VietNamNet Bridge – Foreign invested enterprises have been dominating the soap powder market, putting domestic manufacturers at a disadvantage.


Oligopoly found in detergent market

The Competition Administration Department (CAD), an arm of the Ministry of Industry and Trade (MOIT), has conducted a survey on 10 business fields to find out the real situation of the competitiveness of the fields in the national economy. It was not by chance that detergent was one of the 10 surveyed business fields.

CAD has found out that oligopoly has been existing in six of the survey business fields, while the highest CR (concentration ratio) has been found in the detergent production with three biggest names holding 98 percent of the market share. They are Unilever Vietnam, Procter & Gamble and Lix, a subsidiary of the Vietnam Chemicals Group.

A report by Euromonitor, a British market survey firm, showed that in 2008-2011, Omo, a brand of Unilever Vietnam dominated the market with the market share of 65 percent. The second biggest producer in the field belonged to Tide, a brand of Procter & Gamble, which held 23.1 percent of the market share. Meanwhile, the small remaining market share was held by domestic brands including Vi Dan, Viso, Lix, Daso, My Hao, and some foreign brands like French Econet, Malaysian Lucako and Thai Pao.

Vietnam is really a promising market for detergent manufacturer with the 90 million consumers who have the average income of $1,540 dollar per capita. Despite the economic recession and the demand decrease, the detergent output still increased by 10 percent in 2012.

Euromonitor has predicted that in 2012-2016, the scale of the detergent market would rise from VND7.5 trillion currently to VND8.6 trillion. Prior to that, in 2006-2011, the market value increased from VND3.8 trillion to VND7.3 trillion.

However, despite the “big cake”, domestic manufacturers do not have big pieces of the cake, because they have lost the market shares to the multi-national rivals who have powerful financial capability to run noisy advertisement campaigns and much experience in doing business in different markets all over the world.

According to CAD, only several out of the 30 once existing manufacturers still can survive, but they can only exist in rural areas, while the others have disappeared.

Giving warnings about the threats to be brought by oligopoly, Tran Phuong Lan from CAD said if the enterprises dominant the market have anti-competition agreements, not only domestic enterprises would be seriously hurt, but consumers would also have their pockets picked, because detergent is an essential goods for people’s daily life.

The three strategic choices for domestic enterprises

After obtaining the dominant positions, Unilever and Procter & Gamble have not focused on the production any more, but on developing the brands and distribution networks. Regarding the production plan, they have been outsourcing to domestic enterprises and factories.

At present, in order to exist, domestic enterprises have to choose one of the three ways to follow. First, they need to make products under the outsourcing contracts for the dominant brands, or make products for supermarkets’ private brands.

Second, they need to apply necessary measures to expand their market shares and popularize their brands in all the urban, rural markets and for export.

Third, they need to upgrade production, increase the capacity and optimize the production process in order to upgrade their positions when negotiating the prices with the outsourcers.

It seems that domestic detergent manufacturers have been applying all the three measures.