Click here or press enter for the accessibility optimised version

Vietnam FMCG
Outlook 2024
Winning New Age Consumers
in Shifting Times
Click here or press enter for the accessibility optimised version

Vietnam in Shifting Gears: A Macro Outlook

Decoding Vietnam's macro shifts: Economic, demographic, and consumer trends
Vietnam’s Retail sales continued to improve by 9.6%, a large part thanks to the boost of inbound tourism. Inflation in

economic the whole year was kept well kept under the government’s target of 4.5% and Consumer Price Index (CPI)
increase was capped at 3.25% year on year. Despite this, the challenges of rising costs remain visible

outlook amidst economic uncertainty, particular for the financially struggling consumer groups.

After a strong post-Covid

economic performance in 2022,
Vietnam posted a slower GDP
growth of 5.05% in 2023 due to
various external headwinds and
internal constraints. A slower-
than-expected recovery in
demands for exports from the
country's key trade partners
such as the US, EU and China
put in a dent on its
manufacturing and export
sectors. This resulted in
persistent waves layoffs, job
losses and subsequently
uncertainties in the public about
their financial situation and
future.
Vietnam on course for growth despite short term
challenges
Though this year's GDP growth is below the Vietnamese government’s target of 6.5%, the country remains among
the fastest growing economies in the region.

In a favourable outlook, the Asian Development Bank (ADB) projects a strong GDP growth rate of 6% for 2024. This positions Vietnam as one of
Southeast Asia's fastest-growing economies. Moreover, the Centre for Economics and Business Research (CEBR) predicts a substantial increase in
Vietnam's economic size between 2023 and 2038. By 2024, Vietnam is expected to move up to the 33rd place in global economic rankings, and by
2038 could reach the 21st place. This impressive trajectory highlights Vietnam's significant long-term potential as both an economic power and a
growing consumer market.

While 2023 presented

obstacles and 2024 poses
short term headwinds,
Vietnam's long term
economic trajectory remains
robust, reflecting the
country’s resilience and
stability. Navigating global
uncertainties and capitalising
on future opportunities will
be crucial as Vietnam charts
its course toward a
prosperous and influential
future on the global stage.
Consumer reactions However, by the second quarter, signs of downtrading emerged,

in shifting times signifying a shift towards lower-priced alternatives. This trend

continued into the latter half of the year, with consumers cutting
back on volume even as inflation slowed. This shift highlights the
complex decision-making process of Vietnamese consumers
navigating an evolving economic environment.

While rising prices and economic uncertainty may present a picture

of tightened belts across the board, the consumer landscape is
nuanced. Essential categories remain at the forefront of budgets,
discretionary spending may see cuts, particularly in categories like
eating out and entertainment.

However, it is important to recognise that consumers haven't

entirely shut down their wallets. They're still willing to "splurge,"
but their spending is driven by value. Added values in health,
experiences, and convenience may prompt them to seek out
products that justify their worth.

This presents a unique opportunity for FMCG brands to navigate

In a turbulent economic climate, Vietnamese consumers displayed a challenging times and position themselves for growth. The key lies in
mix of strategies to cope with rising prices of FMCG. In the first understanding how different consumer segments are adapting
quarter, they embraced uptrading, venturing for bigger shopping their behaviour and adopting strategies that cater to these shifts.
trips to secure cost savings through higher volume purchases.
Spending behaviour
by pressure groups

Analysing spend changes across different consumer groups is crucial. Budget-conscious consumers might
demand more affordable options and value-driven promotions. Meanwhile, higher-income segments might be
less sensitive to price increases and more receptive to premium offerings, where brands can effectively
communicate the unique value they provide. For example, in categories like detergents and essential personal
care, consumers may opt for larger pack sizes to save more cost per unit.

