Influenced by several factors, the Fast Moving Consumer Goods (FMCG) industry in Vietnam is indeed ‘fast moving’. We have been asked by many key market players which factors influence this industry and how can manufacturers expect it to change so that they can develop their own strategies and approach to catch the growth opportunities and win.
Some parts of the world are struggling to find growth these days but the Asia Pacific still boasts significant opportunities due to favourable demographic and economic conditions. Global GDP growth from 2016 to 2020 is estimated to be around 3.1% per annum but the US and Europe will grow only around 2% and 1.9%, respectively. On the other hand, emerging markets are forecast to have around 4% growth. As a result, multinational companies continue to look to the Asia Pacific as a driver of growth.
Vietnam is a part of this story. Thanks to the great effort from the government in making significant changes in trade rules to attract foreign investment and being more open to the global economy, Vietnam certainly stands out for future potential and has a role to play when it comes to fueling business growth. According to the Future Business Sentiment report, a Nielsen survey of business leaders, Vietnam ranks among the top three markets for expansion opportunities in the Asia Pacific, along with China and Indonesia. At the same time, Vietnamese local giants are thinking about going regional and global.
Having a reasonable outlook forecast for the Vietnam market has always been a challenge given the high volatility of the market. However, when looking at the bigger picture, there are several signals and drivers of change which will have significant impacts and shape the future. The big shifts are coming from the changing demography, the development of physical and digital infrastructure, the complexity of market structure, the shift of consumers’ preference and the power of retailers.
Let’s take a look at the changing demography as an example. Vietnam's population is still in its golden age with 25% of the population between 10 and 24 and a median age of 29. There are roughly seven people of working age for each 'pensioner'.
Furthermore, Vietnam has the fastest-growing aspiring middle class in Southeast Asia. And it is also expanding geographically, with new provincial pockets of affluence beyond the key and traditional centres of Hanoi and Ho Chi Minh City. Vietnamese towns are now full of IT-savvy, brand-conscious shoppers egged on by sophisticated marketing techniques. Therefore, alongside consumer goods, middle class (and aspiring middle class) parents are investing heavily in their children’s education, with proficiency in English seen as indispensable in climbing the social ladder. There is also an appetite for more sophisticated financial services. These are all areas of considerable opportunities for many industries.
However, an ageing population is just round the corner. The noticeable fact is that Vietnam’s population will age extremely rapidly. It is estimated that in the next 4 years, by 2020, the population between 50 and 69 will account for 20% of the total population, almost doubled vs. 2010. This actually indicates great opportunity for new product ranges focusing on this consumer segment. The success of innovations, unfortunately, depends on the go-to market stage rather than the product itself. It is also important to pay attention to the longer-term consumer needs, and catering for these needs will present economic, social and cultural opportunities and challenges for Vietnam notably not only in basic commodities but also in healthcare, pharmaceuticals and financial services.
The pace of change is accelerating in Southeast Asia as well as in Vietnam and the business environment becomes increasingly difficult to navigate. Keeping an eye open on the horizon and keeping abreast of key trends is essential for business leaders, as 2020 comes firmly into focus.
We welcome the opportunity to continue this conversation with you and your team on exploring the five trends shaping the future of Vietnam's FMCG sector and identifying opportunities to win in this fast-growing and changing market. We look forward to continuing our dialogue to growing your business. If you have any queries for the presentation, please contact our Client Service representatives or email us at [email protected].