The FMCG industry in Vietnam is currently grappling with the multifaceted challenges posed by high inflation rates, which have far-reaching implications for both consumers and businesses alike. As the cost of living continues to surge, consumers are compelled to adapt their shopping behaviors to mitigate the impact of rising prices. In this comprehensive report sourced by Kantar, we delve deep into the key trends and developments that have shaped the FMCG market during the second quarter of 2022, shedding light on critical macroeconomic factors, providing an industry overview, highlighting the hot categories driving growth, and examining the dynamic evolution of the retail landscape.
I. Macro Economy:
Despite the commendable GDP growth witnessed during the second quarter of 2022, Vietnam’s economy has been profoundly influenced by the unforeseen circumstances stemming from the COVID-19 pandemic. These challenging times have led to a notable rise in the Consumer Price Index (CPI), surpassing the 2% mark during this quarter. The resultant escalation in the cost of living, encompassing essentials such as fuel and food prices, has emerged as a significant concern for consumers across the country, potentially posing formidable challenges in the months ahead.
II. FMCG Overview:
While the FMCG market initially reaped the benefits of stockpiling and heightened demand during the height of the COVID-19 pandemic, certain sectors, including Dairy and Packaged Foods, experienced a decline in volume consumption during the second quarter of 2022 as the new normal gradually became more familiar. Notwithstanding this temporary setback, it is worth noting that the primary driver of growth across all sectors within the FMCG market stems from the increase in selling prices of products, reflecting the prevailing inflationary pressures in the market.
In rural areas, the Dairy and Home Care segments stand out as beacons of growth, propelling the overall performance of the FMCG sector. Conversely, other sectors within the industry face stagnation, with the rural market’s growth primarily fueled by the steady increase in average selling prices across different product categories.
III. Hot Category:
The in-home consumption of refreshment beverages emerged as a remarkable success story during the second quarter of 2022, surpassing pre-COVID spending levels and showcasing a robust recovery trajectory. Categories such as Juice, Ready-to-Drink (RTD) Tea, and Energy Drinks have experienced exceptional performance over the past three years, resonating strongly with consumer preferences and evolving consumption patterns.
IV. Retail Landscape:
The ever-evolving retail landscape in Vietnam continues to witness the rise of emerging channels, including online platforms and mini-stores, which have been gaining considerable momentum and solidifying their position in both urban and rural areas. These channels experienced noteworthy double-digit growth rates during the second quarter of 2022, reflecting the increasing shift towards digital commerce and the convenience offered by localized mini-stores. In contrast, large-format stores faced a decline in urban areas, while the health and beauty sector showcased a remarkable bounce-back with notable growth in rural areas.
In conclusion, Vietnam’s economy remains poised for a rapid rebound in 2022 despite the challenges posed by high inflation rates. This optimistic prognosis is expected to have a transformative impact on the retail industry, which is undergoing numerous substantial transitions as it adapts to changing consumer behaviors, technological advancements, and the evolving market landscape. As the FMCG sector navigates these dynamic waters, strategic insights derived from this report will prove invaluable for industry stakeholders seeking to make informed decisions and capitalize on emerging opportunities for growth and resilience.
Key Takeaways
- High inflation is impacting the FMCG market in Vietnam, influencing consumer behavior and pricing strategies.
- Despite a thriving GDP, rising living costs, including fuel and food prices, have become a major concern for consumers.
- Dairy and Home Care sectors shine in rural areas, while overall FMCG growth is driven by increased selling prices.
- Refreshment beverages, particularly Juice, RTD Tea, and Energy Drinks, show strong recovery and higher spending levels.
- Emerging channels like online platforms and mini-stores continue to grow, while large-format stores face challenges in urban areas.
Contact our Vietnam team for support and guidance in navigating the evolving FMCG landscape and maximizing opportunities in the Vietnam market.