While competitive pricing is integral, introducing different pack sizes and strategic promotion schemes enrich
an encompassing strategy to cater to different groups. To justify premium price where applicable, brands must
highlight the unique value the products provide, be it saving, health or experiential benefits.
The 100 million
people club
Rapid urbanisation is also painting a new picture for Vietnam. As individuals and households migrate to cities,
incomes rise, creating an increasingly powerful consuming class. McKinsey forecasts by 2035, over half of
Vietnam in 2023 hit the Vietnamese population will enter the globally-defined middle class. This shift holds significant potential for
milestone of crossing the FMCG businesses as demand for diverse products surges. Understanding the specific needs and aspirations of
100 million people mark, this urbanising population will be key for brands to tap into this growing market.
solidifying its position as
the 15th most populous
nation in the world,
carrying within it both
challenges and
tremendous
opportunities.
Understanding the
country’s evolving
demographic structure is
crucial to capitalise on
Vietnam's major
consumer market.
From golden age to global stage
While Vietnam's youthful population has historically been an immense advantage, the country is
transitioning beyond its peak "golden population" period. While concerns over an aging population are
present, it's crucial to recognise and capture the unique opportunities this period presents. Vietnam still
boasts a relatively young and well-educated workforce, positioning itself as a valuable player in the global
market. Maximising the potential of its youthful "golden population" is crucial for the country to unlock its
full economic potential and achieve its ambitions of becoming a high-income nation.

Capturing the remaining benefits of a young workforce while adapting to an aging population and their
preferences requires proactiveness and innovation. Vietnam's demographic shift signifies a rising demand
for products and services catering to the growing senior population. Investing in specified and age-
appropriate products not only ensure the well-being of the silver generation but also unlock their potential
as consumers, helping brands be more present to more people.
Future drivers of Generation Alpha, currently in their early years, are digital natives
with unparalleled exposure to information and global trends. They

consumption represent a future generation of decision-makers with distinct

preferences and spending habits. Businesses that cultivate brand
loyalty early on by offering innovative and engaging experiences
stand to win over this influential group.

Together with Gen Alpha accounting for 55% of the population, all
of Gen Z are on the cusp of entering the workforce within the next
five years, presenting another exciting opportunity. This generation,
known for their independence and willingness to try new
experiences, will likely have vastly different demands compared to
previous generations. Brands that cater to their desire for
individuality and authenticity will be well-positioned to capture their
spending power.
Shrinking household size, expanding needs
Smaller family size and rising
income also suggest a shift
in consumer preferences
beyond pack size. As
discretionary income rises,
consumers empowered by
technology and diverse
needs are increasingly willing
to invest in value-added and
premium products that cater
to their individual desires.
This presents a fertile ground
Vietnam's demographic landscape is undergoing a significant shift: shrinking household size coupled with for FMCG brands to innovate
rising household income. and expand their reach by
appealing to a broader range
The nuclear Vietnamese family size is getting smaller with both urban and rural families averaging fewer of personal requirements.
members than a decade ago. Gone are the days of single-size-fits-all products. The rise of smaller households
drives an increasing demand for smaller and single-serve pack sizes. Consumers, now with more disposable
income, prioritise products that cater to their unique needs and preferences. This holds especially true for next
gen consumers such as Gen Z and Gen Alpha, often characterised by their needs for individual expressions and
personalised experiences.
The new age consumers

The quest for knowledge has empowered consumers to become smarter shoppers. They actively research
With rising education products online, compare prices across platforms and stores, and demand transparency from brands.
levels, a surge in
white-collar jobs and This translates to a buying process that is no longer linear but multifaceted, with a constant loop of exploration,
ubiquitous research, comparisons, and reviews playing a crucial role in decision-making.
smartphone and
internet access, While the rise of e-commerce has been integral of Vietnam's digital revolution, shoppertainment, the seamless
Vietnamese blend of entertainment and shopping is poised to become the defining feature in the new age of online
households are more commerce. For brands, live-streaming commerce presents a unique opportunity to showcase products in an
connected than ever. engaging and interactive format. It’s crucial for brands to explore the dynamic world of digital commerce, by
This transformation is connecting with their target consumers on the platforms where they are the most active.
not just changing
lifestyles but also
revolutionising FMCG
consumption.
The narrowing gap between urban and rural consumers in terms of income, education, connectivity in Vietnam presents a fascinating shift. rural
consumers’ shopping behaviours may emulate those in urban cities. This translates to increased demand for FMCG products and open doors for many
categories to reach rural shoppers. Increased connectivity and mobile device ownership is transforming digital shopping behaviour in rural areas, which is
projected to develop at higher speed than urban areas in the next 3 years.
Shopping The average monthly FMCG
spend has risen steadily over

