Nutritional packaged F&B: What is the future?
A lot of capability for further growth in nutrition market. What consumers think we should focus on?
The Oxford Dictionary tells us that ‘nutrition’, in simple terms, is the process by which living things receive the food necessary for them to grow and be healthy. There has always been a strong focus on nutrition but today with so many food scandals, growing obesity levels across the world, and with increasing health concerns, it is becoming a hot topic for discussion – and for manufacturers of Nutritional packaged foods and beverages we believe there is a lot of capability for further growth in Vietnam, which we will discuss further.
Firstly, to define nutritional packaged foods and beverages we will consider all packaged foods and beverages categories that can bring nutrients and calories, such as biscuits, liquid milk and dairy products or can be an alternative to a full meal such as cakes, instant noodle, canned and processed foods. Right now, many nutritional categories have been in strong growth over the last 5 years especially ready-to-drink growing up milk powder, liquid tonic food drink, biscuits, cakes, soya milk and drinking yogurt.
According to the recent data from Kantar Worldpanel Vietnam, the in-home FMCG nutrition market* has grown at a compound annual growth rate of 10% over the past 5 years and is forecasted to hit 6 billion dollars by 2020. On average, a Vietnamese household spends more than 3% of their total monthly income on nutritional packaged foods and beverages which they bring home to consume. And every year, Urban households dedicate 10% more for this spending while in Rural, spending on nutrition is accelerating in line with higher health consciousness and better education. This raises some interesting questions from those looking to take a bigger slice of this growing pie, about why there is so much potential, and how to tap into it.
If you are still unsure of the potential, let’s have a simple comparison of how Vietnamese households consume liquid milk with our very near neighbor – Thailand. A normal household in Urban Thailand will drink about 13 liters** of liquid milk a month while in Vietnam even a family having kids is consuming only about 7 liters of liquid milk per month. This comparison holds true for many other nutritional categories too!
To leverage the growth of nutritional foods and beverages, it would be helpful to have a perspective about what could shape the future of this market.
According to Kantar Worldpanel Vietnam’s latest Lifestyle Report, it is now harder than ever for new brands and new products to gain consumers’ trust and be picked up from the shelf. Consumers are more skeptical about the influencing media around them such as news, ads, POSM, promotions as well as suggestions from others. In some ways, the more they see or hear, the less they believe. This drives them to spend time to seek information for themselves to have thorough understanding of what they are going to buy before making any decision. By being connected to the Internet via smartphones and other modern devices, this is even easier than ever!
Building trust is paramount; a trustful image coupled with strong product quality management will help to win consumers’ hearts. However, at this moment, only around a third of consumers in Urban or Rural Vietnam stating they believe in benefits claimed by products. In fact, there is no magic formula to build trust, but there are actions that businesses can take to maximize and maintain trust. Be sure that your products are accredited and searchable is the first step.
Another step to win buyers’ trust is to link products with natural ingredients which are good for health. Above all else, health will always remain a top concern and consumers are getting more knowledgeable over time about this topic. “Health” today is not only about physical health, but also covers nutrition, food safety, hygiene and disease/sickness prevention especially amidst increasing levels of environmental pollution and food scandals – shoppers not only turn to environmentally friendly products but also natural and healthy ingredients. Consumer panel data reveals that with higher demand on seeking for safer products which are organic with no artificial, preservation, toxic, or genetic modification, consumers even agree to pay a higher price. Right now we are observing the swapping trend from recombined milk to fresh milk 100% or from traditional biscuits to rice cracker, and the fast increasing consumption of rice noodles. Therefore, ‘Natural and Healthy’ ingredients together with transparency about product origin are the most effective way to trigger more consumption.
Another aspect may form Vietnamese nutrition status is height and weight solution. Compared to other South East Asia Countries, Vietnam is still considered “short” especially among kids. As well as aiming to have smarter brain, physical attributes such as height and weight remain key concern of Vietnamese mothers and can drive their need for seeking nutritional products. In this sense, products which can propose good solutions on either reaching a healthy height or weight are more likely to be considered and we have seen some good examples of marketing campaigns focussing on these messages recently.
Another area worth considering is that the rates of obesity and diabetes in Vietnam have been growing. That’s why no sugar, low fat, and fewer calorie products, which are beginning to win shopping occasions. Today, 74% of Urban households and 65% of Rural households claim to “prefer to buy low/ free sugar drinks” and this is translating into their shopping behaviour, which could have serious consequences to beverage manufacturers or even to Food sector as well. Potential issues become opportunities if those companies can bring new, healthier variants to Vietnamese as we believe this trend will emerge soon.
Nowadays, nutrition market is more welcomed across Vietnamese age groups, it is no longer circle around children. So we have to refresh our mind and get ready to reach to various individual needs.
Aged population is increasing and the white space of nutrition market for this senior people seems compelling. The number of people older than 50-year-old is rising and expected to account for 22% of total country population in 2020. Helping this group to take care of themselves, and proposing solutions for their children and grandchildren to take care of them is a viable strategy to invest in. Today in Vietnam there is not a huge amount of product choices targeting this segment of the market and there is room to welcome more diverse offers that meet nutritional needs of this senior group. Such an enormous opportunity for foods & beverages! In addition, big population at young age, who are more open to try novelties, promising the growth for new ideas, new products. However, there will be also a challenge to retain these young consumers as they are quite easy to change.
Invest more in other age groups doesn’t mean we leave children age group behind. Though nutritional drinks market for kids has already reached saturation with more than 90% of kids having at least one nutritional drink a week and on average more than 10 drinking occasions a week, this segment is the most important part of the market right now. Unsurprisingly, a family with kids consumes more nutritional drink categories than average. Within this group, there will be a natural limit for horizontal growth because of a shrinking birth rate. However, the silver lining of this is that with fewer children in a house, parents will have a bigger capacity to take care of their child. Therefore, the future of how to grow further in kids’ nutrition should be more about value than consumption. Products for kids with higher nutrition, more premium, new advancement, and innovation will be well placed.
“Even in the complicated world of nutrition, what isn’t complex to observe is that people still want to eat things which taste good, are convenient, and are value for money. Going beyond just simple nutrition will help explore the full potential of foods and beverages industry. Manufacturers should step into providing more innovative offers that are both nutritious and still appealing to consumers. For example, fortified products, which offer more nutrients at competitive price, liquid formats for ready-to-drink occasion, or even smarter and more functional packaging” – said David Anjoubault, General Manager of Kantar Worldpanel Vietnam.
Nutrition will not only be limited in providing essential energy but also health treatment. “I no longer feel that the solution to all the world’s problems is better drugs, I think it actually happens to be better nutrition.” – Jeffrey Blumberg, Tufts University nutrition science professor.
*In-home FMCG nutrition market includes: dairy and products from dairy, Soya Milk, Tonic Food Drink, Noodle & Soup, Biscuits & Cakes, Canned Food, Processed Food, Frozen Food.
**Source: Kantar Worldpanel Thailand | Urban | Liquid milk | MAT P6’2016.
Vietnam Urban means Urban 4 key cities: Ho Chi Minh, Ha Noi, Da Nang and Can Tho.
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