Though the market is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita spending rises commensurate with the upward trend in GDP per person per year and the country moves into the middle-income ranks.
According to experts at a recent conference in Ho Chi Minh City, the average spending by Vietnamese for items related to body care, colour cosmetics, fragrances, facial care, soap, bath and shower, hair care and sun care remains relatively low.
They estimated, citing a study by Nielsen that was performed in 2013, that the average per capita spending in Vietnam is slightly more than US$4, which is one-fifth the average spending of US$20 per person per year in Thailand.
A speaker from the Society of Cosmetics Chemists of Ho Chi Minh City noted a Society report estimates there are roughly 400 cosmetics manufacturers in the country commanding a paltry 10% retail market share.
The Society report indicates that the foreign sector dominates the cosmetics market with a 90% market share divided up as follows – the Republic of Korea 30%, EU 23%, Japan 17%, Thailand 13%, US 10%, and others 7%.
Cosmetic products from the ROK have benefited from a good brand image most often associated with the qualities of youth, affordability, and fashion the Society report shows.
Meanwhile US products are viewed as expensive, good quality and brands for older middle aged people whereas Japanese brands are viewed as economical, possessing good quality and value for the money.
An additional report by the Vietnamese market research firm Q&Me mentioned at the conference notes on average 44% of Vietnamese women wear makeup once a week while only 24% women use it every day, underscoring the proposition that wearing makeup is not mainstream.
The report indicates that most cosmetic consumers in Vietnam are women and they base their purchasing decision based on recommendations from friends and internet websites primarily aimed at the female audience such as eva.vn and phunutoday.vn.
Domestic brands left out to dry
The most popular domestic brands of Saigon Cosmetic, Thorakao and Lan Hao have had only limited success in both the domestic and foreign markets as they suffer from a cheap low quality brand image.
Most of the cosmetics made in Vietnam are currently sold only at the traditional live markets while cosmetics imported from abroad are sold in the large retail supermarkets and trade centres, principally located in the large metropolitan areas of the country.
This dire plight of the domestic sector and its inability to establish a base in the beauty and cosmetics market has left many of its advocates frustrated.
There has been virtually no foreign investment in the manufacture of beauty and cosmetics says Nguyen Thi Thanh Thao, vice chair of the Cosmetics Society, sombrely and what little there was picked up and moved to Thailand after only a short stint in Vietnam.
Still other actors in the industry are adamant that the quality of Vietnamese products is on par with that of the foreign sector.
Though Vietnamese products have only a 10% market share they can easily compete with foreign products in terms of quality, says the deputy chair of Vietnam Essential Oils, Aromatherapy and Cosmetics Association. They just haven’t focused sufficiently on brand development and packaging.
However, others take an opposing view, saying that the quality just isn’t there. They also suggest that the overwhelming majority of Vietnamese cosmetic manufacturers are only able to produce shampoo, shower gels and similar simple products.
Representatives of Phuong Mai JSC, a newcomer to the domestic industry, says their company is taking a different tack, focusing on producing natural products with 100% organic ingredients.
What the domestic beauty and cosmetics industry in Vietnam needs, the reps say— is a green makeover and innovation to get on path to prosperity and sustainability.
VOV