Future of Asia

The new faces of the

Vietnamese consumer
In the next decade, Vietnam’s middle class is expected to continue to
grow, spreading out geographically and becoming more diverse.

By Bruce Delteil, Matthieu Francois, Duy Mai, and Jeongmin Seong

© DragonImages/Getty Images

October 2021
 Powered by continued investments in its
manufacturing sector, dynamic foreign direct
investment, and rising productivity, Vietnam has
been a consistent outperformer in Asia. GDP has
increased at a compound annual rate of 5 percent
in real terms over the past 20 years, which was
1.7 times faster than the global average.1 Even in
2020, when the COVID-19 pandemic was causing
deep disruption in the global economy, Vietnam
posted GDP growth of 2.9 percent.2
The country continues battling the resurgence
of COVID-19 cases and navigating through this
crisis. However, consumption is expected to
expand and define the future as incomes rise. Swift
demographic and technological changes will result
in trailblazing consumer behaviors that offer new
sources of growth to companies informed and
agile enough to capture them. In this article, we
focus on how these trends are shaping the future of
Vietnamese consumers and what companies can do
to win their hearts.
Vietnamese consumers enter the
middle class and put midsize cities on
the radar
Asia is the world’s consumption growth engine: miss
Asia and you could miss half the global picture, a
$10 trillion consumption growth opportunity over
the next decade, according to recent McKinsey
Global Institute research. Vietnam is well positioned
to be a significant driver of the next chapter of
1
World Bank; GDP is expressed in purchasing power parity (PPP) terms.
2
The World Bank in Vietnam, World Bank, updated April 2021, worldbank.org.
3
Members of the consuming class are defined as having sufficient income to pay for necessities such as food, shelter, and clothing, as well as
discretionary goods and services. The definition is broadly aligned with definitions of the middle class by other authors. See Homi Kharas,
The unprecedented expansion of the global middle class: An update, Global Economy & Development working paper number 100, Brookings
Institution, February 2017, brookings.edu.
4
Population projection by UN Department of Economic and Social Affairs.
5
McKinsey Global Institute.
6
This takes into account only the metropolitan area. The province of Hanoi is home to an estimated 15 million to 20 million people, and Ho Chi
Minh City to 21 million.
2 The new faces of the Vietnamese consumer
Asia’s consumption story. Over the next decade,
36 million more consumers may join the Vietnam
consuming class, defined as consumers who spend
at least $11 a day in purchasing power parity (PPP)
terms. 3 This is a major change. In 2000, less than
10 percent of Vietnam’s population were members
of the consuming class, rising to 40 percent today.
By 2030, this figure may be close to 75 percent
(Exhibit 1). New consumption power is coming not
only from those who have entered the consuming
class for the first time, but also from the consuming
class’s sharp rise within the income pyramid. The
two highest tiers of the consuming class (those
spending $30 or more per day) are growing the
fastest and may account for 20 percent of Vietnam’s
population by 2030.
Urbanization is an important contributor to income
growth. Vietnam’s urban population is projected
to surge by ten million over the next decade as the
share of urban population rises from 37 percent in
2020 to 44 percent by 2030. 4 Cities are likely to be
Vietnam’s engine of growth, contributing roughly
90 percent of all consumption growth over the next
decade. 5 The story of Vietnam’s urbanization has
often been seen through the lenses of Hanoi and
Ho Chi Minh City (HCMC), which each city is home to
more than ten million people and most of Vietnam’s
middle class.6 However, our analysis finds that over
the next decade, sources of urban consumption are
likely to spread to smaller cities, including Can Tho,
Da Nang, and Hai Phong, where the middle classes
are set to grow.
Web 2021
FoA Vietnam Consumer
Exhibit 1 of 3

Vietnam
Exhibit 1 could add 37 million people to the consuming class in the next
Vietnam
decade. could add 36 million people to the consuming class in the next decade.

Population by income group (daily spending), millions, 2011 purchasing power parity (PPP)
104
98 2
4
87 18
80 1
1 14
5 36

Higher consuming class

(>$70 per day) 57
Established consuming class
($30–70 per day)
Entry-level consuming class 74 72
($11–30 per day)
Below consuming class 58
(<$11 per day)
27

