Huynh Bich Tran, associate director of Retail Measurement Services, Nielsen Vietnam, said FMCG growth in Vietnam in Q3 and Q4 2017 compared to a year ago had an average volume growth of 3%. This made it the fourth-highest growth in Asia-Pacific, below India (8.2%), Malaysia (5%) and China (4%).
In terms of the value contribution to the FMCG sector, beer and non-alcoholic beverages each constitute almost 20%, while food makes up more than 16%.
For the total value growth in 2017 compared to 2016, the top three FMCG categories are beer (10%), non-alcoholic beverage (7%) and food (7%).
Within food, the greatest growth comes from the impulse food category such as biscuits (11.9% growth), cake/pie (8%) and snacks (21%).
Huynh elaborated on four visible trends in the Vietnamese market: health and wellness, premiumisation, convenience and indulgence.
Health & wellness, and trust
Huynh said the figures regarding health are telling. Citing Nielsen surveys and global trend reports, she said 37% of Vietnamese consumers consider health to be among their top two concerns, while 90% are concerned about the long-term health impact of artificial ingredients (versus 75% globally), and 76% want to know everything that goes into their food (74% globally).
More than that, 83% actively make dietary choices to prevent bad health conditions (79% globally), 89% are willing to pay more for foods that promote health benefits (76% globally), and 88% read packaging labels carefully for nutrition content (75% globally).
Among the top differentiating attributes that Vietnamese consumers consider when choosing healthy products are calcium-fortified, vitamin-fortified, mineral-fortified, micronutrient-fortified, made from vegetables or fruits, all-natural, high in fibre and low or no cholesterol.
Some manufacturers and products in the Vietnamese market have capitalised on this and highlight products with these attributes. They include Knorr’s vitamin-fortified bouillon, Milkiss’ fortified biscuits and using 100% natural milk, and Khong Chien’s Oishi snack that is baked, not fried.
On the other hand, Vietnamese consumers’ trust first has to be addressed. To “I trust health claims on food packages”, only 57% agreed (versus 63% globally). For “Health claims are just a way for manufacturers to charge more”, 60% agreed (58% globally).
To “I feel more positively about companies that are transparent about how products were made.” 83% agreed (73% globally).
“This means that it is not only the physical product that they look at but also the process in producing the product is really important,” said Huynh.
“Right now, we see a lot of TVCs for milk powder categories that talk about the process because they want to make consumers believe in their products.”
Huynh said food firms can take a leaf from China, to have clean and concise labels. In Vietnam, 74% look for products with a simple and recognisable list of ingredients (64% globally).
Vietnamese consumers also view white or transparent packaging to be connected to something natural.
She said consumers are also more attracted to products with trusted and traceable claims, including more using QR codes to trace the origin.
In terms of value contribution by price tier across all food categories, the premium category is increasing.
The premium category of instant noodles increased from 32.5% to 36.2% from 2016 to 2017. This growth trend can be seen for most food categories including soy and oyster sauce, biscuits and cake/pie, when compared to a year ago.
However, premiumisation has not always equalled to successful price increase or sales from it.
It is important to note that Vietnamese consumers associate premiumisation with high-quality materials or ingredients (63%); superior function or performance (50%); and superior style or design (49%).
Need for convenience
Meanwhile, more and more Vietnamese are living in urban areas than rural areas, in smaller yet more well-to-do households.
From 2015 to 2025, the urban population is projected to increase from 34% to 40%. Huynh said secondary cities especially will grow.
Furthermore by 2021, average household sizes will decrease from 4.5 in 2000 to about 3.5 in 2021, while average wages will rise from less than USD 50 per month to about USD 300.
This will lead to an increased need for convenience, and a boom of convenience stores or mini-marts in the country.
In January 2017, there were 700 convenience stores and 1,134 mini-marts. In February this year, there were 823 convenience stores and 1,817 mini-marts.
“These factors indicate what action is needed,” said Huynh.
“Focus on smaller pack types; capture the demand for convenience and on-the-go solutions; bridge gaps in consumer needs from existing retail environment through e-commerce and delivery options; create strategies to capture the valued single consumer segment; and explore premium and luxury opportunities.”
Related product growth categories in value share from 2016 to 2017 include instant cup noodles at 69%, pre-mixed soy sauce at 4%, frozen food at 9% and sausages at 26%.
Importance of innovation
Lastly, Huynh said, in Vietnam, the proportion of consumers who bought new products on their last grocery shopping trip was very high at 88%, compared to Thailand at 77%, Indonesia at 72%, Malaysia at 68% and Taiwan at 58%.
This indicates their interest and openness to new products launched in the market.
Huynh said the formula for a “breakthrough new product launch” is distinctiveness — how to add new value/proposition to differentiate, relevance — whether there is a sizeable need, and endurance — the distribution effort.
One example is Chocopie Dark, launched in October 2017. It had 70% more cocoa and was sold at a premium price. After three months, it had 2.5% share.