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Vietnam’s FMCG market pursues growth at home and abroad

While slowing moderately, in line with general economic trends, Vietnam’s fast-moving consumer goods (FMCG) segment is continuing to expand, with strong areas of potential growth both at home and abroad.

The rate of expansion of FMCG sales in Vietnam’s six main population centres slowed somewhat in the first quarter, according to a survey conducted by market research firm Nielsen, rising by 3.6% year-on-year (y-o-y). This compared to 5.7% growth in the fourth quarter of 2015.

Beverages, including beer, dominated FMCG sales in the first quarter, accounting for 39% of turnover, with milk products contributing 16% and food 15%. This was followed by tobacco products (13%), personal care items (8%), household products (6%) and baby products (4%).

Market challenges

The easing of FMCG sales growth reflects a wider cooling in the Vietnamese economy, with GDP expanding at 5.52% y-o-y in the first half, down from 6.32% for the same period in 2015.

The slowing of sales is also the product of a more sophisticated client base, according to Nguyen Anh Dung, Nielsen Vietnam’s director of retail measurement services.

“Urban consumers are increasingly demanding and expecting better choices. They’re looking for more innovations and new consumption experiments,” he told local press earlier this summer. “With a lack of innovation, FMCG is becoming more basic items, which consumers would still buy, but only at a sufficient level.”

The Vietnamese public’s appetite for new products is both a challenge and an opportunity. According to a recent product innovation study, Vietnamese consumers try more new products than other South-east Asian shoppers, with 88% of Vietnamese consumers saying they bought a new item during their last shopping trip, compared to a regional average of 69%.

This trend is something of a double-edged sword. While maintaining customer loyalty to existing brands is a challenge for manufacturers, this willingness to try new things is also a key advantage for firms breaking into the Vietnamese market or existing players launching new product lines.

However, as trade barriers are lowered as a result of the ASEAN Economic Community and the Trans-Pacific Partnership, Vietnamese FMCG producers are likely to face greater regional and international competition.

Potential remains strong

Though there has been some slowing, medium-term potential in the market is strong, according to a report issued by the Ministry of Industry and Trade early this year. Fuelled by growing incomes and a young and active consumer base, FMCG spending is expected to reach $173bn by 2020, up 23.6% from the $140bn forecast for this year.

Indeed, consumer confidence remained strong heading into the second half of the year. Sentiment in the second quarter was only marginally down on the opening three months of the year, according to an August Nielson survey, with the index at 107 points, two below the first quarter’s peak.

The vast majority of Vietnam’s manufacturing and processing firms also have a positive outlook for the second half, a General Statistics Office survey reported, with more than 90% of respondents expecting production to either increase (55%) or remain stable (35.4%) in the second half of the year.

Market prospects

With Vietnam’s population expanding by 1m per annum, the potential consumer market is significant, and the penetration rate for many FMCGs has yet to be maximised, according to Mai Kieu Lien, CEO of dairy industry leader Vinamilk.

“As in other ASEAN markets, Vietnam’s rapid urbanisation and rising incomes led to a growing adoption of Western styles, which led to a boom in FMCGs,” she told OBG. “However, purchasing power in Vietnam is also one of the lowest in the region, so a localised strategy based on pricing has to be put in place.”

A number of leading Vietnamese FMCG producers are looking further afield for opportunities, with the country’s near neighbours seen as having strong potential.

Kajiwara Junichi, CEO of food manufacturer Acecook Vietnam, told OBG, “Most companies are not focused on South-east Asia, especially Indonesia, as they have their local giants. Laos, Myanmar and Cambodia are good markets to enter, as they are not as mature as Thailand.”

Another area of potential growth is Vietnam’s rural regions, home to roughly two-thirds of the population. According to a report by market survey firm Kantar WorldPanel, household income in rural areas is rising faster than in urban centres, albeit from a lower base.

Sales of domestic FMCGs are already increasing at more than twice the rate of foreign brands in the segment, and Vietnamese brands’ market share in non-urban areas is set to grow from 54% of total FMCG sales in 2015 to 64% by 2020.

This Vietnam economic update was produced by Rey Davis-Tuplano, Editorial Manager Vietnam, Oxford Business Group.

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VIETNAM RETAIL SECTOR BRIEFING 2016

With increasing incomes, rapid urbanisation together with strong economic growth and young population, Vietnam is nowadays one of the fastest growing retail markets in Asia. The year 2016 has seen a significant emerge in retail sector with many remarkable events such as high-value M&A affairs or serial opening of convenience store chains so far; while the amount of FDI generally maintains robust.
For details of the report, please see attached file here 

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The Queen’s 91st Birthday Party - Sapphire Jubilee

 

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British Ambassador to Vietnam Giles Lever giving welcome speech

 

The BBGV staff had the honour to join The Queen’s 91st Birthday Party – Sapphire Jubilee on Tuesday, 06th of June 2017, along with representatives from Her Majesty's Armed Forces, British Embassy Vietnam, other diplomatic missions in Vietnam and the community of honorary enterprises.

 

The ceremony began by a moment of silence to commemorate the victims of the incidents happened in Manchester and London, and followed by the national anthems of The UK and Vietnam. The attendants then welcomed with the speech from the British Ambassador to Vietnam Giles Lever, the British Consul General Ian Gibbons and HCMC Deputy Chairman Le Thanh Liem, highlighting fruitful achievements in economic and other social aspects from the friendship between UK and Vietnam governments.