2000 2010 2020 2030

Source: Marketpro by WorldDataLabs; McKinsey Global Institute analysis

Five demographic shifts transforming by seniors, greater market participation by digital

the consuming class
Although the rising consuming class and
urbanization are large drivers of Vietnam’s growth,
a new chapter is being written that goes beyond
scale and rising incomes. Significant demographic
change and the penetration of digital technologies
are likely to reinforce the diversity of Vietnam’s
consumer markets, prompting sometimes surprising
changes in consumer preferences and behavior. To
thrive in Vietnam’s consumer markets, companies
will have to consider trends that reflect the country’s
evolving socioeconomic realities and will influence
consumption: shrinking households, more spending
natives, economic empowerment of women, and
wider geographic distribution of spending.
Households are getting smaller
Across Asia, households are shrinking. The
size of the average Vietnamese household has
decreased by around 20 percent over the past
two decades, from 4.5 people per household in
1999 to 3.5 people per household in 2019.7 A large
contributor of this change has been Vietnam’s
declining total fertility rate, from 2.25 births
per woman during the 1995–2000 period to an
estimated 2.06 between 2015 and 2020. 8 At the

7
“Preliminary results: The 2019 population and housing census,” press release, General Statistics Office, July 11, 2019, gso.gov.vn; Viet Nam
population and housing census 2009: Age-sex structure and marital status of the population in Viet Nam, General Statistics Office, 2011,
vietnam.unfpa.org.
8
World population prospects, United Nations, August 2019, population.un.org.

The new faces of the Vietnamese consumer 3

 same time, new lifestyles and ways of working
(especially if women make further progress in
economic empowerment) may lead to fewer
multigenerational families living under one roof.
This trend toward smaller households is reinforced
by urbanization, for two reasons. First, the total
fertility rate in cities is even lower than in the
country as a whole; for instance, the fertility rate
in HCMC was around 1.35 in 2020. Second, urban
centers tend to attract young people who move
away from their parents and extended families. If
the experience of other Asian markets holds true
in Vietnam, the declining size of households may
lead to new types of demands, including smaller
homes, increased ownership of pets, and new forms
of entertainment.
Seniors are accounting for an increasing
share of consumption
Vietnam remains a young country overall, with a
median age of 32 in 2020. However, the number of
people aged 60 and over is projected to increase
by five million; seniors could account for more
than 17 percent of Vietnam’s population by 2030.
Spending by seniors is expected to triple in the next
decade, growing at more than double the rate for
the population as a whole during this period. The
expansion of relatively well-off seniors is likely to
have significant impact on several sectors. For
example, over the past decade, there has already
been rapid growth of investments in healthcare.
Local players, such as Vinmec, which runs hospitals,
and Pharmacity, a retail pharmacy company
founded in 2011, are growing rapidly. High-quality
nursing homes are spreading, as well as assisted-
living accommodations. Beyond healthcare, in
the housing market there is growth in real estate
development that is also increasingly focused on
suburban areas where the air quality is better and
there is more space for seniors and retirees.
4 The new faces of the Vietnamese consumer
Digital natives are becoming an increasing
force in Vietnam’s consumption
So-called digital natives born between 1980 and
2012, including members of Generation Z and
millennials, are expected to account for around
40 percent of Vietnam’s consumption by 2030.
Members of this digitally savvy generation live
online and on their mobiles. Almost 70 percent
of Vietnam’s population in 2020 are internet
users. Rapid digitization is changing channels and
communications, not least in e-commerce, where
regional players, such as Shopee and Lazada, and
local ones, such as Tiki, are active.
The rapid emergence of digital consumers has
fueled innovation in retail and purchasing behavior.
For example, local social network Zalo is among the
most used applications in Vietnam, with 52 million
monthly active users, and has become a significant
marketing channel. An estimated 55 percent of
Vietnamese Gen Zers now use TikTok, driving
intense competition, as evidenced in the launch
of YouTube shorts and Instagram reels. Social
commerce sites, such as Mio, and live-streaming
platforms are reinventing consumption methods
by creating new channels that attract new, often
younger, shoppers to a category or a brand.
These new behavioral trends have forced companies
to rethink the allocation of their marketing budget.
Marketers have increasingly realized the importance
and pervasiveness of online channels. In 2021, online
ad spending is expected to hit almost $1 billion in
Vietnam and to grow by about 22 percent a year
until 2025.
Women’s economic empowerment presents a
large opportunity
Vietnam has historically been ahead of other
countries on women’s participation in the labor
force. In 2019, Vietnam’s ratio of female-to-male
labor-force participation was 88 percent, one of the
highest in the world.9 Vietnamese consumers are
accustomed to seeing female executives in leading
roles at large Vietnamese companies, including
PNJ, Sovico, Vinamilk, and Vingroup. Other forms of
empowerment—including increased financial and
digital inclusion, opportunities to raise skills and
therefore transition into higher-income jobs, and
a greater say in household purchasing decisions—
could unleash even more female consumption.
According to MGI research on the estimated GDP
growth potential from narrowing gender gaps,
women’s empowerment could add an additional
$80 billion to Vietnam’s GDP in the period to 2030.
The rise of the small-city and
suburban consumers
Consumption power has become more distributed
over the past decade. While consumption had
largely resided in the nation’s two major economic
and financial hubs, Hanoi and HCMC, other cities
are developing into economic forces. In 2020,
Hanoi and HCMC accounted for 37 percent of
all Vietnamese households with income of more
than $22,000 a year in 2011 PPP terms, but this
share could drop to 31 percent in 2030 (Exhibit 2).
Our analysis notes that growth in the number
of middle-class households in smaller cities
(and even rural areas) is outpacing that in Hanoi
and HCMC—a compound annual rate of about
8 percent, compared with 5 percent.10 Moreover, the
Mekong and Red River Deltas, densely populated
but not fully urbanized, are becoming significant
consumption pools, attracting the attention of
consumer-goods companies and modern retailers.
9
Ratio of female to male labor force participation rate (%) (modeled ILO estimate)—Vietnam, 1990–2019, World Bank, data.worldbank.org.
10
McKinsey Global Institute.
11
Euromonitor International, in current US dollars.
The new faces of the Vietnamese consumer
Behavioral shifts modernizing
and diversifying the consumer
environment
Beyond demographic shifts, Vietnam’s
consumer markets are experiencing significant
changes in behaviors as incomes rise and as
innovation in business models and technology
accelerates. Five shifts are notable: digitization’s
impact on distribution channels, increasing
use of consumer-facing ecosystems, a growing
preference for domestic brands, greater interest
in “conscious lifestyle” products, and a lessening of
geographic differentiation.
New channel mix
In most consumer markets, traditional grocery
stores are being replaced by modern stores,
especially supermarkets and convenience stores.
(The larger hypermarket formats are still present
but growing less rapidly.) But in Vietnam, beyond
this traditional narrative of retail modernization,
digitization is rapidly changing the way Vietnamese
shop. As in several other Asian markets, two types
of leapfrogging are under way. First, e-commerce
is developing so rapidly that it is already to an
extent skipping the usual step from traditional to
modern store-based retail. By 2025, e-commerce in
Vietnam could be almost as large as offline modern
grocery retail.11 Second, even traditional trade is
digitizing rapidly. Vietnam has more than 680,000
offline outlets selling basic food and fast-moving
consumer goods (FCMG). Many of these food and
FMCG players—including, for instance, Telio and
Vinshop—are offering the outlets digital ordering
and digital payments.
As those digital players gradually compete with
traditional business-to-business (B2B) players
such as wholesalers and cash-and-carry stores,
traditional trade can become more connected.
The process could disintermediate traditional
distributors and wholesalers, which could lead to
greater efficiency.
5
 Web 2021
FoA Vietnam Consumer
Exhibit 2 of 3
Exhibit 2
Vietnam will likely
Vietnam likelyhave
have aa more
more distributed consuming class
classin
in the
thenext
nextdecade.
decade.

