Vietnamese people are changing their habits when they go shopping.
The United Nations Development Program (UNDP) has ranked Vietnam in 11th position in terms of foreign direct investment (FDI) attractiveness. Moody’s, meanwhile, places Vietnam in 6th position worldwide for its industrial assets, AT Kearney’s ranks it as one the most attractive countries in the retail industry, and the International Data Corporation (IDC) named Vietnam among the ten countries with the greatest potential IT growth.
Despite the global recession in 2009, Vietnam still managed to obtain the highest GDP growth among Southeast Asian countries. In the years to come, however, it must also cope with macro challenges such as inflation, the trade deficit and the devaluation of the Vietnam dong. Infrastructure appears to remain weak, with poor public transport, one national highway, and a shortage of electricity. Urban areas are becoming more crowded and polluted and heavy traffic jams are common.
A Modernising society
The modernisation of Vietnamese society has had a major impact on Vietnamese housewives, who today remain quite traditional with prominent values being family-oriented, preferring to cook at home, and favouring Vietnamese brands. Vietnamese housewives today need some assurance before purchasing a new product.
They look for products with quality labels and seek products with a long history and credentials. When they find a product that satisfies their safety needs, they will stick to it!
They are also becoming more open to healthy and indulgent products in saying “I worry about my health more than before”, and “Maintaining my good looks is important to me”. Besides housewives, it’s also important to highlight the emergence of the younger generation - more than half of the Vietnamese population is less than 30 years old. The generation “15 to 30 years” in 2010 is going to play an important role in the workforce within ten years. In 2020 Vietnam’s population should reach approximately 100 million people and enter into a golden age for its workforce.
The urban population will be more and more educated and richer. Ten per cent of today’s urban population has a university degree! Thanks to that, Vietnamese now get better jobs with higher responsibilities: white-collar workers now account for 13 per cent of the urban population, while it was only 8 per cent in 2003.
In line with the above, the average household salary in urban areas increased 15 per cent in 2009 against 2008. Household size is shrinking, from more than five members per household to four, and households are better equipped: DVD player ownership reaches nearly 100 per cent, washing machines 61 per cent, computers 50 per cent and even the microwave oven is entering Vietnamese urban kitchens, with 22 per cent ownership already (compared to just 4 per cent in 2003).
Urban households are getting more and more connected to the world. Mobile phone ownership reaches 94 per cent (only 80 per cent in 2008) and 40 per cent of households have an internet connection at home (25 per cent in 2008). In 2008, 42 per cent of urbanites who are more than 15 years old connected to the internet and the average time spent online each day has increased significantly, from 22 minutes in 2007 to 43 minutes in 2008. In summary, a new era of information and technology is beginning in Vietnam: the three main mobile operators in Vietnam are now providing 3G services, social networks are mushrooming and Vietnamese newspapers are going online. As a consequence, the leading fast-moving-consumer-goods manufacturers (fast moving consumer goods) have been increasing their digital footprint over the years.
Electronic wallet services have developed in Vietnam: travellers booking tours at www.viettravel.com.vn can pay online via the Mobivi electronic wallet. Some companies have started to propose more commodities to customers when it comes to pay, such as the plastic card “Flexicard” from Petrolimex gas stations.
Nowadays, 20 per cent of Vietnamese have a bank account and around 17 million ATM cards are in use.
A modernising consumer
FMCG in Vietnam grew by 11 per cent in value in 2009, primarily thanks to higher volume consumption not price increases.
Convenience is one of the main trends: 67 per cent of housewives said that they like to prepare food that doesn’t require much time, compared to 64 per cent in 2008. Over the years we have observed significant changes from some key categories in Vietnam, like coffee. During the 1990s packaged coffee in Vietnam was mainly represented by R&G and soluble coffee. During the 2000s packaged coffee was represented by instant coffee and, in 2010, we see the emergence of ready to drink coffee with brands such as Birdy or Nescafe, which are highlighting the convenience trend among key markets in Vietnam.
The ready-to-drink tea category, which aims to replace the traditional “tra da” and CSD, has been literally exploding in the past couple of years, with more than 300 active references, and the “good for health” benefit is now claimed more and more.
Vietnamese consumers are not just looking for convenience; they are also looking for health benefits. In the seasoning powder category we can observe a real switch in terms of consumption, from MSG to Granules, as Granules are perceived to be a convenient cooking aid and healthier than MSG.
This convenience and health trends affect the personal care sector as well. Nappies for babies are on a very good trend, as well as baby wipes. Baby wipes, a perfect example of a convenient product for young mothers, are booming significantly: more and more baby wipes references are available on the market with additional “healthy” benefits like Aloe Vera and Vitamin E. Drinking yogurt with additional active ingredients (functional drinking yogurt such as yakult and probi) are on a very good trend, and 75 per cent of housewives say that they like products that have additional “active” ingredients like vitamins, ginseng, and calcium.
A modernising society, a modernising consumer and a modernising shopper as well, Vietnamese shoppers are smarter especially when it comes to purchasing fast moving consumer goods. They are looking for more convenience as well: 58 per cent of housewives said “I like to buy all my groceries in one store”. Today, shoppers purchase less frequently but put more in their shopping baskets. They save time.
In this context, traditional trade remains the main shopping channel in Vietnam for fast moving consumer goods. However, modern trade has been catching up over the years and today has 20 per cent value share in urban Vietnam. In comparison with other Asian countries, we can still forecast better performance of modern trade in Vietnam. In 2009, the hyper/supermarket format led the growth of fast moving consumer goods in urban Vietnam, with 20 per cent growth in value, while wholesale and wet markets lost ground.
The store traffic in hyper/supermarkets is much higher than before. In 2009, 37 per cent of urban households bought fast moving consumer goods monthly in hyper/supermarkets (compared to 32 per cent in 2005), and the purchase frequency has also increased: +1 purchase occasion per year and per household. Today, hyper/supermarkets assets are numerous according to Vietnamese housewives: easier to find products, safer products, more new products, a wide choice of products, better quality products, everything in the same place and better promotion.
However there are still some points for improvement for hyper/supermarkets, such as “always crowded and spend too much time queuing” and “more expensive perceptions”. The more expensive perception has been improved quite a lot recently. In 2008, 70 per cent of housewives stated that hyper/supermarkets were more expensive, which fell to 60 per cent in 2009.
The change in this perception is perhaps due to the emergence of private labels in hyper/supermarkets. Private labels represented only 0.5 per cent value share of fast moving consumer goods in 2008, then nearly 2 per cent in 2009.
Finally, let us not forget rural Vietnam, which accounts for 70 per cent of Vietnam’s population and contributes nearly 60 per cent to the country’s GDP. More than that, today, 54 per cent of the rural population belongs to a family that earns at least VND1.5 million ($80) per month. This population is becoming reachable for manufacturers and represents 36 million available consumers.