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2008 SIX VIETNAMESE CONSUMER MEGA TRENDS

2008 will be remembered as one of the most turbulent years in Vietnams post Doi Moi Market Capitalism
era. From the stock market collapse, to spiralling inflation to the devaluation of the real estate market, the
technology boom and Foreign Direct Investment of over US $58 Billion, Vietnam has indeed witnessed
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great change over the past 12 months. As Vietnam is about to embark on its 3 year of WTO accession,
TNS Vietnam looks back at the year of the RAT (rather fitting) and provides an overview of SIX MEGA
TRENDS which have begun to shape Vietnams consumer and will continue to influence the Vietnamese
consumer over the next few years.
1

Wealth, Inflation & Consumer Confidence

The Growth & Polarization of Wealth

Even with all the upheaval in the global economy and the impact of inflation in 2008, the average
Vietnamese consumer household has become much more affluent. TNS VietCycle has monitored this
growth in affluence since 1999 and in 2008 only 15% of all urban households had an income of 3 Million
VND or less, while in contrast, over 45% of consumer households earned between 4.5 million and 20
million VND per month.

Evolution of Household Income

2008

2006

2004

12

33

14

18

27

32

22

20

32

34

1999

33

20%
E

16

60%
C

1 3

10

31

80%
A

14

21

40%
F

39

2001

0%

28

2 0

100%

A1

2008 Household Income

D = VND 3,000,001 4,500,001 = 33%
E = VND 2,000,001 3,000,000 = 18%
F = VND 750,000 2,000,000 = 3%

B = VND 6,500,001 13,500,000 = 28%

C = VND 4,500,001 6,500,000 = 18%

A1 = VND 15,000,001+ = US$1,200+ = 4%

A = VND 13,500,001 15,000,000 = 2%

Source: TNS VietCycle 1999-2008

However, there is a widening gap between the higher income and lower income households. In 1999,
some 63% of all urban households were making a monthly income of 3 million VND or lower, while only
16% were earning more than 6.5 million vnd per month. In contrast, today 15% of urban households earn
less than 3 million vnd per month, while a third of all urban households now earn over 6.5 million vnd per
month. Marketers and manufacturers need to provide consumers with a variety of both product and price
points to ensure they are able to entice the extending gap within Vietnams consumer income class.

The Impact of Inflation

In the past two years, inflation has
risen by a compounded 36% plus.
Though not all families are
impacted
similarly,
Vietnams
inflation bug has definitely eaten
into Vietnams purchasing power.
The most severe impact of inflation
has been felt by Vietnams poorer
households, especially in rural
Vietnam. Spend on Fast Moving
Consumer Goods for the lower
income classes saw a -16%
decline in 2007, while experiencing
a mild growth in 2008 of 4%.

2007 - 2008 FMCG Growth

51.3

51.0

6.5 mil
vnd plus

3.5 mil 6.5 vnd

19.9

Below
3.5vnd

18.0

13.7
8.0
4.4

All Households

High Income

Middle Income

Low Income

Compared to Vietnams wealthier

-16.3
households, growth in spend has
% Value Change 07 vs. 06
% Value Change YTD P10/08 vs. P10/07
Source: TNS Worldpanel
continued at an unprecedented
rate of over 50% in both 2007 and
2008. Today, consumerism is truly being driven by the wealthier classes in Vietnam and should continue to
do so, over the next 6 to 18 months. Surprisingly, consumer spend is experiencing a 20% growth in 2008,
but this is largely driven by the price of inflation and not the excessive purchasing by consumers. Most
Vietnamese are presently combating inflation by buying less (63%), holding off on big ticket item
purchases (37%) and brand down trading (20%). Marketers and manufacturers need to be able to provide
their customers with a value for money proposition, such as more volume for the same or similar price to
help consumers alleviate their present predicament.
Consumer Confidence
Ironically with all the news of
recession and economic down
turn, consumers are still fairly
optimistic about their futures as
witnessed by the 61 % who felt
their living standard in the next
12 months would be better or
much better than last year. This
is further confirmed by the
average savings of Vietnamese
consumers having decreased
from 17% in 1999 to 9% in 2008,
simply
pointing
out
that
consumer confidence is still high,
but should surly begin to level off
by mid next year.

