Regaining market share
Because she suffers from alopecia, Pham Linh Dan, a 30-year-old copywriter living in Hanoi, has decided to only use shampoos made of natural ingredients for her hair. Her favourite shampoo is Italian Nashi, an organic mix made with Argan and linseed oil.
Dan prefers not only shampoos, but many other daily products made with natural ingredients such as face lotions, sun screen, foundation, eye shadow, or perfume. Dan has also bought natural items like talcum powder, shampoo, and body lotion for her two-year-old daughter.
“Natural ingredients ensure that there are no side effects such as skin allergies for users. Therefore, their prices are often 20-30% higher than those of conventional products that might carry harmful substances,” said Dan, adding that she has now gotten into the habit of finding out information about the components of products.
According to Huynh Bich Tram, deputy director of market research firm Nielsen Vietnam, a recent survey by the company on the natural cosmetics market in six countries in the Asia Pacific region-including Vietnam-showed that 88% of Vietnamese consumers would buy new and improved products for personal use, including high-grade product lines using natural ingredients. This is the highest score in the region.
Figures show that Vietnamese spend an average US$4 per capita per year on cosmetics. However, Vietnamese women alone spend an average VND140,000 (US$6.3) on cosmetics a month, mainly chosen through two advisory channels, namely from friends (70%) and from websites (58%).
The total value of cosmetics imported into Vietnam was US$500 million in 2011 and jumped to US$2 billion in 2016, according to International Trade Centre figures. It is expected to touch US$3-4 billion this year in the wake of soaring demand for natural cosmetics from foreign countries.
Not only for foreign players
With an annual growth rate of 30%, the domestic cosmetics market has attracted many global cosmetic brands such as L’Oreal, Kanebo, Ohui, The Body Shop, The Face Shop, Shiseido, Yves Rocher, and others. These brands have all launched natural cosmetics, shampoos, and nourishing items containing vitamins C and E.
To match the trend, multi-nationals with factories in Vietnam such as Unilever, Kao, and P&G have also marked products as using local natural ingredients such as soapberry, green tea, cucumber, saffron, aloe, rice bran, or husked rice.
However, the domestic cosmetics market is no longer reserved for foreign players, as local firms have recently scaled up efforts to regain shares in the segment.
Familiar local brands on the market are Miss Saigon and Fresh by Saigon Cosmetics JSC (SCC), Thorakao by Lan Hao Cosmetics Production Ltd., Thai Duong by Sao Thai Duong JSC, as well as Lana and E 100 by Dai Viet Huong Ltd., (VIETCOS).
According to SCC business director Nguyen Phuoc Hung, natural shampoo and perfume products currently make up more than 30% of the company’s total revenue.
For traditional shampoo lines such as soapberry shampoos, the company has teamed up with foreign partners to re-design product packaging.
For new product lines such as shampoos using extracts from neem leaves or pomelo leaves, the company has been cooperating with foreign partners to study products ear-marked for above-average target customers.
“Despite keeping up with domestic and foreign rivals, we currently only account for a market share of about 2% due to a slow pace in new product development. We aim to raise our market share to 3% this year,” Hung said.
Lan Hoa Cosmetics Production Ltd., with its Thorakao brand focuses on producing items made of herbs and plants such as aloe, citronella, saffron, pomelo leaves, and soapberry.
With their competitive pricing, the company’s products are favoured in rural markets. Thorakao aims to widen its global footprint in Saudi Arabia, Australia, the US, France, and Africa.
Distributors also join the game
Having entered the Vietnamese market more than a year ago, Korean-inspired fashion and lifestyle store chain Ilahui has boosted its presence with 37 outlets in 26 provinces and municipalities throughout Vietnam.
The Vietnamese franchiser VIC Retail brought the shop chain to Vietnam after the chain had already dropped anchor in Dubai in the UAE, the Philippines, China, and Thailand. This year, Ilahui is set to increase its number of outlets to about 50, with a surge to 63 locations planned for next year.
According to Bui Ngoc Quynh Giao, Ilahui Vietnam’s brand director, aside from expanding its shop distribution, Ilahui will also bring several natural organic product lines by well-known global brands to Vietnam to catch the trend.
In April 2018, the brand will bring a wide assortment of cosmetic products ranging from makeup to skin and hair care items catered to men, women and children to Vietnam, with prices ranging from VND200,000 (US$9) to VND1 million (US$45) for each item.
“This year, Ilahui focuses on distributing products in the food and beverage and organic cosmetics segments,” said Giao.
As a competitor, LaBambi, presumably Vietnam’s first natural cosmetics distribution system, came into being several months ago. Until now, six major local natural cosmetics brands-TheHerbalCup, Skinna, SheaGhana, Myin, Karose, and Bambi Green-have all become available at LaBambi.
Giao from Ilahui Vietnam said that aside from products by renowned foreign brands, local eminent cosmetic brands can also join Ilahui outlets.
Often, local brands do not have good packaging and are weak in marketing, leading to high marketing costs. In addition, there is a ‘bottleneck’ related to input material sources, which explains why local cosmetics firms must think carefully before entering the natural cosmetics market. Currently, herbal materials report unstable quality. Therefore, to increase market share and compete equally with global brands, local brands-apart from having to improve design, packaging, and distribution systems-must secure material sources of stable quality.