FAST-MOVING CONSUMER GOODS MARKET IN VIETNAM

1.     Overview

With increasing disposable income, rising living standard, stable GDP and economic growth, young population and low inflation, Vietnam is one of the most dynamic emerging market in Southeast Asia region. Fast movingconsumer goods industry has promised a robust development.

2.     Fast-moving Consumer Goods (FMCG) in Vietnam

• FMCG growth

There is a significant volume growth from -1,6% in 2014 to 2,7% in 2015 in terms of demand for FMCG and the figure is expected to continue increasing in 2016 and 2017 (Nielsen, 2015). Vietnam’s volume growth in 2015 in only behind Thailand and the Philippines in South East Asian religion. In short term, urban citizens remain positive value growth of 3,6% whereas value of growth in rural areas grow at weak pace.

• Value contribution in FMCG

It can be seen from the chart beverage contribute the largest value to FMCG industry while baby care products remain the lowest value contribution. Interestingly, urban prefers liquid tonic food drink with the rise of 4,4 PTS when the most popular beverage in rural is soya milk with the increase of 8,7 PTS.

• Distribution channel

The data of Kantar research shows that traditional trade outlet such as wet markets and grocery stores is still one of the most popular channel for FMCG. Convenient stores/mini market is a new rising star in distribution channel which experience 60% growth from 2014 to 2015. For example, VinMart + have appeared from 100 to 200 store in 2015, Circle K from 97 to 129 stores, and Shop & Go from 103 to 130 stores. E-commerce also will be a big trend which reaches steady growth of 13%.

• Consumer behaviour patterns

Consumer confidence index also experiences positive trend since Vietnam is the 6^th most optimistic country globally. Despite of the increase of 6,3% CPI in 2015 compared to 2014, Vietnamese consumer is prudent, still prefer saving than spending. Pricing has also been one of the most important decision making factor during purchase. Additionally, dropping shopping frequency proves that Vietnamese consumer has been lessen spending

The demand for high end FMCG is still week regard to relatively low income of majority of Vietnamese consumers in rural areas. Compared to other South East Asian countries, Vietnam’s per-capital expenditure on food and non-alcoholic beverages was US$200 in 2011 while this figure is US$900 in Thai Land and US$1000 in Malaysia.

3.     Future trend and potential investment

• Booming of foreign investment in FMCG

Vietnam has emerged as a popular destination for multinational and regional retailers. It is allegedly agreed that Vietnamese consumers are more likely to prefer foreign brands. In addition, 57% of Vietnam’s population below 35 years old, 44% monthly increasing income, 30% urbanisation rate with 3,4% growth rate per year; and 1.6 times more college and university graduate (Nielsen) result inthe shift toward modern trade outlets such as shopping mall and supermarket. Some of well-known foreign retailers are AEON (Japan), Lotte (Korea), Central Group (Thailand), Mark and Spencer (UK). In additional to strong foreign competitors, Vinmart and Citimart are the most popular domestic rising stars in FMCG/retail market in Vietnam.

• Shopper get smarter and more purchasing power

In 2015, 48% of Vietnamese consumers stated that “staying fit and healthy” is the top concern (Nielsen). Therefore, Vietnamese consumers have become more concerned about the quality, hygiene and safety of the products. Due to high competition in FMCG industry in terms of manufactures and retail outlets, Vietnamese consumer have more purchase power decision. This implies that manufactures as well as retailers also need to be more selective with the products that provide to customers.

• The emergence of new online channel

According to Nielson report in 2 big cities: Hanoi and HCMC, 92% of internet users are online shopper and 93% of shopper are middle class and millennial. Additionally, in such a busy world, on-the-go lifestyle will become a big trend in Vietnam. Thus, it indicates the high demand for online platform that conveniently host information and acquire interaction between online and offline store choices. Also lack of innovative approach and strategy to attract online shoppers is a huge issue in Vietnam market at the moment. Also there has been a huge lack of accessibility to online channel in rural areas and other smaller cities. E-commerce in FMCG promises high potential for investment.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation.  

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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BANKING SECTOR IN VIETNAM

1. Overview

Vietnam’s banking sector has shown significant improvement which results from stable inflation and interested rate, favorable environment for foreign direct investment and a shift from deficit to surplus of the country’s current account. This sector plays a crucial role in Vietnam’s economic development in recent years.

2.Banking system

There are two tiers in banking sector in Vietnam. The first one is State Bank of Vietnam (SBV) which is responsible for monetary policy and supervision/regulation of the banking system in Vietnam. The second one consists of commercial banks, financial companies, credit co-operatives, people’s credit funds, and insurance companies. The main activity driving banking system is commercial bank which includes 5 state-owned commercial banks, 33 joint stock commercial banks, 5 joint venture commercial banks and 5 wholly-owned foreign owned bank.