behaviour: the past five years, with a

notable surge in urban areas
(10.27% increase in 2023
Does increasing price have compared to the previous
an impact on purchased two years) significantly
volume? outpacing the growth seen in
2021 compared to 2019
(5.19%). Similarly, rural
average FMCG spending A closer look reveals that this Even in difficult times, some
jumped 21.3% in 2023 substantial surge in FMCG brands thrive while others
compared to the previous spend was primarily driven find growth elusive. While
two years, making the 8.3% by rising prices and does not competitive pricing coupled
increase from 2019 to 2021 translate to a bigger basket. with strategic promotions is a
look modest. As price hikes have been must, success in securing
evidence since late 2021, consumers’ share of wallet
shoppers are essentially hinges on brands’ ability to
“paying more for less”. In seize the opportunities to
2023, over 75% of FMCG offer consumers smarter
categories have a higher solutions and value-driven
average price while only half choices.
of all the categories were
able to gain volume.
Consumer
priorities in
uncertain
times

2023 proved challenging for both consumers and businesses in Vietnam. Challenging global economic conditions and their local impact dampened
Vietnamese consumers’ confidence.

While Vietnamese consumers showed a slightly more optimistic view for the economic picture in Q3 2023, the average consumer index in the whole 2023
was more similar to that of 2021, the year when Covid-19 peaked in Vietnam.

The year witnessed a significant rise in financially vulnerable families, growing from 20% in Q2 2022 to 30% by the end of 2023. Consumer concerns over
rising costs and household income are consistently top of mind, exacerbating the perception about their financial future. In this challenging environment,
consumers exhibit seemingly polarising trends: they may become more cost-conscious in certain categories while still willing to splurge on
others.
Price Beyond
Sensitivity Price
The quest for value

Rising grocery prices coupled with As the cost-of-living burden is

concerns over income and job weighing on consumers, the quest
security add to the financial for value extends beyond quantities
pressure. Consumers must or the price tag. Value takes the
rationalise and carefully scrutinise centre stage, regardless of the price
every purchase when costs become point.
a paramount concern. To manage
their budgets, they increasingly To maximise every dollar spent,
refer to different stores and cost-conscious consumers seek
platforms to seek the best deals products that deliver the most
and more likely to switch brands "bang for their buck," prioritising
based on price promotions and essential categories and quantities
value offerings. at accessible prices. This may
appear as growing preferences for
multipack, bigger pack size or
multi-use products, offering
convenience and affordability.

In the premium segment, added

Evolving health needs
Consumers are increasingly prioritising their health and well-being, more specifically the Covid-19 pandemic. This
search for value now extends to evolving demand for products with additional value propositions like healthier
ingredients, stress-reducing properties, or natural alternatives.

Brands offering such value-added features, even at premium prices, resonate with health-conscious consumers
seeking solutions that enriched their overall well-being in an increasingly busy lifestyle.

Diverse age demographics have distinct health demands. For instance, in beverage choices, younger generations
like Gen Z seek products that support digestion or enhance skin health while Generation X, with different health
concerns, may prioritise drinks that act as a health booster or address specific health problems. Brands positioned
to understand and meet these different needs stand to secure a larger share of the consumer wallet.
Strategies for FMCG
brands and
manufacturers in 2024
Click here or press enter for the accessibility optimised version

Thrive in Turbulence
4 growth pillars for the future
How to be chosen by more
consumers?
In today's uncertain economic climate, navigating the delicate balance
between managing costs and winning consumers is critical and requires
strategic planning.

Post answer

Interactive poll not supported

View online version
Winning consumers’ choices relies on the dual strategy of capturing the attention of shoppers' minds and effectively engaging them at the crucial point
of sale. This multifaceted approach requires not only establishing a strong brand presence that resonates with consumers but also ensuring a compelling
experience when they are making purchase decisions.

By strategically crafting marketing activities that focus on shopper behaviours’ drivers, brands can imprint themselves in the minds of consumers, build
relevancy and thereby, increase the likelihood of being chosen when it comes time to make a purchase.

Additionally, by optimising the retail environment and creating a positive shopping experience at the point of sale by through impactful promotions and
strategic shelf display, brands can help shoppers find what they need and make informed purchasing decisions.
1.
Unlocking the
Why: Decoding
drivers of
change

The year 2024 is expected to see even fiercer competition in the FMCG
playground. Kantar’s data reveals that over half of FMCG brands struggled
to keep pace with the competition in 2023, particularly within growing
categories where approximately one-third of brands began to lag. This
highlights the urgent need for brands to identify their unique growth drivers to
stay ahead of competition.
Decoding Brand Performance

First, to identify growth drivers we need to understand the reasons for decline
and growth on brand performance, which are clustered into 4 groups:
Ex
Excellence
cellence Driv
Driver
ers,
s, K
Keey Driv
Driver
ers,
s, Ne
Neutr
utral
al Driv
Driver
erss and Is
Issue
sue Driv
Driver
erss.