Personal Savings HCMC & Hanoi

2008

12

88

2006

2001

14

86

17

83

1999

0%

20%

Source: TNS VietCycle 1999-2008

91

40%
Total expenditures

60%

80%

100%

Savings

The Emergence of Credit & Speculation

An Emergence Credit Culture

As WTO opened the door for international financial institutions in Vietnam back in late 2006, nowhere has
the impact of WTO been felt more than in the banking and finance industries. Literally overnight some fifty

plus financial institutions have opened their vaults to Vietnam, opening ATM machines and giving out loans
like parents give candy to kids at Halloween.
This has created some remarkable growth. In 2006, roughly 29% of urban consumers had bank accounts,
vs. 38% in 2008. During this same period, only 2% of bank account owners, owned credit cards, while
today this figure has almost reached double digits at 9%. At the same time ATM card use has sky rocketed
from a mere 20% of bank account owners to 87% in 2008. As they say, it is always easier to spend money
thats already in your pocket and the Vietnamese are using ATMs at a fast and furious pace.
,
Growth of Finance
Instruments

Fuelled
by
the
unprecedented
speculative real estate boom, the IPO
scourge and institutional lending,
financial institutions looked to have it
made. However, much of this
speculation was the direct cause of
inflation where the Government
needed to intercede by capping
minimum interest rates.

87%

38%
29%
20%

TNS research identified (VOP Survey)

9%
that by mid 2008, 14% of all wealthy
2%
households had taken out bank loans
Bank accounts
ATM usage of bank ccount
Credit card ow nership
over the past 12 months, with the
ow ners
average loan size about US $12,000.
2006
2008
Source: TNS VietCycle 1999-2008
This is an alarmingly high loan rate,
when on average these same
households only make the equivalent to US $12,000 to US $15,000 per year. The question thus arises
iswho will be able to pay back these loans, as most investments made, hold much less value today,
than 12 months ago. As most of these loans will only be called in by financial institutions within the next 1
to 6 months, it will be interesting to see, who suffers the consequences, the institutions or the consumer
themselves and how this further impacts consumerism in Vietnam.
Investment & Savings Options

Personal investments 20072007-2008

15

14%

14%

12

6%
6

5%

Back in March 12, 2007, the

HCMC Browse reached its peak
at an index of 1,170. As of
November 25, 2008, the index
sits at a paltry 310. Needless to
say, Vietnams biggest casino is
no longer as bright and shinny
as it once was. In 2008, 14% of
the wealthy class noted that they
had invested into Vietnams
fledgling stock market, compared
to only 5% of the average urban
population.

Invested in Stock market

(Jun 07 - Jun 08)

Bank Loan
(Jun 07 - Jun 08)

Since over half of these investors

placed money into the stock
Total Household
Wealthly AB household
exchange because they did not
HCMC/HN
HCMC/HN
Source: TNS VoP
earn much money and were
hoping for quick dividends and or
invested because everyone else
did, it would represent about half the investors who have lost money they probably could not afford too
lose and would hesitant to make such investment in the future. Add to this the 14% who took out loans to
buy / speculate on real estate, and the recent global financial crisis, the next big mega trend in Vietnam will
be finding safe and secure avenues for investing and protecting consumers disposable income. Watch

for the average Vietnamese consumer to become more cautious with their investments and hesitant
towards get rich quick schemes. This will lead to a new paradigm in how consumers spend and save.
3

Brands & Social Behaviour

Social Recognition Consumer Cycle

As wealth continues to permeate the average Vietnamese household and Vietnams young and
aspirational consumers continue to upgrade their lives, Vietnam has finally arrived at the classical
advertising branding stage, known as Brand as a Personality. This stage of branding is classified as a
period of intense competition, psychographic segmentation and emotional lifestyle ads. This is creating a
noticeable shift from humble, community focussed ideas and values towards a desire for more personal
recognition by family and peers alike, as witnessed by the following consumer quotesPeople say that I
am a modern mother because I choose good quality brands for my baby. It shows my great love for my
children (28 year old mother) I only buy brands that make me look more mature, sophisticated and
confident (27 year old single working female). It is not only international brands which have made inroads
into consumers hearts and minds, but also Vietnamese brands, which represented 4 of the 10 fastest
growing brands in Vietnam in 2008. Marketers and manufacturers need to better understand the emotive
needs of consumers and the new developing segments within Vietnam to better full-fill needs of social
recognition and varying product efficacy..
Personalized Products
Though only in its infancy,
the desire and need to stand
out from the crowd is starting
to finally show its face in
Vietnamese
consumer
culture. Not the domain of
the
poor,
personalized
products, whether a gold
plated mobile phone, special
hair or skin care products, or
imported cars, the wealthier
segment of the populations
is and does spend money on
the rare and unique, as a
way to stand out from the
crowd. A good example of
this is the high priced
imported
cars
(CBUs)
market. Hummers, Cooper
Minis, Bentleys and a wide
range in between have begun to populate the roads of Hanoi and HCMC alike. Considering these vehicles
have a 110% plus import tax, one can only speculate on how much certain wealthy Vietnamese are willing
to pay to stand out.
Though this is only a minute percent of the population (under 1%), it is a trend none the less that will
continue and take on different dimensions over time. One need only visit Huong Vuong Plaza to see young
Vietnamese kids following both Korean and Japanese youth culture as a way of identifying with their own
pack, while clearly standing out from the conventional norm.
Personalized brands and design will allow for smaller niche brands and products to enter the market by
speaking directly to these consumers needs for differentiation and non conformity.