State owned commercial banks (SOCB) account for more than 40% of market share. The largest bank in terms of total assets, network and still 100% state owned share is Agribank. And four other SOCB areVietcom bank, Viettin Bank, BIDV and MHB.

Joint stock commercial banks (JSCB) have small capital/deposit base and more diversified shareholding structured compared to state owned commercial banks. There are currently 33 JSCB, which the leading ones are SaiGon Joint Stock Commercial Bank (SCB), Military Joint Stock Commercial Bank (MBB), Vietnam Export Import Commercial Joint Stock Bank (EIB), Asia Commercial Bank (ACB) and SaiGonThuong Tin Commercial Joint Stock Bank (STB)

Also SBV had granted 5 licences to permit HSBC, Standard Charter Bank, ANZ Bank, Shinhan Bank and Hong Leong Bank to establish as wholly-owned foreign banks

3.Potential opportunities for foreign investment

There are solid evidences to prove that Vietnam’s banking sector has such a huge potential for foreign investment

• Government effort of reforming banking system

• Trade agreements facilitate foreign ownership and investment

• Vietnam- a destination of foreign investment in South East Asian market

• Market Entry

• Tax Advice

• Legal Advice

• Outsourcing Services

SBV suggested that merge and acquisition of loss making and incompetent bank would be necessary to improve efficiency within the industry. For example, in 2015, SBV forced merge of loss making Vietnam Construction Bank to Vietcom bank with purchasing share price for 0 VND. By forcing merge and acquisition of incompetent banks, SBV has increased exploitation of economies of scale and the reduced burden on regulators

Have taken part in variety of trade agreement such as Trans Pacific Strategic Economic Partnership (TTP),  Association of Southeast Asian Nations (ASEAN) and Free Trade Agreement with different countries, Vietnam has made restructuring move to standardize banking system which will be compatible and accessible to other countries. Vietnam is required to have bilateral arrangement which eliminate the challenges of foreign establishment of banking services.

The government also encourages foreign investors to hold shares for five year period and partnering with the local bank to enhance management, capacity or new development. With the 30% limit of oversea ownership to domestic banks, the strategic foreign investors are allowed to acquire up to 15% of share in a bank, and up to 20% with Prime Ministerial approval. HSBC has also invested in a leading local bank, possessing a 20% stake in the Vietnam Technological and Commercial Joint Stock Bank—Techcombank. It is also the sole foreign strategic partner of the BaoViet Finance-Insurance Group, Vietnam’s largest insurance company. In a vote of confidence in the insurer, HSBC increased its stake to 18% in October 2009.

There is a huge untapped market in Vietnam. According to SBV, only 20% of more than 90 million citizens in Vietnam hold bank accounts and 3% of the population have credit cards. With 87% of the population under the age of 54, there is a great opportunity for retail banking activity development in Vietnam.

Also it is agreed that SME and rural areas have had challenges to access bank investment and loan. The data of Asian Development Bank shows that “lack the capacity to assess the risk of investment into SMEs and find bankable projects” and lack of knowledge about loan and lending systems for rural citizens are the main reasons leading to currentunder-banked circumstances.

The stable economic with GDP growth of around 6% to 7%; low wage costs; a large population with a high savings rate and lack of innovative approach to the market are advantages for foreign investors to accelerate financial and industrial development in Vietnam market.

ANT Consulting is here to assist you from the outset; providing corporate intelligence, risk advisory, management consulting services that assist market entrance, and ensure efficient business start-up operation.  Our services are as following:

We strive to save your cost by guiding you towards economical solutions that comply with local legislation and procedures. We support you through early logistic solutions and carry you through as your business grows.  We aim to bridge the gap between international best practices and local cultures and assist foreign companies and organizations entering Vietnam market to overcome commercial and regulatory issues.

We could be reached at email: ant@antconsult.vn or tel: +848 3520 2779 .  To learn more about us, please visit www.antconsult.vn

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HOW TO MANAGE RISK?

Depending on the size and characteristics of the enterprise that they may establish a risk management department consists of experienced professionals, or at least they should use the risk management services of professional consulting and law firms with extensive experiences in this field. The risk managementde partments have to perform many tasks but should focus on three main functions: risk identification, risk analysis and risk response.

