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FMCG can win from greater consumer confidence

Released at: 11:29, 17/12/2015

FMCG can win from greater consumer confidence

Mr. Vaughan Ryan, Managing Director of Nielsen Vietnam, tells VET about the Consumer Confidence Index (CCI) and its impact on the plans of manufacturers of fast-moving consumer goods (FMCG).

by Hoang Thu

■ Nielsen has released the Consumer Confidence Index (CCI) for Vietnam for a number of years. Have there been any commons trends in the index over the last two or three years?

There has been some volatility in Vietnam in the last two or three years. And we are seeing the same trend across Southeast Asia. What we are clearly seeing is a consumer that is worried about the immediate situation but is confident about the future, and I think that is really the biggest issue that is surfacing today.

■ In your recent report, Vietnam’s CCI remains among the Top 10 most optimistic globally. What meaning does the index hold for FMCG manufacturers? How can they seize the opportunities presented by the optimistic CCI in Vietnam?

Vietnamese remain among the Top 10 most optimistic globally because the population is young. Young people usually feel more enthusiastic than other countries that are already mature. It’s also because we are seeing a growing level of confidence as an emerging middle class exists or becomes more pronounced in Asia and more particular in Southeast Asia. 

Vietnam’s middle class is set to almost triple by 2020, from 12 million people in 2014 to 33 million people in 2020. Consumers’ lives are getting better every day and we are starting to see that resonate in consumer confidence.

At Nielsen we talk about the “three R’s”, which are “Reach, Resonate and React”.

The first is how you get your product on the shelf so that it’s physically available to all consumers. That’s the Reach part and in some ways it’s the easiest part to actually do. To win in Vietnam, manufacturers have to understand that traditional trade accounts for about 85 per cent of all FMCG sales, with over 1.1 million retail outlets where FMCG are sold. Then, identifying the right stores to distribute to so that products can reach customers is really important.

The next one is Resonate, and that’s how you build trust. How does the brand sufficiently resonate with consumers so they actually want to buy it? How does a brand resonate with retailers so they want to sell it? Retailers have an unbelievable level of trust when it comes to consumer thinking. The retailer is quite often someone consumers have known since they were young - a family friend or a neighbor that they really trust, so when they recommend a brand it most likely ends in a sale.

And, obviously, Reaction remains the key and that’s the final “R’. How do you make a consumer buy in-store? Today, to a certain extent, manufacturers can be a bit lazy and use price as the only driver. At Nielsen we would encourage them to think beyond price. We would talk to them about innovation, packaging, and communications leading to “before-store”, “during-store”, and “after-store” experiences.

■ The CCI survey has been conducted not only in Vietnam but also in other countries. Can you tell us the characteristics of Vietnamese consumers’ saving and spending and the commonalties and differences of these compared with other countries and regions?

Savings has been elevated over the last two years but consumers are now willing to spend more on big ticket items such as travel, smartphones, appliances, and travel. This investment intent shows long-term improvements in living standards.

When it comes to savings, we see a similar trend across Southeast Asia. Most consumers say they will cut down on out-of-home entertainment, gas and electricity, and new clothes, and delay upgrading to new technology devices.

When it comes to spending, most consumers in Southeast Asia say they will spend more on holidays and paying off loans after covering essential living costs.

■ Do you think Vietnam’s current economic situation will see consumers spend more in the future? What products would they be likely to spend more on and what spending would be tightened?

In the current economic situation I think the big aspect that we haven’t seen in the past is the desire among Vietnamese consumers to buy “Vietnamese-made”, “convenient”, and good quality products. Here’s why.

We’ve seen local companies prosper over the last two or three years and the hesitancy to buy a Vietnamese-made product no longer exists. People are now very proud to buy “Made in Vietnam”, and whether goods are made here or grown here has become important for Vietnamese consumers.

Furthermore, as household sizes fall and people are getting busier, convenience becomes a way of life. Consumers want something fresh and ready-to-eat products or ready-to-cook ingredients.

And, last but not least, the Number 1 concern for Vietnamese people is health. Manufacturers that can respond to increasing demand for health-conscious products will earn their way to the top of consumers’ minds.

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