VietNamNet Bridge - Fast moving consumer goods (FMCG), which is believed to be one of the most profitable business sectors, has not grown as quickly as thought. 

 

Fast moving consumer goodshas not grown as quickly as thought.

A report released at the workshop on improving the competitiveness of the Vietnamese FMCG market held by the Ministry of Industry and Trade some days ago showed that the market was very promising with Vietnamese spending expected to double by 2020 to $173 billion.

Another report showed that Vietnamese income had increased by 15 percent in the last two years.

According to Phan Chi Dung, head of the Ministry of Industry and Trade’s (MOIT) Light Industries Department, the total real revenue of the business fields relating to FMCG in Vietnam will reach $140 billion by 2016.

Dung also said the real spending growth rate of Vietnamese consumers in the 2011-2016 period is 3 percent in the retail industry, 6 percent in consumer goods and 3 percent in food and beverage.

The market was very promising with Vietnamese spending expected to double by 2020 to $173 billion.

Vietnam is believed to be a promising FMCG market because of improved living standards and a sharp increase in Vietnamese spending. Vietnam is among the countries with the youngest population with 56 percent of population at below 30.

Dung reassured that the FMCG market growth rate would be 20 percent per annum in Vietnam, which far exceeds other markets like China and India.

Le Viet Nga, deputy director of MOIT’s Domestic Market Department, while confirming that FMCG sector has an average high growth rate in recent years, explained that the demand for FMCG was always big because these are essential goods for daily life which can be distributed through many different distribution channels, from traditional markets to hypermarkets.

The instant coffee consumption in Vietnam increased by 5 percent in 2014, while the dairy production maintains a 2-digit growth rate.

However, an expert noted that FMCG still has been witnessing steady growth for many years, but the growth mostly comes from increases in prices instead of increases in quantity. 

Meanwhile, the sales have been going slowly because of the unhealthy competition among manufacturers.

However, the expert believes that the biggest challenge for the Vietnamese FMCG would come from imports which will flood the domestic market as a result of the implementation of FTAs. 

Under the agreements, Vietnam will have to slash the import tariff on import products to zero percent, which will make imports more competitive in price. 

While the supply is believed to increase with the presence of imports with more reasonable prices, the distribution channels remain unchanged.

Businesses now focus on developing urban markets in large cities, and do not pay appropriate attention to rural areas where 68 percent of 90 million Vietnamese live. But only 54 percent of FMCG sales are from the areas. 

PL TPHCM