First, we need to identify the risks. It is the process of gathering information, data and analysis of factors that may impact negatively on the achievement of goals, including the inside and outside, macro and micro factors. We can use analysis tools such as brainstorming, interviewing, root-cause analysis, checklist, SWOT analysis… along with other tools that are used in the strategic planning process. Enterprises need to create and regularly update the information and data system to serve for the analysis.

The next process is risk analysis, in which we need to analyze to assess risk that has been identified at the main aspects: the root causes of risk, risk probability and condition to occur, scope and displaced persons entitled to, impact of the risks, factors that change the level of impact…

Finally is the process of responding to risks. More specifically, it is the process of choosing the way to respond to risk, which may include measures to: (i) risk aversion (abandon risky activities); (ii) risk prevention (eliminate the root causes of risk); (iii) reduce the likelihood of risk; (iv) eliminate the negative impacts; (v) reduce the negative impact; (vi) risk sharing; (vii) risk transferring (buy insurance, use derivative instruments); (viii) take risks and preparing resources to overcome the consequences.

Principles

Risk management must ensure the main principles: (1) create value (cost of risk management has to lower than benefit that it brings); (2) is an integral part of the business activities; (3) attached to the decision making (all important decisions have to consider risk management); (4) to be systematic and follow a throughout process (5) are regularly evaluated and improved.

It can be said, at the present, only the financial institutions and the banks are interested in risk managementactivities (although not enough) while most other companies have not focused on this activity. Towards the sustainable development, enterprises cannot just “take risks” in the passive and desperate ways, they should be towards to manage risk in proactively and wisely ways.

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EMART HYPERMARKET (KOREA) OFFICIALLY JOINS VIETNAM MARKET

After 5 years of conducting the survey and researching the market of Vietnam, the leading retail group from Korea – Emart (owned by Shinsegae Group) has officially entered Vietnam market by opening the first Emart hypermarket in Vietnam on December 28^th 2015 in 366 Phan Van Tri street, ward 5, Go Vap district, Ho Chi Minh City (HCMC).

Go Vap Emart Hypermarket has over 3 ha in area with a total investment of up to 60 million USD (equivalent to 1,350 billion VND). Starting construction from early 2015 and went into operation at the end of the year,  Emart Go Vap is expected to meet the shopping needs and create modern consumption habits of Vietnamese people with quality products and reasonable price.

Emart Go Vap has two main parts with an area of 6,000m2, serving diverse items from staples, fresh products to household goods, electronics, fashion…; the utility service areas include restaurants, children’s education and entertainment park… The modern shopping space, nonstop improving and upgrading services are differences that help Emart Go Vap conquer local consumers.

Mr. Choi Kwang Ho, CEO of Emart Vietnam said that the growth of Emart will accompany the development of Vietnam. Thus, 95% of goods in Emart are domestic goods. With the quality and best price as well as services that match with shopping habits of Vietnamese, Emart commits to put on great efforts to become a close shopping destination for local people.

Come to the opening of Emart from December 28^th, customers will have chance to visit and shopping with many attractive 50% discount programs plus thousands of gifts and awards such as Emart helmets, Emart environmental bags, SH 150i motorcycles, Samsung TV… At the same time, customers can also participate in many exciting activities such as taking pictures with snow, the rotation of luck, darts and face painting… Especially, customers visit Emart Go Vap will enjoy unique dishes from Korea as traditional kimpap and many other unique Asian dishes… With the shopping discounts and attractive activities, Emart Go Vap promises to bring consumers an exciting and attractive shopping space, especially in the time of Lunar New Year is coming very close.

As the first Emart Hypermarket in Vietnam, Emart Go Vap is an important step in the launching plans and the ambition to penetrate the Vietnam retail market. Pursuing the motto “Every day of customers will be full of joy”, Emart committed to providing goods and best service to customers.

With the desire to grow in breadth and depth in new markets as well as to realize the goal to brand Emart to the world, Emart promises to continue a-20-year-history of impressive development with Emart Go Vap and the future system of Emart in HCMC and Vietnam.

Since the opening of the first low cost shop in Korea in 1993, Emart has achieved impressive growth steps in the past 20 years. Currently, Emart Hypermarket is the no 1 hypermarket chain in Korea with over 160 hypermarkets in Korea and foreign countries. Emart is the largest and oldest low cost store chain in Korea with sales exceeding 13.2 billion USD as of 2014. Through the launching of new series of trade centers and acquired Walmart Korea in 2006, Emart is confirming the leading position in the field of retail and supermarket chains.

Further information   

Risk Prevention in Vietnam

 Trade promotion in Vietnam

Fraud Management in Vietnam

Due diligence corporate investigations

Vietnam entry strategy

Vietnam market intelligence

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