ese cosmetics manufacturers are uneasy if overseas products gain control of the country’s distribution network as domestic cosmetics have been overwhelmed by multinationals due to a lack of innovation and promotional strategies, according to www.cosmeticsdesign-asia.com.
Local Firms Struggle to Stay Afloat
While Vietnam’s cosmetics players strive to upgrade their technology, their small and medium size impedes them from catching up with the output of multinational R&D labs.
Some regional analysts say that the quality of these cosmetics is not relatively inferior to that of international players, but the issue lies in the product developing strategy as well as advertising campaigns that fail to convince local consumers.
According to the Sai Gon Giai Phong newspaper, there were around 430 Vietnamese companies and units that produced and traded cosmetics between 2009 and 2011, but they merely accounted for a 10% share of the market.
“Many Vietnamese well-known brand names have gradually vanished from the market while some fell into the hands of foreign companies because of poor competitiveness,” the newspaper wrote.
At one stage, brands like Da Lan and P/S toothpaste were trademarks that accounted for 95% of the domestic market, but have disappeared from the market, due to “strategic moves” by foreign companies.
For instance, the deal between Unilever offering $5 million to franchise the P/S toothpaste trademark was one of the biggest business deals of the time.
However, the Vietnamese personal care brand lost its foothold in Vietnam to foreign peers. Eventually, Unilever took over the company and P/S became a wholly foreign-owned company.
Vietnam – A Lucrative Market for Foreign Players
With a population of over 90 million and over half aged between 30 and below, Vietnam is an attractive market for the cosmetic industry. Currently the country’s cosmetic and personal care market is estimated to be worth $150 million per year and has been enjoying a market growth of 30% for the past several years.
Around 90% of cosmetics sold in the country are imported, representing 430 leading cosmetic brands. The country’s largest players are Korea, EU, Japan, US and Thailand. The demand has increased steadily over the years and a change of government regulations has made it easier for the cosmetic industry to grow.
Le Chau Giang, head of Regulatory and Medical Affairs at Johnson and Johnson Consumer Asia Pacific cum special adviser to President of ASEAN
Cosmetic Association, noted that the Vietnamese market is still under-developed, thus opportunities are present in all segments.
The market for natural personal care products in Vietnam is on the rise, she said. Vietnam has an abundance of natural ingredients, such as essential oils and lemongrass, both of which are popular with Western consumers as well as domestic ones.
Vietnamese consumers tend to favor more sophisticated products and brand names. This will result in local manufacturers spending more money on the research and development of new skin care products, she added.
According to Beauty Cosmetic Co., Vietnamese consumers spent $82 million on beauty and skin care products in 2006.
Illegal and unofficial imports are estimated to account for as much as 60% of these sales in Vietnam.
Currently, Vietnamese women spend $3-$4 per capita on cosmetics and beauty products per year, much lower than that in other Asian countries.