October 2008

Nielsen Vietnam Grocery Report

INSIDE:
Six key cities account for 38 percent of nationwide sales Local chain Saigon Coop is most often cited as the preferred supermarket for grocery shopping In tandem with the increasing importance of Internet in Vietnam, manufacturers are strengthening their online presence Consumers say they are shopping at Modern Trade stores less often than Traditional Trade and market stalls Vietnamese consumers allocate more spare cash to purchase new technology than their regional counterparts

Vietnam, the new Asian Tiger, is considered the most attractive emerging retail market for investors today, and is one of the fastest growing nations in Asia Pacific1.
The nation’s 2008 GDP growth is estimated at 6.5 percent2, substantially below the original estimate of nine percent, and lower than the healthy 8.5 percent recorded in previous years. Yet amidst Vietnam’s high inflation, the economy remains robust, with the performance of most Fast Moving Consumer Goods (FMCG) categories relatively buoyant. Nielsen’s annual Vietnam Grocery Report provides a comprehensive snapshot of the retail market in Vietnam from 2006-2007 by integrating information from the full range of Nielsen research services which include Nielsen Retail Audit, Omnibus Surveys, Global Consumer Confidence Surveys, Qualitative Focus Groups as well as statistics from the Vietnamese Government.

The majority of sales across the total FMCG retail market in Vietnam occurs in the six key cities (HCMC, Hanoi, Danang, Cantho, Haiphong, Nha Trang), which account for 38 percent of nationwide sales in 2007. The off-premise sales have also recorded a buoyant 21 percent growth from 2006. Vietnam’s population is estimated at 86.5 million and a huge three quarters of the population reside in rural areas. It’s no surprise that almost 40 percent of Vietnam’s FMCG sales are attributed to rural areas3. What’s interesting for suppliers is that over time, rural consumers are introducing new categories to their repertoires as their level of disposable income increases and demand grows for more sophisticated products. Consumers are also moving from the “must have” staple items such as rice and shampoo to discretionary items such as deodorants/ skincare. All leading manufacturers will need to get into the game early and capture the share of mind of this largest consumer segment in Vietnam.

Current Retail Landscape
With half a million stores countrywide selling consumer packaged goods – a 13-percent increase from 2006 – Vietnam’s retail landscape is vast and rapidly growing. This, coupled with a value growth of 18 percent, means all eyes are on Vietnam for its huge growth opportunities in the coming years.

1 Source: Seventh annual Global Retail Development Index™ (GRDI), a study of retail investment attractiveness among 30 emerging markets conducted by management consulting firm A.T. Kearney.
2 3

Vietnamese Government Statistic. Source: Nielsen Rural Census.

1

Vietnam also boasts a very young population, with over one third under the age of 19 in 2000, and more than half under the age of 30. For manufacturers, it is key to cultivate and sustain customer loyalty among this emerging middle class in the key cities who are young, independent professionals and hungry for new brands and products. In fact, manufacturers of a number of categories have already kicked off their marketing efforts by targeting this large young segment via different product offerings as well as targeted communications on the internet and mobile – mediums that satisfy young people’s appetites and lifestyles.

In parallel with Vietnam’s rapid development is the fast emerging Modern Trade channel. As with total store numbers, the Modern Trade is growing in terms of numbers (now 394) and contribution to total retail sales (10%). The key international players include Big C, Metro Cash and Carry, while local chain Saigon Coop is most often cited as the preferred supermarket for grocery shopping, driven largely by its store locations and numbers, as well as competitive pricing. The Traditional Trade, nevertheless, continues to play a key role in the everyday lives of Vietnamese consumers, accounting for 68 percent of total Grocery sales. The fact remains that due to

Vietnamese cuisine, fresh food dominates the monthly grocery budget at 70 percent or USD168 per month. Vietnamese shoppers still see the Wet Market as the best outlet for freshness and price for their daily essentials. Therefore, we see shoppers using the Wet Markets almost daily, and the supermarket fortnightly.

