09:30 | 03/01/2018 Trade
(VEN) - The sale of domestically produced goods in the Fast Moving Consumer Goods (FMCG) sector such as milk and dairy products, instant noodles and “refresher” drinks is growing faster than those produced by foreign manufacturers.
In 2016, sales by local players in Vietnam grew seven percent in value, compared to five percent two years ago, and contributed 42 percent to total FMCG sales in the country, according to a survey conducted by Nielsen Vietnam. At the same time, the growth of sales by multinational companies was stagnant with an increase of only two percent in value.
Nielsen’s analysis covered the Top 100 FMCG players across Asia Pacific in 2016, representing approximately 85 percent of such items produced in the region. The survey examined four categories, including food, beverage, household, and personal.
Only a few years back, multinational companies dominated modern trade while local companies’ strength lay in traditional retail formats. This too is quickly changing with local players driving 90 percent of FMCG growth in modern trade and 63 percent in traditional trade.
The growth rate of real consumer spending (CAGR) in the 2011-2016 period was three percent in the retail, six percent in consumer goods (non-food and beverage), and three percent in food and beverages and other.
Rural areas continue to be the biggest potential market for FMCG manufacturers. Data indicates that while urban areas gained 4.7 percent in FMCG growth in the third quarter of the year compared with the same period last year, sales in rural areas grew 7.6 percent during this period, mainly led by 7.4 percent in volume growth, and contributed 54 percent to total FMCG sales.
According to Nguyen Anh Dung, director of the Retail Measurement Services at Nielsen Vietnam, “getting products to each and every retailer in rural areas to expand distribution to drive more sales is a challenging game for manufacturers. As the rural Vietnamese community continues to evolve, transform, and take center stage as a key group for businesses, understanding who they really are, where, how, and what they are buying, and what their most effective touch points are will be prerequisites for future success.”
According to Nielsen, domestic businesses are increasingly gaining dominance in the FMCG market. The preference among Vietnamese for local brands was strongest in the dairy (milk/butter/cheese/yogurt) and biscuits/snacks categories, where up to 48 percent and 44 percent of consumers, respectively, said they prefer to buy local brands.