA, we support investors from selecting investment locations and reviewing factory lease agreements to designing production processes aligned with Vietnamese law. We also assist with internal labor regulations, salary scale registration, environmental compliance, and other crucial yet often overlooked tasks.

Proactive Trademark and Formula Protection

Another common mistake is prioritizing production and marketing while neglecting early registration of trademarks and product formulas. This creates risks such as:

Trademarks being snatched by third parties when the product becomes successful.
Formula leaks due to lack of confidentiality agreements and legal safeguards.

DEDICA’s legal team has helped numerous foreign FMCG firms register brand protection and copyright for packaging, giving them peace of mind when expanding throughout Vietnam and Southeast Asia.

Real Case: Japanese Cosmetic Brand Holds Up Due to Missing Testing Procedures

Client B, a well-known Japanese cosmetics firm, decided to open a skincare product factory in Vietnam. They invested in advanced production lines, imported high-quality raw materials, and even flew in Japanese experts to train staff. However, just before product launch, authorities demanded a recall—because the product lacked component testing certification and approved Vietnamese labeling.

They then approached DEDICA. We promptly conducted testing procedures, compiled product registration dossiers, and liaised with regulatory bodies to minimize administrative penalties.

After this costly lesson, Client B engaged DEDICA as their regular legal advisor—avoiding similar issues in future.

The packaged consumer goods sector is a lucrative but legally sensitive market. Overlooking even small details can lead to significant repercussions—or threat business continuity in Vietnam.

DEDICA Law Firm—with extensive experience in FDI and FMCG—stands by clients from initial setup to product market launch. We provide not only legal advice but strategic solutions to help investors invest wisely, grow sustainably, and minimize legal risk.

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