In fact, each driver does not only have a one-way but a two-way impact and
what makes the difference is whether the impact is positive or negative on
growth. This is of great significance in helping manufacturers shape and
prioritise the factors affecting their growth.
Case Study: Let’s take an example of a snack brand, where the brand must strategically allocate investments to
drive profitability and develop the category.

Measuring drivers’ impact for Specifically, one of the drivers to address is the indulgence factor. While neglecting this driver could
strategic decision making result in a substantial 35% reduction in purchase volume, rectifying it presents an opportunity for a
12% volume increase, albeit the lowest volume gain among all factors.

On the other hand, prioritising innovation through product development and new offerings yields
significant growth potential, exceeding 40% of volume increase. Focusing solely on refining existing
products might lead to an 8% decline, showcasing how aligning with consumer desires through
product innovation unlocks substantially higher growth prospects.
Understanding At Kantar, we can make the link between the choices shoppers make: when they’re doing it, where
and how often; to why they are doing it and what they want next.

the power Understanding what shoppers think about your brand and category and connecting that to a real

of why purchase can help you find the real behaviour changemakers, unlock unconscious behaviours and
quantify your opportunities.
2. Being consumers’ top of mind is the first step.
The next challenge lies in getting your products
For brands attempting to be more present in
smaller formats, every inch of shelf space
seen in the places where your shoppers becomes precious real estate. Brands need to

Channel frequent and stand out to be chosen. maximise space to meet more shopper needs
and missions with strategic product selection

strategy: The FMCG retail landscape in Vietnam is

shifting to more convenient and modern
with less space.

Mastering the formats but not all modern trade channels can
win. Mini stores are gaining popularity due to
Meanwhile, Online is exponentially growing in
importance, capturing a bigger buyer base and

multi-channel expanding product availability as well as

proximity and convenience advantages. This
fostering increased purchase frequency.

landscape rise comes at the expense of hypermarkets and

supermarkets, whose value contribution is
facing a gradual decline.
As channel choices and preferences shift, understanding the "shopping
shopping
mis
mission
sion" - the reason behind a shopper's visit to each channel - becomes
crucial for success at the point of purchase.

At its core, the ‘shopping mission’ dictates where consumers shop. By

grasping its nuances, brands and retailers can pinpoint their target audience
and create targeted marketing initiatives that resonate effectively at the point
of sale.
This understanding ensures your
offerings are relevant at each
channel and allows for strategic
promotional activities, ultimately
driving optimal engagement and
conversions.

By decoding the shopper missions

for each channel/retailer and
adapting strategies accordingly,
brands can ensure their products
are not just seen, but chosen in
the right places, at the right time.

In catering to consumer missions,

it is imperative to recognise that
different retail channels demand
unique strategies, but it doesn't
end there. Each retailer within
those channels also needs a
specific approach to effectively
address the needs and preferences
of their consumer base.
Location, For example, studies reveal a high co-purchase rate between beer and energy drinks, carbonated
soft drinks as well as biscuits, snacks and nuts in the same trip.

location The primary location for beers should be within the Beverage sector in-store, where shoppers can
find other key shopping basket complimentary categories such as soda drinks nearby. Such
complimentary categories have high compatibility with alcoholic beverages and are more likely to
unlock new opportunities for unplanned purchases.
Contrary to consumers, shoppers can be
influenced by various factors when they reach For secondary placements on promotion and marketing tie-up, the optimum category would be
the point of sale, including the time of next to or nearby snack category that is a high traffic category in-stores.
shopping, pricing, promotional incentives
among others. Consequently, upon reaching
the point of sale, there is a possibility that
shoppers may opt for not making a purchase,
selecting a different product from originally
planned, or adjusting the quantity of the
products they intended to buy.

Strategic product placement plays a key role.