Modern Trade Evolution
Sales through Modern Trade stores have enjoyed growth of 45 percent in 2007 versus 2006 with the contribution of Modern Trade sales to total FMCG sales across Vietnam at 10 percent by the end of 2007. We have seen all Supermarkets, local and international, increase their store

Vietnamese shoppers utilizing more stores for their regular shopping – 50% of shoppers now use more than one supermarket per month
2006
1 store 55

2007
50

2 stores

36

38

3 stores+ Average/ (shops)

9

11

1.57

1.65

Base: All Supermarket/Hypermarket shoppers 2006 (n=910 ) , 2007(n=1009)

MT Value % Contribution Personal Care Household Care Food

2006 14.6% 11.0% 4.3%

2007 17.8% 13.3% 5.3%

4 Given internet penetration in LATAM is skewed towards high socio-economic groups, our findings are only indicative of trends among this segment of the market, and cannot be said to represent the general population. Nielsen’s findings are supported in part by a 2002 study conducted by the Food Policy and Nutrition Unit / University of Brasilia which found that 75% of Brazilian consumers read the label at point of purchase. Mentioned in ‘Nutritional labels and Health Claims: The Global Regulatory Environment’. World Health Organisation. Countries included in study: Brazil, Mexico, Argentina, Chile. 5

Countries surveyed: Malaysia, Vietnam, Philpines, Thailand, Indonesia, Singapore.

2

coverage dramatically over the last year. There are 394 Modern Trade Outlets in Vietnam, up 22 percent from last year. The frequency of visiting supermarkets has increased in the past few years, with 43 percent of shoppers in HCMC visiting a supermarket weekly.Supermarkets are visited twice a month and remain the most important channel for Personal Care & Household products (40-45%). Personal Care categories in particular seem to be increasing their importance in Modern Trade with sales contribution from 14.6 percent in 2007 to almost 18 percent this year. Store accessibility is the key driver of store choice and is a key driver of Saigon Coop-mart’s success, while Metro is more renowned for its lower price offering. In terms of brand loyalty by category, there is a high level of store switching noted for Personal Care categories and a higher level of emotional involvement for the shopper compared to those in the food and beverage categories. More shoppers visited supermarkets in any month in 2007, up three percentage points versus last year, yet this doesn’t correspond to higher levels of spending. Vietnamese consumers continue to visit the Modern Trade channel but allocate the bulk of their grocery spend to Wet Markets and traditional grocery stores. Within Nielsen’s Store Equity Model, awareness and consideration remain the key contributors. Brand association, particularly “Store accessibility” is also crucial to the success of Modern Trade outlets in Vietnam.

Three Key Emerging Trends Metro Male
Personal Care categories are becoming more robust with male-targeted products. Shampoo, facial care and deodorants have increasingly focused on male consumers, with a staggering 41 percent of deodorant sales, for instance, attributable to the men’s segment. Heavy marketing campaigns aimed at young Vietnamese males are being launched by various brands with the product categories expanding from Personal Care categories to Food and Beverage categories. According to a global Nielsen survey on personal grooming, 87 percent of men surveyed claimed to be more interested in personal grooming today than they used to be and 61 percent say it is perfectly okay for men to spend time and money enhancing their appearance. Vietnam also mirrors the global trends with the rapid emergence of men-only stores or shelf space as well as the male-specific versions of products previously tailored for “women only” (e.g Facial Care). The global survey also revealed that 81 percent claim the pressure to look good these days is much greater than it was during their parents’ generation and 81 percent claim they buy health and beauty products. Personal grooming in urban Vietnam has long passed the “basic” stage when products were used simply for their key functional features – the use of personal care products is now becoming more personal and more emotional for both men and women.

• 84% of men agree they invest in personal grooming because it makes them feel better about themselves • 81% agree they invest in personal grooming because they want to look good for their partner • 75% agree they invest in personal grooming because they want to attract a partner It’s important to note that these numbers are much higher than global averages (respectively 62%, 56% and 42%).

3

Going Green
The Vietnamese population is becoming increasingly health-conscious. In Ho Chi Minh City alone, Ready-to-drink (RTD) tea has now overtaken soft drinks as the number one non-alcoholic beverage. The ‘green’ trend is contagious, spreading to confectionery and gum, feminine hygiene, washing detergents, milk, toothpaste and tissues as manufacturers race to get a piece of the “green” pie.

Teen & Online
With a third of the population under the age of 19, Vietnam presents huge opportunities for companies that have a vast interest in the teen market. 17 percent of the population has Internet access, an extraordinary figure for a country at this stage of development. This compares to 10 percent in China and four percent in India. In the two key cities of HCMC and Hanoi, a third of the population is now online. Vietnamese consumers in the 18-30 age group spend the majority of their time reading news online, and engage in a host of social networking and gaming activities: 54 percent use the internet predominantly for chat rooms and online social groups; 33 percent play games and 22 percent say they read online advertisements. In tandem with the increasing importance of Internet in the daily lives of Vietnamese, manufacturers are also strengthening their online presence, with more marketing and a stronger brand presence on popular sites and networks.

