FMCG market: the race is in the high-end segment

The FMCG sector in Vietnam is predicted to continue to have a growth rate of 20% per annum until 2025.

fmcg market: the race is in the high-end segment hinh 0

Seventy percent of population is aged 15-64, the total spending of Vietnamese is expected to reach US$173 billion by 2020, and one-third of population is expected to belong to the middle class by 2020, and income is to rise by 8.8% per annum. 

The predicted growth rate of 20% per annum is also making Vietnam an attractive destination for FMCG manufacturers. 

According to Euromonitor, the spending level per head on FMCG in Vietnam remains low compared with other emerging markets. 

Vietnam's rice, pasta and noodles market value is estimated at VND28 trillion and it is forecast to grow by 3% in the next five years. The figures are VND23.7 trillion and 4% by 2020. The bottled beverage sector had value of VND92 trillion in 2017, and is expected to grow 13% in 2017-2020.

Though the market is full of potential and the sales of FMCG are good, the profit from every product is relatively low. Therefore, manufacturers focus on the high-end market segment to improve profit margin.

An analyst commented this is a good decision, because consumers tend to become choosier and their income has improved, thus making high-quality products affordable. 

In general, the profit margin manufacturers can expect in the market segment is higher, and they don’t have to compete on price.

Masan Consumer Corp at the 2018 shareholders’ meeting reported satisfactory business performance in Q1 with net revenue up by 78.3% compared with the same period last year. This was attributed to the strategy on focusing the high-end market segment.

The company projects revenue of VND6 trillion for spices in 2018 and growth rate of 15-20% for convenient food sector with 1/3 coming from new products.

Kido has reported a 15.7% growth rate in 2017, higher than the average growth rate of 14.7% of the industry thanks to high-end products. It confirmed that it is developing these kinds of products this year. In its latest move, it has marketed Taiyaki ice cream with Celano brand.

The FMCG market is so promising that it has attracted companies in other business fields as well. Digiworld (DGW), known as a digital product distributor, jumped on the bandwagon in 2017.

Though revenue from FMCG in 2017 was modest, VND50 billion only, accounting for 1.3% of total revenue, Digiworld still has high expectations in the business field, planning for VND200 billion in revenue this year and VND600 billion by 2020.

Digiworld has joined hands with the companies which have high-end products, but remain newcomers in the market. 

Vietnamnet

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