Health and local brands take higher priority in Vietnam

NIELSEN MARKET SNAPSHOT: VIETNAM

With the gradual pick-up of the economy, Vietnam’s GDP in the second quarter of this year expanded by 0.36% (compared 3.83% to in Q1 2020). Although private consumption and foreign demand have been the traditional drivers of economic growth, post Covid-19 growth depends on new economic policies to boost manufacturing and enhance consumption.

The consumer confidence index for Q2 2020 for Vietnam was recorded at 117[1] (as compared to 123 in Q4 2019). Job security and health remain the top concerns for over 40% of consumers followed by concerns on the economy. Survey results indicate that consumers are allocating monthly budgets for purchases in food and beverage at home, education and savings while reducing expenses on dining out considerably.

The FMCG industry witnessed a slump in growth with 0.6% growth in Q1 2020 versus 4.6%[2] growth in Q4 2019. As an effect of the coronavirus the FMCG category as a whole witnessed a decline of 12% in March and April this year as the lockdown impacted traditional trade channels. During this period modern trade recorded a growth of 23% as shoppers preferred fewer shopping trips in a safe and sanitized environment. Online channels also flourished as a result of the stay-home phenomenon, while additionally a Nielsen survey says that 63% of Vietnamese consumers are willing to shop online more frequently after Covid-19[3]. However, they go to pharmacies more frequently for items like medical masks, sanitizers, etc.

As consumers rise to the new reality post-pandemic, their shopping behaviour has been reset based on the income levels and future concerns on economic stability with a majority of consumers (82%)[4] saying that they have reduced out of home consumption. Consumers are purchasing more products in categories such as instant noodles, staples, veggies, home care and frozen food; whereas significantly reducing spending on alcoholic beverages, cigarettes, carbonated beverages (CSD) and energy drinks.

The Nielsen survey suggests that consumers are looking forward to relaxation in travel bans and expect public transportation and dometic travel to resume in next two to three months. In the lead up to economic rebound scenario, nearly half Vietnamese consumers are prioritising their health. Nearly 60%[5] consumers are tipping in favour of local products while making purchasing as an emphasis on product origin gains stronger purchase preference in consumers’ mind.

For FMCG companies it is paramount that they meet the demand of consumers by ensuring supply side replenishment at important outlets given that shopping trips have considerably reduced, while at the same time FMCG brands should use this opportunity to rationalize their portfolios to address the new demands of consumers and their evolving circumstances. This is a great opportunity for FMCG retailers to design efficient promotional strategies as consumers are willing to trade-up in relevant categories post Covid-19.