Photo: Duc Anh
Hanoi, HCMC, Hai Phong, Can Tho, Nha Trang and Da Nang all exhibited strong FMCG growth in the second quarter after a poor first quarter, reaching 6.3 per cent.
Growth in fast-moving consumer goods (FMCG) in six key cities in Vietnam hit a three-year high in the second quarter of 6.3 per cent after coming in at just 3.6 per cent in the first quarter, according to Nielsen’s Market Pulse report released on August 10.
The six key cities - Hanoi, Ho Chi Minh City, Hai Phong, Can Tho, Nha Trang and Da Nang - saw strong momentum in FMCG growth in the quarter, mainly driven by an increase of 5.2 per cent in volume growth.
The recovery is reflected in growth across most categories, such as food, with 4.7 per cent, milk-based products 4 per cent, and home care 4.6 per cent.
Beverages (including beer) continued to be the biggest category, contributing 41 per cent of total FMCG sales and growing a healthy 9.2 per cent, led by an increase of 6.9 per cent in volume growth.
Rural areas continue to be a new source of growth for many manufacturers, with a 7.6 per cent increase over the long term (the last 12 months) but slowing slightly in the second quarter, at 5.6 per cent.
Urban areas, meanwhile, witnessed a stronger bounce back in the second quarter, with 6.3 per cent growth. The good news is that the pick up in both rural and urban areas are mostly driven by volume increases.
Rural areas present many opportunities to businesses. Mr. Nguyen Anh Dung, Director of Retail Measurement Services at Nielsen, said that Vietnam’s rural community accounts for 68 percent of the country’s 92 million people and half of all FMCG sales.
“Rural inhabitants are now investing in education and have enjoyed income growth of around 44 per cent over the last three years,” he added. “But this potential remains largely unknown to many businesses.”
Despite the potential, expanding into rural areas in Vietnam also poses many challenges, in particular the high cost of serving geographically dispersed districts. “In India and China and now Vietnam it is more important for manufacturers to be able to prioritize their rural expansion efforts,” he said. “Some parts of rural areas offer better prospects than others, so identifying these becomes very important to ensure maximum return on investment.”
When it comes to purchase drivers among rural consumers, in addition to valuing the opinions and recommendations of family and friends they also respond positively to recommendations from retailers.
Thirty-one per cent of shoppers buy 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 have a great understanding of rural consumers and a proper market plan,” Mr. Dung said. “Especially important is connecting with and nurturing your brand’s super consumers to leverage the power of word of mouth, leveraging retailers as brand ambassadors, and tapping into the power of TV for mass reach while keeping digital channels in the mix for connecting with younger consumers.”