Consumer Connection 2013
Ho Chi Minh City, Vietnam - Kantar Worldpanel, the global market leader in consumer panels, held its Consumer Connection 2013 – Map your journey to success on 15th October 2013 at Nikko Saigon Hotel. Kantar Worldpanel’s clients and invited guests were treated to an exclusive session designed as a platform to capture the current trends of consumption habits and inspire them to make well-informed decisions within the FMCG market. The event was structured into five main Connection Points, with the key messages as laid out below.
1. GLOBAL OUTLOOK
How to decode global consumer trends into local initiatives?
Today, global consumers are always connected, convenience-seeking, self-indulgent, health-driven, and value-conscious. Through 5 highlighted global mega trends, Kantar Worldpanel is delighted to discuss how those latest trends will shape demand and impact marketing strategies going forward.
Given the worldwide increasing Internet availability, together with the use of Smartphones and social networks, there is a huge opportunity for Vietnam to develop online shopping further with more creative approaches to shoppers. The second consumer portrait appears in the context of a busier lifestyle where more women are working; urban cities are more crowded and people spend less time for doing shopping and cooking. This drives our thoughts on more in-store services, innovations for easier shopping and ready-to-serve products.
Thirdly, individuality shapes a typical global consumer today, who has a greater desire for entertainment with a purpose of instant gratification. To meet his demand, more consumer segmentation, customized communication, diversified shopping experience and exclusively offered products should be considered. We can’t forget to mention about health, one of the key global concerns, as long as more people are facing health issues and spending more on functional food. It implies a need for educating a healthy life and care for ingredients, offering functional products or OTC products in-store.
Last but not least, more and more global consumers are seeking for value items, by trading down or opting for private label and hard discount. To address their needs, let’s think about/ consider appealing promotion, private label or economical product line. Maximizing loyalty cards or price benchmark in-store or online are also good initiatives to drive revenue growth.
2. TODAY’S CHALLENGES
What’s behind the slowdown of the FMCG market?
Even though long term perspectives are extremely promising for Vietnam, ones would tend to acknowledge that the local economy is currently facing major challenges which have resulted into a moderate growth over the past 3 years – the national GDP has only increased by +5% on average over this period in comparison to a +8% before the 2008 global crisis.
As the local economy slows down, so does the FMCG industry. Taking into consideration this sluggish environment, Vietnamese households are today more concerned about their future. From the Quarter 2 2013 Kantar Worldpanel Smart Shopper survey, the % of respondents who agreed that “the country economic condition in Vietnam will be better than today in 6 months’ time” has dropped by 6 points versus last year. As such, consumers are also more cautious when it comes to their FMCG spending – from the Quarter 2 2013 Kantar Worldpanel Purchasing Confidence indicator, about half of the urban families think “this is not the right time to make big purchase”.
In urban Vietnam, households’ response has been illustrated through different reactions in regards to their purchase habits on FMCG. From the Kantar Worldpanel FMCG Consumer Panel (4 key urban cities of Vietnam), we have noticed some changes over the first semester 2013 that lead to a +10% increase in value compared to a +16% increase for the same period last year. At first, although the average value spent on FMCG keeps increasing among high-income families who continue to up trade on their product choice, lower class families on the other hand have no other choice than to cut down their budget especially on Dairy and Packaged Foods. For a large majority of those lower class families, lower spending means that they drop out ‘nice to have’ categories (e.g. RTD Tea, Facial Moisturizer, etc.) while chose smaller pack size on other (e.g. Canned Pate, Floor Cleaner, etc.). Picking up more products on promotion and downgrading (e.g. Soya Sauce or Taste Enhancer, etc.) are also 2 alternatives for those lower income families to save on their consumption. But more ‘value’ options does not mean that consumers will turn more towards low quality brands as illustrated by the recent stagnation of the Private Label. One of the latest trends we noticed that is to put in light with the fact that consumers have been considering more proximity retailers (street shops, convenience stores) at the expense of hyper-supermarkets over the past 6 months.
Looking forward, the country CPI is forecasted to drop back a little further in the coming months while the economic outlook is currently more positive, so we would expect better results in the second half of the year. Nevertheless, all in all, winning brands in 2013 would be those who are able to: (1) maintain their investment in media to communicate the value of their products, (2) take advantage of the shifting needs in terms of price tier and pack size, (3) adapt their retail strategy to capture moving consumers.
3. SHOPPER CONNECTION
How to ride the wave in the rapidly changing retail landscape?
3.1 The retail market in Vietnam is changing rapidly
Started with the opening of the very first supermarket in HCMC in 1994, Modern Retailing was continuously expanding its footprint and become more and more popular to Vietnamese shoppers. Yet, recent economic difficulty in Vietnam has had some short-term slow-down impact on the growth of Modern trade. In this context, less shoppers move to Hyper-Super market to shop and some even switch back from Modern trade to Grocery stores. This slow-down can be explained by some reasons. Firstly, more than half of shoppers still think that price in Modern trade is higher than that in Traditional trade while the product quality is not significantly better. Secondly, shopping in Modern trade has not yet been convenient in comparison with the small shops at street corners.