Going beyond securing primary shelf space,
brands can leverage secondary shelf positions
and promotional placements, where frequently
purchased items or adjacent categories are
showcased. This strategy improves the visibility
of products and increase the likelihood of
impulsive selection by shoppers browsing
through the shelves.
3. Standing out in a crowded aisle

Playing in multiple categories allows manufacturers to broaden the spectrum of value they offer and

Building a reach new consumers with diverse needs. However, simply adding products to the existing portfolio
isn't the answer. A winning FMCG product mix requires strategic planning and continuous

winning evaluation.

portfolio with For FMCG manufacturers with a vast portfolio, identifying the key categories to prioritise
investments in is crucial. There are opportunities for rising FMCG categories as well as mature

consumer- categories.

centric
innovation

Brand owners, with the right consumer insights, can examine the opportunities among small rising
categories and mature ones. Different strategies would be required for different categories,
depending on the category size, growth and competition landscape.
Nurturing To achieve sustained category growth and profitability, it is important to prioritise hero SKUs—those
incremental or distinctive SKUs that not only address shopper needs but also have the potential to

champions: propel the overall category expansion.

Simultaneously, brands need to evaluate the tail end of the product portfolio, identifying items with

Optimising your minimal traction that can be rationalised without significant adverse effects. By striking a balance
between nurturing hero SKUs and streamlining less impactful offerings, businesses can optimise

product their product assortment to better meet consumer demands while maximising operational efficiency
and profitability.

assortment
Beyond the Driving FMCG innovation that resonates with evolving consumer
preferences is essential for staying competitive in today's dynamic
launch: market landscape. However, sustaining the quality and revenue impact
of these innovations often poses a significant challenge.

Why sustaining Kantar’s innovation study shows that strong support is crucial for new product launches, particularly
during the initial two years. During this period, investments in marketing, distribution, and product

support is key refinement are vital to establish a strong foothold in the market, build brand loyalty, and maximise
revenue potential. By prioritising ongoing support and strategic investments in innovation,

to innovation businesses can effectively navigate the complexities of the market and capitalise on emerging
opportunities to meet the needs of today’s shoppers.

success
4.
Promotions:
quality over Answering these questions is essential for
brands to assess the true impact of their pricing

quantity and promotional efforts and refine their

strategies accordingly.

Brands in this situation, allocate considerable resources to

Under mounting financial crafting pricing and promotion strategies aimed at driving
pressures, consumers tend sales growth.
to become increasingly
sensitive to prices, prompting However, the outcomes of these initiatives may not always “Before running a promotion campaign, it's
them to actively seek out the be beneficial to brand growth. Questions arise regarding the important to set clear goals. Is it to grow your
best deals through promotions efficacy of promotions: market share, outshine competitors, or to build
to manage their budgets. brand loyalty and strengthen relationships with
Did they successfully entice non-buyers into making your consumers?
purchases?
Were competitors' customers swayed to switch brands? Each goal targets a specific group of shoppers
Did existing buyers increase their consumption, or merely with different needs and therefore are attracted
stockpile products? to different promotion schemes. Knowing what
Moreover, how long will it take for consumer behaviour to matters to them will help you design a
revert to its normal patterns post-promotion? promotion that truly appeals.”
Promotion Using our promotion evaluation for a beverage category as a case in point, we find that the Gifted
Promotion strategy, which involves offering a gift of additional FMCG/non-FMCG items upon

evaluation purchase within the category, yields the most significant impact on recruitment.

This includes attracting new buyers to the category as well as drawing customers away from
competitors, aligning precisely with the brand's intended objectives.
4 Growth pillars
for the future
Explore
Worldpanel
Vietnam's
reports
Who Cares? Who Does? 2023 Tet 2023 Report
Vietnam's consumer sustainability report Three festive shopping insights unveiled

Vietnam Brand Footprint 2023 FMCG Monitor

The most chosen FMCG brands in Vietnam An integrated FMCG update in a macro context
Click here or press enter for the accessibility optimised version

Thank you for reading

Vietnam FMCG Outlook 2024

Contact us:
Jane Ha – Senior Marketing Manager
Worldpanel Division, Vietnam
E: Jane.Ha@kantar.com
58 Vo Van Tan St., Dist. 3, Ho Chi Minh City, Vietnam

Cookies [ 1 ] [ 2 ] Terms [ 1 ] [ 2 ] Privacy [ 1 ] [ 2 ] POWERED BY