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FMCG growth doing better in rural areas

Released at: 15:03, 18/09/2015

FMCG growth doing better in rural areas

As growth declines in cities, urban areas have become a new source of growth for manufacturers.

by Thu Hoang

While growth in fast-moving consumer goods (FMCG) in six key cities in Vietnam - Hanoi, Ho Chi Minh City, Hai Phong, Can Tho, Nha Trang, and Da Nang - has been slowing down, rural areas have appeared as a new source of growth for many manufacturers, according to the Market Pulse Quarter 2 Report from Nielsen Retail Measurement, released on September 18.

According to Nielsen’s study, rural areas saw better growth than urban areas in the first and second quarters.

While urban areas grew 1.6 per cent in the second quarter, rural areas grew 2.7 per cent, mainly led by volume growth.  

Additionally, while key categories remains challenging in the six key cities, eleven out of 18 categories saw positive growth rate in rural areas, providing huge opportunities for manufacturers and service providers.

The Top 5 categories recording the fastest growth rate in rural areas are energy drinks, dishwashing liquid, ready-to-drink milk, packaged water, and soft drinks.

FMCG, Q2 2015  

Source: Nielsen

Expanding to rural areas in Vietnam brings with it the same challenge seen in other large Asian countries - a high cost in serving geographically-dispersed districts, according to Mr. Ashwin Sukumaran, Senior Manager of Advanced Analytical Consulting at Nielsen Vietnam.

“As we have seen in India and China and now Vietnam, it is more important for manufacturers to be able to prioritize their rural expansion efforts,” he added. “Some parts of rural areas offer better prospects than others, and identifying these therefore becomes very important to ensure maximum Return on Investment.”

In regard to purchase drivers among rural consumers, in addition to valuing the opinions and recommendations of family and friends, consumers also respond positively to recommendations from retailers.

Ninety per cent of retailers recommend products to their shoppers, achieving on average a one-in-three hit rate, with 31 per cent of shoppers buying products recommended by retailers. With up to 27.5 million shoppers visiting retail stores every day, retailer recommendations can be a powerful form of brand endorsement.

The mix of challenges and opportunities in rural areas requires manufacturers to have a great understanding of rural consumers and a proper route to market plan, according to Mr. Alex Jeater, Senior Manager of Retail Management Services at Nielsen Vietnam. “Especially, connecting with and nurturing your brand’s fans to leverage the power of word of mouth, leveraging retailers as brand ambassadors, and tapping into the power of television for mass reach while keeping digital channels in the mix for connecting with younger consumers,” Mr. Jeater said.

The Market Pulse Report is based on the results of the Nielsen Retail Measurement study of FMCG. The Nielsen Retail Measurement provides continuous tracking of product movement through defined retail outlets. The data are used to measure manufacturer and retailer efforts as well as consumer off-take.

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