Meanwhile, under long term perspective, with certain advantages and the huge investment from both local and foreign retailers, Hyper-Super market is expected to expand and grow further. Along with this growth, the shopping behaviors will definitely change. Shoppers tend to make bigger trips, pick up bigger items and go shopping less frequently. However, they will be less loyal and switch brands easily, which makes the competition in Modern trade much fiercer. Therefore, manufacturers should spend more efforts and perform more outstandingly in order to win shoppers in this channel.
In recent years, the retail market in Vietnam has also seen an impressive development of mini markets and convenience stores. 20% shoppers in 4 key cities are already attracted by this new format and with the mushroom growth of new stores; this number is expected to expand further in the coming years.
3.2 Influencing the shoppers is uneasy yet still feasible
Tough economic conditions combined with an explosion in new technology and an appetite for all things digital means that shoppers no longer follow a simple linear path to purchase.
Being relevant at the place of purchase is not enough. It’s important to recognize that the shopper journey starts at the point where people identify a need to purchase, wherever that might be! 55% of shoppers make shopping list before going to stores and this ratio is much higher among Modern trade shoppers. Besides “to fill-in few items” which is the key reason for shopping across channels, promotion is also a tool to attract shoppers for Modern trade.
So many decisions are made in stores! Especially in Modern trade and wet market as 64% of the shoppers there say that they did buy something out of their plan. Visibility and promotion are 2 factors impacting them the most. The brands should not just get into the stores. To really get the attention, it should be outstanding with good designs and in the diamond zone. Moreover, the advice from retailers can play some roles in Traditional Trade.
Consumers are “forward thinking” while shoppers are “task-oriented”. Understanding the path to purchase of your shoppers will help you make the right marketing strategy to influence them.
4. MEASURE OF SUCCESS
What makes a successful launch?
Every year, manufacturers invest billions of USD on new product innovations to meet constantly evolving consumer needs and usage occasions. More than 60% of urban consumers would like to see more new products to ease their life.
New products are substantial to market growth, and even more prevails when the market slows down. Yet, our finding shows that the survival rate of new products in the second year of launch is 71%, and in the third year is only 40%. Therefore, continuous support is the key to sustainable growth of new products. Manufacturers need to build awareness and visibility through media communication and strong distribution in the first year, while shopper-based promotion campaigns are encouraged in the second year to retain buyers and defend against competition from copycats.
Kantar Worldpanel Vietnam monitors consumer purchase behavior of more than 100 FMCG categories from its 2,350 urban household panel, and by closely studying nearly 300 new variants of 25 major categories* in the last 5 years, our analysis indicated that in one year after launch, a new product (variant level) can attract 1 in 15 households (7% penetration), of whom, 28% have repurchased.
The level of penetration varies across different categories, and higher among high frequency categories such as detergent, liquid milk or soya sauce. In general, new product launches in food and beverage categories can recruit more buyers than non-food categories after one year of launch. An average new launch in big categories can attract 3 times bigger client size than small & medium categories after 1 year launch but the repeat rate is not much different.
Noticeably, trial build slows down dramatically after 3 months. After this initial period, the performance of a new launch can be fairly predictable. Therefore, marketers have 90 working days to best target the early adopters. In addition, manufacturers can improve the success rate of the new products by understanding how consumers shop the categories and quantify the business opportunities associated with launches into new segments.
5. RURAL DISCOVERY
What worked for Urban may not necessarily grant your success in Rural
Accounting for nearly 70% of population and 60% of GDP nationwide, rural Vietnam emerges as an indispensable target for manufacturer’s growth in recent years. It is noted that rural consumer behaviors are different from those of urban and also vary across regions.
In general, rural consumers tend to prioritize necessities as having smaller cash outlays than in urban. With high family-orientation, northern consumers dedicate bigger wallet share for foods and home care while healthy trend drives central market, especially in beverages. With higher income, southern consumers are willing to spend for more advanced needs (in dairy and personal care) and seeking for convenience. In terms of shopping habits, rural consumers shop less frequently, with less bulky baskets and smaller tickets. Small packs are still essential, especially in the South. Besides, rural consumers pay only half that of urban in each shopping trip. Street shops, especially Mom & Pop stores, account for two third of rural FMCG value. However, Wet market should also be considered in central and south where it contributes nearly one third of FMCG revenue. Tet season is highly important in rural (especially in north and central) as FMCG value growth during Tet (vs. normal month) is twice higher than urban.
The rural picture is changing rapidly and showing huge business opportunities and first entry advantages. In such market, what have worked for you in urban may not necessarily grant your success in rural. Therefore, in-depth understanding of the consumer behavior differences and changes by rural regions is vital for manufacturers to capture the opportunities and win the game.
(*) 25 categories include: adult milk powder, liquid milk, yoghurt, instant coffee, chocolate malt beverage, soya sauce, taste enhancer, hair care, skin cleansing, facial care, body care, deodorant, oral care, sanitary napkins, laundry, fabric conditioner, dishwashing liquid, and household cleaners.