Households with annual income greater than $22,000, 2011 international dollars (PPP)

x Multiplier between 2020 and 2030 2.0x

15.7
Hanoi 2.6 1.8x
Ho Chi Minh City
Next 13 cities (by GDP)1 2.2 1.6x
Rest of the country
2.5 1.9x
7.8
1.5
1.4
1.3 8.4 2.3x

3.6

2020 2030

The next 13 cities are Hai Phong, Can Tho, Bien Hoa, Da Nang, Hue, Vung Tau, Nha Trang, Buon Ma Thuot, Vinh, Qui Nhon, Ha Long, Rach Gia, and Long Xuyen.
1

Source: McKinsey Global Institute Cityscope v4.1

A big convergence There is still headroom for growth in Vietnam’s

Consumer demand is being reshaped by a “big
convergence” in which digital ecosystems are
aggregating many consumer needs and serving
them with varying degrees of integration. At
the most integrated end of the spectrum are
super apps, which offer a one-stop digital shop
for customers through multiple uses, functions
and complementary services. As consumer-
facing ecosystems have emerged and grown
rapidly, players in consumer packaged goods
(CPGs) and retail have had to rethink their stance
on partnerships.
digital ecosystems. In many economies around the
world, the disruption associated with the COVID‑19
pandemic accelerated digital adoption across
categories, including groceries, entertainment,
digital healthcare, real estate, and education. This
acceleration is evident in Vietnam. From online
school classes to food ordering, Vietnamese
consumers have increased the pace of their digital
adoption and use. One study found that 41 percent
of all digital consumers in Vietnam are new
consumers, and 91 percent of these new consumers
said they intend to continue their use of digital tools
after the pandemic.

