Vietnamese brands look plain as foreigners wear the beauty industry crown

Nguyen Van Minh, chairman of the Vietnam Essential Oils Aromas and Cosmetics Association (VOCA), said companies in the beauty and personal care industry have seen stronger growth than they’d forecast.

“Vietnam is an emerging market for the beauty care industry, with annual growth rate averaging 30% in recent years,” he said.

In 2016 alone, the industry generated US$1.2 billion in revenue, a figure that the association had previously predicted for 2020.

The import value of beauty care products surged almost twofold from around US$3 billion in 2016 to US$5.5 billion last year, but exports stayed insignificant at just VND500 million (US$21,520) last year, it said.

These figures match findings by British research firm Euromonitor International, which said last year that up to 90% of beauty products in Vietnam are imported.

It also said the market value of this industry had crossed US$1 billion since 2015 and repeatedly recorded double digit growth in recent years.

A representative of Medicare, a drug and beauty care retailer based in Ho Chi Minh City, said that imported products or those produced in Vietnam by foreign companies make up most of its sales, and that imported brands will have more opportunities to expand their market shares than domestic rivals in the future.

At the Mekong Beauty Show 2018, an international beauty and cosmetics expo that was held in the city in June, 110 of more than 300 international exhibitors were Korean companies who came to find potential importers and business opportunities in Vietnam.

Dominic Oh, general director of Korea International Exhibition and Convention Center (Kintex), the event's organizer, told the Saigon Times that Vietnam was considered one of the key markets for the Republic of Korea (RoK)’s beauty care sector.

In 2016, Singapore was the biggest exporter to Vietnam’s beauty care sector, accounting for 34 percent of its total imports.

The EU followed with 19%, Thailand, 9%, and RoK, 8%, according to Euromonitor International.

In its report on beauty and personal care in Vietnam, the research firm said the market was dominated by global brands, thanks to innovative products, strong distribution network and dynamic marketing.

Three foreign companies, Unilever Vietnam International Co Ltd, Procter & Gamble Vietnam Ltd and Colgate-Palmolive Co Ltd were in the top three positions in 2017, it added.

Local firms held back

According to VOCA, as their incomes improve, Vietnamese people are paying more attention to beauty and personal care, creating a lot of opportunities for businesses.

In a report released early April, the World Bank said 70% of Vietnam’s population are now classified as economically secure, including the 13% who are now part of the global middle-class.

These income classes are growing rapidly, rising by over 20 percentage points between 2010 and 2017.

An average of 1.5 million Vietnamese have joined the global middle class each year since 2014, confirming that households continue to climb the economic ladder after escaping poverty.

The WB also predicted that as many as 33 million Vietnamese will be in the middle class by 2022.

Despite this fertile ground for beauty care products, Vietnamese brands have struggled to do well.

Even top companies with decades in the market, like Saigon Cosmetics Corporation and Lan Hao Cosmetics Co Ltd, have stopped at making low and mid-range products.

Minh, chairman of VOCA, said local firms were held back by a lack of serious investment in packaging, design and advertisement.

Medicare, an HCMC-based drug and beauty care retailer, said it looked for Vietnamese partners to produce Medicare-branded beauty and personal care products, but local firms did not have the capacity to make products that could compete with foreign rivals.

As organic beauty products is the new trend, VOCA chairman Minh said local firms should make good use of natural ingredients that are plentiful in Vietnam to create high quality products so that they can start competing with foreign firms.

However, doing this will require bigger investments in more advanced technologies; and given the current state and scale of domestic firms, the upgrade is easier said than done, Minh said.