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Vietnam cosmetic market ripe for the expansion of domestic players

By Simon Pitman , 28-Aug-2012

A new report from Vietnam’s Chemical Cosmetic Association highlights the fact that 90 percent of the cosmetic brands on sale in the country are imported.

The report suggests there is significant room for the expansion and further development of domestic brands, although the modest presence does indicate the fact that there is a lot of work to be done to enhance the perception of foreign brands amongst Vietnamese consumers.

According to the association’s data, the estimate came from an assessment of 430 leading cosmetic brands on sale in the country, of which it described 90 percent as being ‘well-known foreign brands’.

Cosmetics growth is being fed by economic prosperity

The cosmetics industry in the country is enjoying significant growth on the back of unprecedented economic growth that is tied to the strong growth of the China market.

Currently the country’s cosmetics and personal care market is estimated to be worth $150m a year and has been enjoying market growth of around 30 percent for the past several years.

However, the domestic brands only cater to the lower end of the market, with cheaper less sophisticated brands that tend towards simple formulations and basic packaging.

Growth is being driven by young professionals

But this is not the segment of the market where growth is being seen. According to the association, growth is being driven by younger professionals, who have a growing expendable income that they want to spend on good quality but affordable products.

Well-known international brands such as L’Oreal, Clinique, Estee Lauder and Clarins are all proving very popular and are continuing to build on an existing brand recognition and association with good quality products.

In the past ten years or so, the international brand owners have chosen to invest in production and distribution facilities in Vietnam, with names such as Unilever and Avon, all building facilities there.

Domestic brands cannot compete on marketing

The association says that although the quality of the products can match that of many international brands, where the domestic brands are challenged is in finding the resources to invest in marketing strategies that match the more aggressive campaigns of the foreign brands.

Le Thi Chau Giang, former president of the ASEAN Cosmetic Scientific Body stated in an interview with the government run publication Saigon Giai Phong that Vietnamese cosmetic brands have many advantages over international brands.

These advantages include the fact that the domestic brand owners understand the market and the consumers’ needs, and more specifically the growth potential from the younger and increasingly affluent population.

Likewise, the former president also pointed to opportunities for ingredients suppliers, underlining the fact that country’s tropical climate is perfect for growing crops to produce extracts of peppermint, cajuput and citronella.

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