6 The new faces of the Vietnamese consumer

Greater preference for homegrown brands Of course, what consumers say may not predict
Asian brands are maintaining a strong position in what they actually do. Indeed, there is ample
many consumer-facing categories across Asia, evidence that willingness to pay premiums for
including in Vietnam. In FMCG, for instance, Asian eco-conscious products is not yet sufficient in
brands increased revenue at 9 percent a year, most Asian markets. Nevertheless, Vietnamese
compared with 5 percent for global non-Asian consumers clearly are paying more attention
brands.12 Conventional wisdom has held that to sustainability, social responsibility, and labor
emerging middle classes in Asia tend to favor buying conditions, and many are willing to take action
global (Western) brands, but this does not hold through their wallets.
true—or at least not in every category. Local players
have built successful brands in Vietnam, including Less emphasis on geographic differentiation,
VinFast in the automotive sector and Masan, including the traditional north–south divide
Nutifood, and Vinamilk in FMCG. Local players Vietnam has a very distinct geography and history. It
have been successful in modern retail too. Foreign has two large cities of roughly equal size, separated
retailers were among the pioneers of modern trade by more than 1,100 kilometers. These cities are
in Vietnam, but most of the fastest-growing brands Vietnam’s largest consumption centers but have
of retail chains today are local players, such as Bach
very different climates (and therefore different
Hoa Xanh, Coop Mart, and VinMart. fashion) and histories, leading to significant
variations in consumer behavior and preferences.
Conscious lifestyle choices Therefore, the traditional marketing approach was
Consumer lifestyle and behaviors that take into to deploy tailored communications to reach the
consideration other people, the environment, and specific preferences of customers in the north,
society are often associated with more developed south, and cities in between. Such large differences
economies. However, surveys suggest that in the consumer landscape within Vietnam could be
Vietnamese consumers are emulating this behavior— a hurdle for brands, especially those of players who
more so than those in other parts of Southeast Asia. are unfamiliar with local context.
Reusable straws and mugs in coffee shops, tote
bags at supermarkets, and eco-friendly fashion Paradoxically, however, while Vietnamese
brands are now common sights in cities throughout consumers are segmenting and diversifying,
Vietnam. In one consumer survey, 91 percent of cultural differentiation by geography appears
Vietnamese respondents said they were aware of to be diminishing. Domestic travel is increasing
and were participating in a conscious lifestyle. In and connecting Vietnam more than ever before.
contrast, 86 percent of respondents in Indonesia, The flight route from Hanoi to HCMC is the
73 percent in Thailand, and 75 percent in Malaysia second-busiest in the world, with close to a
said the same. Notably, 84 percent of Vietnamese million seats. Consumers across the country’s
respondents said they were willing to pay a premium regions are becoming more affluent. Digital media
for conscious-lifestyle products. This suggests are harmonizing brand communication; brands
potential for premiumization in the market. that have established a regional stronghold are
now capturing other regional markets. In short,
different parts of the country and different types of
consumers are converging.

