At a recent business forum in Hanoi, Phan Chi Dung of the MOIT told a capacity audience that the growth of the foreign sector in the market for so called fast-moving consumer goods (FMCG) has really put the pressure on domestic brands.
Mr Dung, who is the general director of the MOIT Light Industries Department, said FMCG are consumer goods that people use every day and purchase frequently that have a useful life of less than one year.
More durable goods that have a useful life of more than one year and a slower sales frequency such as household appliances, furniture and home improvement products are referred to as slow-moving consumer goods (SMCG).
The competitive landscape for FMCG is being shaped by large transnational consumer packaged goods (CPG) companies the likes of US-based Procter & Gamble (P&G), Unilever, L’Oréal and Nestlé.
These large companies, said Mr Dung, have invested large amounts of money into research and development of their brands and fine-tuned their products specifically to meet with Vietnamese consumer tastes and demand.
Many of these CPG companies are manufacturing their products in China and Thailand and shipping them into Vietnam, which accounts for increased exports in the latest official figures from these two countries.
In addition, brands from Japan and the Republic of Korea have made significant headway into the local FMCG market as evidenced by the proliferation of convenience stores in the nation’s major cities.
At the forum there was considerable discussion about the lop-sidedness of the market penetration achieved by the foreign sector in reference to development in the nation’s urban and less densely populated rural areas.
There was general consensus by the panel of government and economic leaders at the forum that the increased market share achieved by the foreign sector is largely confined to the urban areas, consistent with a 2015 Nielsen forecast.
There was also much speculation as to why Vietnamese are choosing foreign made goods over locally produced. Some members of the panel and audience suggested consumers have simply lost faith in the food safety of locally produced goods.
Others said they thought Vietnamese brands were of equivalent quality and price but that foreign companies did a much better job of advertising and marketing their products and truly ‘branding’ them in the mind of the Vietnamese consumer.
Mr Dung, suggested local companies selling FMCG adjust their sale strategies to concentrate more heavily on the rural areas in the short term while they strategize how to compete more effectively with the savvier foreign competitors entering the market.