 

Also mentioned in these speeches the Incubator Unit concept which The BBGV Business Centre is on the way to put into practise. Our aim is that British and Vietnamese companies can trade together in an accessible and equitable manner… The BBGV Incubator would provide flexi-desk arrangements, meeting rooms and facilities for UK businesses as an additional service for those companies requiring physical office support and services.

 

Clients of the Incubator would benefit from the professional support of the BBGV Business Centre team and network in order to facilitate their business goals in Vietnam. BBGV would assist in connecting to the right individuals and organisations and form partnerships with the Vietnamese business and governmental sectors.

 

The structure - which would require a business visa to be issued – would allow UK companies a quick and cost-effective set up and licensing path in order to identify and meet key business contacts, and deliver business success.

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A brief on Healthcare sector of Vietnam

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Vietnam’s health system is a mixed public-private system, in which the public system plays the key role, especially in policy, prevention, research and training. In 2015, Vietnam had approximately 1,316 hospitals with 2.89 beds per 1,000 populations. The private healthcare sector has grown steadily and the number of private hospitals has grown dramatically in recent years, representing 13.2% of hospitals and 4% beds nationwide. This number highlights opportunities for investors to enter the healthcare market.

 

Healthcare expenditure in Vietnam reached a value of USD13.9bn in 2015 and increased to USD14.9bn in 2016, marking a year-over-year growth of 9.6% in local currency terms. By 2025, healthcare expenditure is expected to reach USD33.7bn, more than doubling over the decade. A large and expanding population, rising incomes and improved access to healthcare services will act as key drivers of healthcare sector growth over the forecast period.

 

In addition to State funding, Overseas Development Assistance (ODA) and private sector funding, PPP is increasingly seen as a potentially important mechanism for Vietnam to improve its growing healthcare system.

 

The medical device market in Vietnam is considered as one of the Asia's fastest growing medical device markets, with a 2015-2020 CAGR of 9.0%. It ranked as the ninth largest market in the APAC region, valued at USD781.8mn in 2015. Most modern health equipment in hospitals is imported as the quality of domestic health equipment in Vietnam has yet to meet the national and international standards. Local production accounts for only 5% of the market. Domestic production is limited to basic items such as consumables. Some multinationals (B Braun, United Healthcare, Mediplast, etc...) have set up plants, attracted by low manufacturing and labour costs.

 

Only local companies can distribute medical devices in Vietnam, foreign companies must therefore sell their products through appointed local distributors and agents. VINAMED (Vietnam Medical Equipment Corporation) is one of the country's leading distributors. Vietnamese buyers, especially in the public sector, generally expect to deal with a local distributor to handle all aspects of distribution, from delivery to after sales service and provision of spare parts.

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Free UK- Import Inquiries Service for Vietnamese Companies

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The Business Centre provides a free service to Vietnamese companies, in the form of first-line confidential inquiries issue on the UK government’s portal: https://opportunities.export.great.gov.uk/.

Import & partnership demand from Vietnamese companies are raised on this portal. The portal targets UK businesses who are keen on exporting to specific countries including Vietnam. Business Centre then connects interested UK businesses to the respected Vietnamese companies.

For the past three months, we have posted 25 inquiries and connected around 18 Vietnamese companies with around 80 UK prospects.

 

Details of inquiry service:

Step 1: Vietnamese companies can submit inquiries to the BBGV Business Centre via phone, email or in person, following the template .
Step 2: BBGV Business Center will upload the inquiries onto the portal within 3 working days
Step 3: Additional quality control measurement will be applied and managed by the UK government (maximum 10 working days)
Step 4: UK companies start bidding within the deadlines. BBGV will assess the capability of interested UK companies and connect the suitable ones to the Vietnamese side.

The service is expected to deliver excellence connection between Vietnamese companies and potential UK exporters, enabling Vietnamese companies to broaden their product portfolios and seek sustainable operational solutions in order to improve their competitive advantages and satisfy customers.

For more information, please visit our website: https://opportunities.export.great.gov.uk/

 

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UK Export Finance (UKEF) Chief Executive Officer visits Vietnam

Chief Executive Officer of UKEF Louis Taylor, during his three-day visit to Vietnam, brought goodwill to foster infrastructure development with a credit financial support package of up to 1.5 billion GBP.

 

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 Louis Taylor together with HCMC Deputy Chairman Le Thanh Liem at their meeting. (Source: HCM City People’s Committee Website)

Mr. Taylor held discussions on competitive long-term packages with public and private project sponsors in Hanoi. On the third day of his visit, Louis Taylor travelled to Ho Chi Minh City and held several meetings, including one with Mr. Le Van Liem – Deputy Chairman of HCMC People’s Committee.  Mr. Liem appreciated the offer from UKEF for the infrastructure progress of Vietnam and looked forward to further investment from UK companies in different sectors, in particular for Healthcare and Education projects. Mr. Taylor expressed a firm belief in the significant progress made by  Vietnam’s economy and, expressed his hope that the with UKEF support that the UK could continue to support the development made to date. 

Louis Taylor also met with UK business leaders in HCMC including the Urban Development Working Group, Mr Kenneth Atkinsion  - Executive Chairman of Grant Thornton Vietnam and Mr Tom Vaizey - Legal Counsel of the Dragon Capital Group. 

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