Transnationals dominate Vietnam personal care market

VOV.VN - Large transnational companies have rapidly taken control of the manufacturing and retail beauty and personal care segments of the Vietnam economy, say leading market analysts.

transnationals dominate vietnam personal care market hinh 0
At a recent conference in Ho Chi Minh City, the analysts said the reason is in large part due to lack of investment by domestic sector companies in research and development as well as the latest technologies among other things.

Deputy chair of the Vietnam Essential Oils, Aromatherapy and Cosmetics Association, Nguyen Van Minh said the domestic sector has only a 10% market share though they could easily compete with transnationals in terms of quality but for the lack of equity or debt capital.

Mr Minh said there are only 14 domestic sector manufactures operating in the country. He noted that Korean transnationals hold a 30% market share followed by those from the EU (23%), Japan (17%) and Thailand (13%).

The US and other countries account for the remaining 7%, he added, but the market is dynamic and market shares can change quickly.

According to the latest estimates by market research company Mintel, the personal care retail market in Vietnam is thought to be worth US$1.78 billion, a figure that should grow to US$2.35 billion in the near term.

Although the market is not large by international standards, its rapid expansion is creating opportunities in most personal care categories including body care, colour cosmetics, facial care, soap, fragrances, bath, hair care and sun care.

The growing demand for organic personal care items such as those for natural hair care, skin care and cosmetic products is expected to ignite growth in the personal care market over the short term.

Increasing consumer disposable incomes coupled with changing lifestyles has contributed to the rising demand for chemical-free skin and hair care products by Vietnamese consumers, other analysts at the conference noted.

Consumers are aware of the ability of natural ingredients to provide anti-oxidation properties and improve skin immunity and now with more money in their pockets—that is a major factor fuelling market growth.

Consumers are moving away from petroleum based products in favour of natural products, said Huynh Ky Tran, director of Lan Hao-Thorakao Cosmetic Company, noting that this gives domestic companies an advantage over foreign competitors.

Vietnam agriculture produces many plants that are perfect for the manufacturing segment such as aloe, citronella, saffron, grapefruit and soapberry that his company uses to make their personal care products.

Transnationals have much higher manufacturing and transportation costs than we have in Vietnam, said Mr Tran. The fact that we can buy natural products locally at favourable prices and our manufacturing costs are not as high gives us a competitive advantage in the local market.

Where the 14 companies comprising the domestic sector come up short is in terms of equity or debt capital for investing in research and development as well as modernized machinery and equipment incorporating the latest technological advances.

The domestic sector companies also skimp on marketing expenses and as a result lose out on sales.

Consequently, most of the domestic sector manufacturers produce facial and hand cleansers that are targeted at low income consumers who base their purchasing decisions almost entirely on cost.

A sizeable proportion of domestic manufacturers products, probably around 60%, said Mr Tran, are also exported to poor African countries and low income markets in Laos and Cambodia.

VOV

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