FMCG Monitor May 2018
FMCG growth: Challenges and opportunities?
Key market highlights in May 2018 issues:
Vietnam’s economy continues showing positive results. CPI has remained under control (less than the target 4%), however, seeing a pickup in short term which requires government’s efforts to manage in the rest of the year. Retail sales of Consumer Goods keep growing steadily at double-digit rate. The local demand for consumer goods, the performance of industry and service sector and export are main contributors to the economic growth during the first months of 2018.
In line with the global trend, achieving growth in FMCG industry is getting more difficult. The FMCG market grows slower in both Urban (4 cities) and Rural Vietnam, posting a modest growth. Consumers continue shopping less often with less categories in their shopping basket, which leads to the lower volume of in-home consumption.
Personal Care and Beverages are leading the growth in both Urban 4 Cities and Rural. Other sectors experience negative performance, even Dairy, the potential sector in Rural, posts a flat growth in this area. With a more challenging environment, two trends still prevail: convenience and health, which can be opportunities for future growth. Despite the slow-down of the total FMCG market, those categories capturing these trends could sustain growth such as rice soup, cream desserts, box tissue…
In Urban 4 cities, as convenient format, Liquid detergent continues to rise by adding incremental buyers to its buyer base. The liquid segment becomes polarized as one group moves to low-cost products while the other group goes to high-priced products. So pricing strategy will play an important role for brands to win their target consumers within this format. In Rural, a huge opportunity has been seen in paper products, especially Table napkins. More and more consumers buy this category thanks to its convenience and hygiene!?
2018 seems to be another year of speed, experience and value for money, which fit to the concept of modern trade with a growth rate of 15%. However, a slow-down has been seen in supermarket format. This may be explained by its competing position with mini-stores and online in terms of speed and convenience and with hypermarket in terms of good deals and shopping experience. Online, from a very small base, keep growing exponentially, especially in Health & Beauty sector, by continuously adding new shoppers. Vietnam’s retail picture promises a lot of changes in the near future!
Spotlight of the Month – Challenges / Opportunities for FMCG growth?
The biggest challenge to FMCG growth is consumers’ rapidly changing needs and expectations. Consumers today are not only focusing on the basic needs but also moving to new aspirations. They have the tendency to cut their budget of grocery expenditure to spend for non-FMCG items. People are getting busier and go shopping for FMCG less often. As a result, there are fewer shopping occasions for categories and brands to be picked up off the shelf. However the growth opportunities are still there with more ‘real’ innovations in FMCG market, secondary cities and rural areas, the fast-changing retail landscape and new retail formats in Vietnam!?
Urban 4 cities include Ho Chi Minh, Ha Noi, Da Nang and Can Tho.
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