Vietnam - A Fertile Market for the Fast Moving Consumer Goods Industry

With the third largest population in Southeast Asia, nearly 70% of the population is of working age (16-60 years old), Vietnam is a large market for the fast-moving consumer goods industry. The process of international economic integration is increasingly deep, the average income per capita is increasingly improved, which is the driving force for the consumer goods industry in general and the fast-moving consumer goods industry in particular to develop very strongly in the coming time.

Vietnamese consumers have many choices of Vietnamese products.

Fast-moving consumer goods (or consumer packaged goods) are low-priced products that are consumed, recycled and expired quickly within a short period of time (usually less than 1 year). In the light manufacturing sector, fast-moving consumer goods include major product groups such as beverages (including beer), food, milk, personal and household care products, cigarettes, etc.

During the period 2010 - 2014, Vietnam's economy had a high and stable growth rate (about 5-7%/year), leading to the stable growth of the consumer goods sector in general and fast-moving consumer goods in particular. In particular, the real growth rate of consumer spending in retail was 3%, consumer goods (not food and beverages) 6%, other food and beverages 3%.

During the period 2014-2015, the beverage product group continued to have good growth with 38% of the total sales of the entire FMCG industry and achieved the highest growth rate of 6.7%. The development of beverage products mainly came from beer, energy drinks and soft drinks. Milk and dairy products increased by 12% in urban areas and 20% in rural areas. In contrast to the beverage product group, the consumption market for the remaining product groups still faces many difficulties, especially for household care products such as laundry detergent, packaged food, etc.

Total real revenue of consumer goods related sectors in Vietnam is expected to increase to 140 billion USD in 2016. This is a great opportunity for fast-moving consumer goods enterprises to boost production, expand markets, and seek growth opportunities.

In terms of market, while the growth rate of the FMCG industry in the six main cities of Vietnam (Hanoi, Ho Chi Minh City, Hai Phong, Can Tho, Nha Trang and Da Nang) seems to be gradually saturated, the rural market has emerged as a new source of growth.

While urban areas only grew at around 1.6%, the rural market grew at 2.7%, mainly due to volume growth. The leading product groups with the fastest growth rates in the rural market are energy drinks, dishwashing liquid, bottled/canned milk, bottled water and soft drinks…

Vietnam’s rural population accounts for 68% of the total 90 million people and currently only 54% of FMCG sales go to rural areas. Rural income growth has also reached about 44% in the past 3 years. This shows that the rural market still has a lot of potential opportunities. Expansion into the rural market in Vietnam is appropriate and it is important to have a plan to focus appropriate investments in rural areas.

Sustainable development of fast-moving consumer goods industry

Although they have achieved relatively positive growth in recent times, in general, enterprises producing fast-moving consumer products still have some limitations such as weak financial capacity, many products depend on imported raw materials...

With the goal of providing solutions for sustainable development of the industrial sector in general and the fast-moving consumer goods sector in particular in Vietnam, in the "Vietnam Industrial Development Strategy to 2025, vision to 2035" approved by the Prime Minister in Decision No. 879/QD-TTg dated June 9, 2014, it is clearly stated: Effectively mobilize all resources from domestic and foreign economic sectors to develop and restructure the industrial sector towards modernization; focus on training skilled, disciplined and creative industrial human resources; prioritize technology development and transfer for sectors and fields with competitive advantages and modern, advanced technology in a number of agricultural, forestry and fishery processing, electronics, telecommunications, new and renewable energy, mechanical engineering and pharmaceutical chemistry; Adjust the distribution of industrial space reasonably to promote the strength of linkages between industries, regions and localities to participate deeply in the global value chain.

To realize the contents of the Vietnam Industrial Development Strategy in the coming years and to overcome existing limitations, create conditions for the fast-moving consumer goods industry to develop sustainably in the domestic market and gradually dominate foreign markets, the State needs to continue to issue appropriate development incentive policies, focusing mainly on supporting enterprises in promoting, registering product trademarks, protecting industrial property, promoting trade, training, providing market information, etc.

In addition, enterprises need to have a strategy to promote investment and product development in rural areas. Building appropriate distribution channels, along with introducing, promoting and selling convenient products that are suitable for the consumption culture of different regions, is very important to support the consumption of goods. In particular, enterprises need to promote the development of new products because the consumer goods market is constantly changing, improving and creating new products not only stimulates consumer demand but also helps the market grow.

Vietnam has one of the youngest population structures in the world (56% of the population is under 30 years old), and total consumer spending in Vietnam is expected to double and reach approximately 173 billion USD by 2020. This will lead to an average growth rate of about 20%/year in the fast-moving consumer goods market in Vietnam, surpassing large markets such as India, China, etc.