Ktetaichinh’s Blog

January 2, 2010

Buyers find claws in Year of the Tiger

Filed under: Uncategorized — ktetaichinh @ 7:56 pm
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The year 2009 was marked by global recession and consumer uncertainty. By reviewing last years consumption dynamics, TNS Vietnam, Kantar Worldpanel and Kantar Media have identified several key trends that will influence consumerism in 2010.

One year ago, Vietnam was marred in its first recession in modern history and the prospects of the average consumer were looking bleak. Twelve months later, it appears that Vietnamese consumers seem to have weathered “the perfect financial storm” and are feeling much more optimistic.

The return of consumer confidence

Last January, 86 per cent of all consumers surveyed believed that unemployment in Vietnam would increase over the course of 2009. For 2010, consumers appear to be much more upbeat with fear of unemployment dropping below 50 per cent, while a third believes that unemployment will reduce in 2010.

Three quarters of these same consumers also noted that they were secure in their present jobs, compared to only 60 per cent in 2009. Though concerns still exist, this is a significant increase in overall employment confidence and should translate into stronger consumer purchasing behaviour.

On the whole consumer confidence has rebounded significantly from 2009. As part of the TNS consumer confidence poll conducted in both January 2009 and January 2010, the TNS consumer confidence index has risen from 64 in 2009 to 78 for 2010. The index is comprised of the following measures, the value of the Vietnamese dong, employment, cost of living, Vietnam’s economy, foreign direct investment and consumers’ personal standard of living and the impact these indices will have on consumers in the next 12 months.

Only the value of the dong saw a decline while all other indices showed some to vast improvement from 2009. Leading the way were Vietnam’s economy (60 per cent), foreign direct investment (59 per cent) and consumers personal standard of living (53 per cent) agreeing that these indices would improve over the next 12 months of 2010. If confidence is the true measure of consumer spending, 2010 should see a positive return of consumer spend, maybe not to the levels of 2008, but certainly better than in 2009.

The Facts and Future of Fast Moving Consumer Goods (FMCG) in Vietnam

Kantar Worldpanel Vietnam data, recently re-branded from TNS, identifies some key changes in purchase behavior of consumers that will likely shape consumption attitudes of more mature and demanding consumers for years to come.

From Nice-to-have to Must-have

Overall, Vietnamese urban households re-arranged their budget on FMCG categories in order to deal with the high price increase in packaged foods. They spent more on necessities and sacrificed on nice-to-have products among their share of wallet for FMCG.

Simultaneous up-trading and down-trading
To maintain the value growth rate during the recession, manufacturers in Vietnam played it smart by up-trading the spending of the current consumers by launching new products with new added-values and benefits, targeting to the current ‘better-value-for-money’ attitude of the consumers. At the same time, they also continued to consider the limited ‘cash outlay’ of the low income consumers by launching or re-launching more economical products and smaller pack sizes into the FMCG market.

A new era of ready to drink

The beverage sector in Vietnam was the fastest growing sector in the region with healthy growth in both value and volume. This increase was strongly fueled by the expansion of modern drinks like RTD tea, energy drinks and branded soy milk. Simultaneously, Kantar Worldpanel recorded negative growth of major powder type beverages.

Looking at the switching in expenditure for beverages of urban consumers, there was definitely a transition from powder to liquid, especially among categories where a ready to drink format is available. This new wave has gone wild in urban Vietnam and is expected to get even stronger in 2010 and the coming years.

The rise of the private labels

As part of the changes fuelled by the recession Kantar Worldpanel recorded a strong growth of the private label brands in the FMCG market in urban Vietnam. The penetration of this segment has more than doubled and is now reaching a fifth of urban families. In modern trade channels, private label are gaining significant share, especially for big pack size products.

With the fast development of the modern trade in Vietnam, and the bi-polarisation trend between luxurious and mass products, key FMCG manufacturers could expect to cope with more competitive pressure from private labels in the next few years.