12
Euromonitor International; all data used in current terms.

The new faces of the Vietnamese consumer 7

 A telling example of this convergence is the beer
industry. In 2015, brands distributed nationally
without a local stronghold had about 32 percent
of economy-wide volume, with 37 percent for
brands focused on the south, such as Saigon Beer,
and 24 percent for northern or central-focused
brands such as Hanoi Beer or Carlsberg’s portfolio.
However, by 2020, the share of national brands
had risen to about 40 percent, while the share of
northern and central brands had declined.13 Thus,
even as Vietnam’s consumer market is diversifying,
geographical stereotypes about Vietnamese
consumers could become obsolete.
Implications for companies wooing
Vietnam’s consumers
Vietnam’s consumer markets are changing rapidly—
diversifying, modernizing, and digitizing. Companies
can find considerable momentum to tap into, but to
position themselves in a way that can win the hearts
and minds of Vietnamese consumers, they need
to answer questions about which markets to enter,
how to communicate with consumers, and how to
maintain a combination of localization and agility.
Where to play?
Companies in Vietnam need to take a broader view
of where to compete than sufficed in the past.
Success today requires moving beyond the two-city
approach and considering new channels in light of
changing technology.
In more than two cities. Except in a few sectors such
as high-end luxury, the era of focusing exclusively
on Hanoi and HCMC is over. Competitive local
consumer-facing industries are already pursuing
rural consumers over a broad geographic area.
Companies that have confined themselves to
serving consumers in Vietnam’s two leading cities
will need to broaden their approach. To reach
around 50 percent of the population with incomes
of more than $22,000 per year, companies
typically need to plan distribution to the top 15
cities. Major retail players are seeking to capture
new opportunities by investing not only in key cities
13
Data from Euromonitor; market share by volume.
8 The new faces of the Vietnamese consumer
but also in a broad swath of nonurban areas whose
overall population is large (Exhibit 3).
In more than traditional channels. Companies in
Vietnam also should take a flexible distribution
approach to embrace the changes occurring in
channel mix. Vietnam’s hybrid and fast-changing
channel mix will pose challenges. Companies
need to be agile in positioning themselves for
a combination of a large share of fragmented
traditional trade, a rapidly growing but still
unpredictable online B2B sector, a constantly
recomposing modern retail landscape, and relatively
new e-commerce that is one of the fastest growing
in Southeast Asia. In this context, competing in
Vietnam requires not only the right strategy, but also
capabilities in channel management, key account
management, pricing, and promotions optimization.
How to communicate with Vietnam’s
new consumers?
Businesses that succeed in Vietnam will have
to upgrade their messages and channels of
communication to reach today’s consumers. More
often than not, this involves digital channels, as well
as an awareness of new norms and values.
Double down on digital engagement. Vietnamese
consumers across age groups and regions are
digitally connected. While online retail is just taking
off, marketing and brands will need to make full
use of social media, user reviews, social commerce,
live streams, and online ecosystems to gain
early traction.
Build relatable brands with a conscience and, if
possible, a local vibe. Vietnamese consumers are
adopting the kind of conscious consumption that
is more prevalent in economies further down their
development path. To capture their attention and
their wallet, companies may consider localizing
brands that “fit” the new zeitgeist. Approaches
that could make brands relatable include using
icons and champions of local culture and designing
products that focus on local heritage. To some
extent, Asian (rather than Vietnamese) brand image
and ambassadors have also sometimes proven
Web 2021
FoA Vietnam Consumer
Exhibit 3 of 3
Exhibit 3
Vietnam’smodern
Vietnam’s modernretail
retailhas
hasexpanded
expandedrapidly
rapidlybeyond
beyondkey
keycities.
cities.

Supermarkets (>150 square meters and chains of >10 stores) mapped in Vietnam

4
North: Red River Delta 26 31
2017 2021

3
North: Midland and Mountains 14 16

52
Central: Coast 178
33

88
Central: Highlands 150
12

117
South: Southeast 484
22

107
South: Mekong River Delta 673
37

42 701
Hanoi and HCMC 172
2017 2020

Source: Company websites; McKinsey we-scrapping and geospatial mapping

suitable; some brands recruit Korean and Japanese
ambassadors with a local audience. Importantly,
adopting the norms and values of the modern,
socially conscious consumer is a must.
How to operate?
Talent localization and agility have become critical.
In the face of rapid change, companies in Vietnam
will also likely need to reinvent their operating
models around three axioms:
— Update the operating model. Shape an
operating model that favors the speed of local
innovation and personalization, in response
to the fast development of Vietnamese
consumers’ behavior.
— Reallocate resources rapidly. As conditions in
the market change, companies need to move
resources rapidly between product lines or
distribution channels.

— Recruit, train, and promote local talent.
Talent management grows in importance
as capabilities needed to compete become
increasingly complex (for example, to
digitize businesses).
— Build the ability to enter cross-sector
partnerships. In an increasingly interconnected
world, such partnerships are likely to become a
source of performance.

The new faces of the Vietnamese consumer 9

 In short, beyond building an effective entry
strategy, companies will need to double down on
forming more robust Vietnamese organizations to
compete successfully.

Vietnam’s dynamic consumer markets have

had strong momentum for a while, and they are
now becoming more complex. The consuming
class is diversifying geographically, socially,
demographically, and technologically. As
consumers become more diverse and demanding,
companies wishing to serve them will need to
refine their strategy to take account not only of
income levels, but also of new channels, strategy,
marketing allocation, and behavior even within their
established customer bases.

Bruce Delteil is the managing partner of McKinsey’s Vietnam office, based in Hanoi, where Duy Mai is a consultant. Matthieu
Francois is an associate partner based in Ho Chi Minh City, and Jeongmin Seong is a McKinsey Global Institute partner based
in Shanghai.

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10 The new faces of the Vietnamese consumer