News, chatrooms and gaming are where they spend their online time…more so than just email
Uses of the internet in HCMC and Hanoi By Age Group

Catching up with news Chatrooms Email Play games Listen to music online Read small advertisings Watch movies Study / homework Work Job search Search for or update information Check the weather Dating online Shopping online Banking online
1% 2% 1% 2% 6% 1% 5% 3% 6% 6% 4% 5% 4%

21% 8% 13% 33% 9% 5% 16% 10% 9% 8% 27% 22% 20% 40%

54% 54%

41-50 18-30

46% of Internet users still use at Internet services

27% Internet usage at home

3%

Source: ACNielsen Omnibus 2007

4

Economic Impact on Retail Sales
Given Vietnam’s high inflation rates, the current economic crisis in the U.S and stock market uncertainty across the globe, it is not surprising to see consumer confidence dropping dramatically worldwide in the latest quarter in 2008. In Vietnam, consumer confidence dropped to 96 – the lowest ever since Nielsen’s Global Consumer Confidence survey began in Vietnam in 2005. That compares to a global consumer confidence record low of 88. Inflation is a hot topic in Vietnam – This is no surprise given Vietnam’s Consumer Price Index (CPI), at 21.6 percent, is the highest in Asia. Basic wages are expected to increase by up to 22 percent in 2009, so further inflationary and labor challenges lay ahead for all major players in Vietnam. According to Nielsen’s recent Inflation in Vietnam study4, which examined the changes in attitudes and behaviours among Vietnamese consumers resulting from high inflation, 77 percent of consumers claim they have changed their store choice because of the rising prices. Consumers say they are shopping at Modern Trade stores less often than Traditional Trade and market stalls5. At a product level, staple goods such as noodles, edible oil and sauces, are the most affected. Yet consumption levels for these categories are still hitting doubledigit sales growth - edible oil, for example, has seen the highest price inflation of all (66%), yet it enjoyed a 12-percent growth in sales. Likewise, sauce has experienced a 29-percent sales growth despite a price hike of 22 percent.

Sales in all categories are not necessarily impacted by price rises with double digit CPI matched in volume terms
High Inflation Categories (May ’08)
Price Inflation Cooking Oil Noodle Sweet. Cond. Milk Sauce Toilet Tissue Laundry CSD RTDM Dishwashing Liquid Cigarette 18 15 14 13 11 11
Source: Nielsen Retail Audit – Vietnam 6 Cities

Volume % Growth 64 62 27 22 12 (2) 6 11 55 11 (2) 29 6 12

77 percent of consumers claim they have changed their store choice because of rising prices

4 5

Nielsen’s Inflation in Vietnam study, 2008. Nielsen’s Inflation in Vietnam study, 2008.

5

In a time of budget constraints, family is of utmost importance
Another insight from the Nielsen Inflation study is that a family’s well being commands a high priority for Vietnamese consumers, who would trade off spending on discretionary personal items for family needs. They are also more willing to upgrade to more premium products of better quality. The findings show that 73 percent of consumers are willing to continue to buy products for the family regardless of price increases and 79 percent are less likely to purchase items for themselves. As such, performance of products for the family is relatively intact –the high inflation rate should therefore have low impact.

Discretionary spending
Since 2000, Vietnam’s GDP has grown by 43 percent in urban areas, and with it has come an emerging middle class with an increasing disposable income. The average monthly disposable income has increased greatly over the past 5 years – in 2002, 81 percent of households lived on less than 4 million VND per month while today, more than 50 percent of households earn more than 4 million VND per month. The increasing affluence of the Vietnamese consumers is well reflected in the growing penetration levels of Hi-tech products across Vietnam. 94 percent of A-class consumers now own a PC and a staggering 97 percent own at least one mobile phone. Even within the lower socio-economic groups (E/F), over half have the luxury of owning a mobile phone. Vietnamese consumers also allocate more spare cash to purchase new technology than their regional counterparts in Asia Pacific. According to Nielsen’s 2007 Global Consumer Confidence Survey, 53 percent of people spend most of their disposable income after covering essential living expenses, on keeping up with technology. This compares to 43 percent in China and 22 percent in Singapore.

For more information, please contact Asha Phillips: asha.phillips@nielsen.com (84) 8 3 847 6300 ext 199

High levels of ownership for high-tech goods particularly mobile phones and 94% of A class own a PC… the Vietnamese are a tech savvy nation
Hi-Tech Ownership (Households)
Audio system w CD/VCD/DVD Hand phone Computer Photo camera Microwave Radio/cassette/ Audio (no CD) VCR Radio VDO camera CD player
18 17
Source: ACNielsen Omnibus

70 49 4 6 62 34 12 21 30 36 54 65 94

98 97

E&F (%) A class (%)

6

About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit www.nielsen.com headquarters in New York, USA. For more information, please visit www.nielsen.com

7

Sign up to vote on this title
UsefulNot useful