A shift in media consumption

Vietnam is on the verge of the digital age. With over 25 million weekly on-line users of the internet, the way Vietnamese communicate, shop and gain information shall change rapidly. Though e-commerce will still be a small element of the overall digital commercial offer, more and more of the interactive generation will be purchasing on line and more importantly shall be seeking new forms of entertainment and information.

This will actually have a direct impact on print readership, which has already shown an overall decline from 40 per cent reading newspapers daily in September of 2008 to only 35 per cent in September 2009, based on Kantar Media results. This phenomenon is largely attributed to the growth of internet usership, which has ballooned by 609 per cent in the past six years and to the fact that most dailies are now also on-line.

English media content is on the rise

One of the new trends to emerge in 2009 in the Vietnamese media sector is the emergence of English content and programming. Since some 80 per cent of university students are presently studying English and a similar number also taking some form of English as a second language at the high school level this should come as no surprise.

In a recent Kantar Media (re-branded as of January 1, from TNS Media) national radio survey, the 15-29 year old demographic has bucked the 2008-2009 broadcast media decline, tuning-in to the radio in droves with the highest youth measures ever recorded.

The new wave of modern commercial youth FM programming in Vietnam has certainly been evidenced, and in the most part created, by Xone FM. The national survey, released in December 2009 ranks Xone FM in the number one position in the country with over 10 million listeners aged 15-35, which equates to 56 per cent of all radio listeners in Vietnam. Interestingly, 48 per cent of these listeners are aged between 15-19 and 28 per cent between 20-25 years further evidencing the youth listening movement and the new found desire for English and international music content.

Following on from radio, English language newspapers and magazines are also seeing an uplift in Vietnamese readers. Based on survey findings undertaken by Cimigo, The Word Ho Chi Minh City has noticed that Vietnamese readership is up 62 per cent, from 2008, suggesting an increased Anglicisation of the urban Vietnamese population living in Ho Chi Minh City.

However, there is no better proof of this emerging trend than comparing TV audiences in Vietnam. Free-to-air TV (Vietnamese Language) viewership has dropped by 8.3 per cent in one year, (September 2008-September 2009) while English cable viewership has risen by 1.4 per cent during this same period. Though Vietnamese have more entertainment options than ever before, due to increased English language studies and the fact that the programming provided by English language programming such as SCTV, Vietnamese are more and more tuning into English content media.

Time is money

Purchasing convenience products and services is another trend on the rise and will continue to grow as consumers look for time saving devices to ease their busy lives. A prime example of this trend can be seen in Vietnamese consumers increase in bulk shopping purchases and a shift from traditional to modern trade shopping venue selection.

Consumers are gradually moving from daily shopping to bulk purchasing and stocking-up with more items purchased per trip, bigger pack sizes, and a higher spend per trip. They also changed their shopping behaviors from traditional trade to modern trade channels where they can find better product ranges with more competitive prices. This also indicates spending less time shopping, while saving their time for other more enjoyable activities.

Another example of time is money is the growth of the instant/ready to drink beverage market in Vietnam. Over the past three years, this has been the single largest growth engine for beverages among with milk in Vietnam. This leads one to foresee many time saving products and services to grow and consumers with more disposable income begin to pay for convenience as a way to save their own time.

A prime example is the growth of instant coffee, which in the past few years has taken off as consumers no longer have the time nor inclination to wait for their coffee to drip. The raise of internet backing and ATM cards use has also blossomed and shall continue to do so as more and more consumers are looking to save their time to earn more wealth.

So 2010 will be marked by returned consumer confidence which will drive spend, shaped by more western style shopping habits and a desire for convenience. The year of the Tiger shall also see a continued shift in media trends such as more internet and radio consumption, which will keep businesses on their toes, as they adjust their strategies to meet Vietnamese consumers increased and more sophisticated needs.

Ralf Matthaes – TNS Vietnam, Antoine Louat Bort – Kantar Worldpanel, and Tran Thi Thanh Mai – Kantar Media

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