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Retailers shift towards own brands

Released at: 11:27, 06/10/2018

Retailers shift towards own brands

Photo: Viet Tuan

Home brands are increasingly finding favor and will play a critical role in the success or otherwise of all retailers in Vietnam.

by Ngoc Lan

Of the many cooking oils on the shelf at Big C Thang Long in Hanoi, 37-year-old Ms. Do Hong Van picked up a two-liter bottle of Big C soya oil. “I began using this cooking oil a few months ago, and its quality is no different to the cooking oils of famous brands, while its price is better,” she said.

When shopping in supermarkets like Big C, Lotte Mart, and Aeon, it’s easy to find products such as cooking oil, fish sauce, rice, candy, sausages, eggs, other fresh food, and home appliances bearing a “home brand”, or the label of the retailer. Many choose these home brands because of their cheap price and trust the reputation of the retailer. For foreign retailers, the development of home brands is considered an important part of their development strategy in Vietnam’s retail market. 

Providing choice

Home brands are not a new concept in Asia as they’ve been around for 20 years or more. In Vietnam, price is important to most consumers and is the primary driver of their decision to buy home brands. Much shopping in Vietnam is indeed done based on brand. 

Ms. Nguyen Huong Quynh, Managing Director at Nielsen Vietnam, told VET that according to its latest research, 66 per cent of respondents in Vietnam feel it is important to get the best price on a product and 72 per cent said they purchase home brands to save money. While just over half (55 per cent) believe home brands offers extremely good value for money, 56 per cent said buying a home brand makes them feel like a smart shopper.

Aeon Vietnam announced in late July that its revenue increased 60 per cent after focusing on Vietnamese customers’ needs and wants through offering home brands. Mr. Yuichiro Shiotani, General Director of Aeon Topvalu Vietnam, a company developing home brands for Aeon Vietnam, told VET that many customers in Vietnam stick with brands they have already used, and always take into account price, value and convenience. “At Aeon Topvalu, we pursue these elements to support various demands from customers, so home brands have the potential to develop in Vietnam,” he said. 

In its home brand development strategy, Topvalu plans for a share of 2.8 per cent in 2018 and 5.1 per cent in 2019. “We believe that sales of home brands will increase strongly in Vietnam in the future and contribute a larger proportion of profit,” Mr. Shiotani said.

Among large foreign retailers in Vietnam, Lotte Mart’s home brand is on some 1,700 products in almost every category. Mr. Lee Yong Ho, Director of Product Differencing at Lotte Mart, told VET that, in general, home brands at Lotte Mart are from 10 per cent to 30 per cent cheaper than similar products it also sells. “Our goal is to develop products of equal quality but at a cheaper price,” he added. 

The retailer also reported its Choice L home brand has continued to grow since being launched in May 2016, with a compound annual growth rate (CAGR) of more than 120 per cent. At the end of this year it plans to develop its SAVE home brand, with 150 products, and Choice L Prime, with 100 products.

Understanding the habits of Vietnamese shoppers, MM Mega Market stocks more than a thousand home brand products. Unlike Lotte Mart and Aeon, though, it meets the needs of a specialized customer group, such as restaurants, hotels, company canteens, and grocery stores with competitive prices. 

Consumers in Vietnam tend to choose products based on brand and price, but such sentiments don’t always lead to growth in the product. Around the globe, home brand sales and market shares are strongest in commodity-driven, high-purchase categories. The definition of a commodity varies greatly in the world. While some commonalities exist, home brand market shares differ dramatically by country. To increase the chances of success, Ms. Quynh said, identifying where growth is remains essential for retailers. “Retailers should enhance in-store awareness, increase visibility and provide value-for-money options,” she said. “Home brands are no longer viewed simply as low-cost alternatives to name brands and are increasingly high-quality products that meet consumer needs across a variety of price points.” 

Growth still low

The development of home brands has brought substantial results to retailers in Vietnam yet remains limited. Research by Kantar Worldpanel Vietnam released last year reveal that while home brands account for 20-30 per cent of total retail sales in the US and EU, the figure is 2.4 per cent in Vietnam. So why has growth been so slow in Vietnam?

Ms. Quynh explained that Asian shoppers are very much brand-loyal, requiring retailers invest time and resources in educating them and building trust in a home brand. Retailers, though, have not invested sufficiently in marketing home brands to persuade shoppers to trust their quality. “It is risky for consumers, particularly lower-income shoppers with limited disposable income, to buy a home brand product they don’t trust,” she said. In the latest Nielsen survey, 69 per cent of Vietnamese shoppers said they will buy home brands from retailers they trust while 45 per cent believe trying new brands puts them at risk of wasting their money.

On the other hand, many experts say that a weakness of home brands is less attractive packaging, as retailers must cut production costs and prices to attract customers. “Meanwhile, growth in home brands depend on retailers’ ability to create a consistent source of manufacturing expertise and supply,” said Ms. Quynh. “This has been a significant hurdle regionally, as many have struggled to find local suppliers that are able to match the quality of multinational fast-moving consumer goods (FMCG) manufacturers.”

Retailers must also overcome the strong brand loyalty held by many customers. Local retailers such as Vinmart are a popular choice for consumers, and at the Vinmart in Vincom Nguyen Chi Thanh Hanoi, Ms. Le Thi Thanh Trang, a 42-year-old housewife, said that shopping at local supermarkets is easier than at foreign supermarkets. “I think foreign brands are of good quality but their prices are high,” she added. “So, I usually shop here, because of the product quality and the reasonable price.” 

The appearance of convenience stores also makes the market more competitive. For example, 7-Eleven Vietnam aims to open 100 over the next three years and South Korea’s GS25 hopes to open 50 this year. “There are many brands that are famous in Vietnam, while home brands have struggled with low awareness and trust,” said Ms. Quynh.

However, with shoppers looking to trim their spending and find greater value for money, home brands cater to a segment that wants to participate in the modern trade experience. So, it is clear that retailers will use home brands as a point of differentiation. “Vietnam still has room for growth in its retail market in general and in home brands in particular,” Mr. Shiotani believes.

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