Technology adoption

Mobile Madness
In a short 2 years urban mobile
phone penetration has grown
from 53% in 2006 to 84% in
2008. Even in rural Vietnam
almost one of every three
households have at least 1
mobile phone user. This places
Vietnam amongst the fastest
growing mobile phone markets
in the world and opens up new
opportunities for marketers
with respect to direct mail
campaigns and sponsorship
opportunities.

100

2008 Household Technology Penetration

84%

80

60

51%

40

34%

33%

20

9%

Mobile
users
are
also
1%
0
expecting more from their
Mobile phone ow nership
In-home PC
In-home Internet penetration
handset than ever before.
Whether a simple SMS, to
Urban
Rural
Source: TNS VietCycle 1999-2008
taking shots with your mobile
camera, listening to the radio,
or surfing the web, demand for
creative design and multiple
functions will continue to drive this dynamic market. Marketers need to embrace digital marketing now in
order to gain first entry strategy into this new and growing advertising opportunity.
The Internet Gener@tion
Though still substantially behind developed countries such as The U.S. and Singapore, internet
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penetration has now reached a 3 of all urban households in Vietnam. With in home computer penetration
now exceeding 50%, Internet and all its applications are now becoming mainstream and with such a young
population, will only continue to grow.
Though still dominated by reading the news, listening to music, Chat, Info search and emailing as main
activities (all over 60%), on-line gaming and even on-line shopping are seeing solid growth. Shopping
online has started to take off, especially on forums like muare.vn, where consumers sell brands purchased
from abroad at cheaper prices than in Vietnams department stores.
It is estimated that only between US $ 6 to 8 million was spent on Internet advertising in 2008, so clearly
rd
with over 50% of the urban population surfing weekly and a 3 in the comforts of their own homes,
marketers need to take better advantage of this new and dynamic form of advertising in years the to come.
Social Networking
Vietnam is embracing social networks such as Yahoo! 360 and Facebook and blogs as new communities
and forums for expression. Blogging for younger consumers is becoming a useful outlet for personal
expression, sharing ideas, connecting with others at a deeper level and allows for a level of amenity which
is still part of the overall Vietnamese cultural mosaic.
Though not much data is available, some companies in Vietnam have already established blogs as a
forum for their consumers to provide feedback and share opinions as a cheaper form of customer
satisfaction and as quick response rate. Only problem today, is that most bloggers represent a very young
age group that do not necessarily represent a companys customer base.

Changing Consumer Concerns

Safety & Hygiene Concerns

The single largest trend in the FMCG market could well be the backlash to be experienced with respect to
products-made-in-China and their health related risks. Not surprisingly many cheap FMCG products
consumed in rural Vietnam originate from China, representing several hundred brands and many more
with Chinese sourced ingredients.
Thus, food safety, in the form of expiry dates, ingredients, sources of ingredients and product, as well as
health organization approval shall become a much more prominent consumer concern moving into 2009.
Marketers and manufacturers need to concentrate more on promoting food safety, country of origin and
approval mechanisms to gain what could be a huge market share in the otherwise cheap Chinese
dominated rural market landscape, so long as price points are within reach of these otherwise poorer
consumers.
Health, Beauty, Convenience & Indulgence
There is a gradual change in the share of wallet of Vietnamese consumers towards Indulgence & Beauty,
Health and Convenience products. Convenience is being re-defined, not only meaning instant or ready
but also standing for easy to use, makes my life more comfortable and fun and saving time under time
pressure. This new trend is reflected in the foods market where fresh food consumption is gradually
moving to canned foods consumption with more convenient packs and the wild growth of the fast food
industry.
Health products, such as RTD Tea and Liquid milk are leading the charge of the fastest growing FMCG
categories for 2008. Well over 80% of consumers claim that Im ready to pay more for healthier products
which becomes more & more meaningful given the recent Chinese made product scandals.
To cope with Vietnams younger, more demanding and sophisticated consumer base, the market is also
moving towards Beauty and Indulgence trends. Skin care and Make-up products are still growing and have
become an important part in the consumers share of wallet despite inflation. Almost nine in ten consumers
note they are willing to purchase high quality products although they are expensive!
Consumer Choice Overload
Consumers are becoming lost in their decision purchase process, as today they are faced with a huge and
growing product offer. According to TNS Worldpanel Vietnams latest figures, over 3,000 new products
have been launched thus far in 2008, whether it be a new brand, variant, or new SKU, creating new and
more segmentations and ultimately leading to consumer confusion. Ad to this the constant bombardment
by advertisement on TV, radio, print, outdoor and even the internet, consumer choice overload has
become a negative trend in Vietnam. Thus, marketers and manufacturers need to educate consumers,
drive consumers power in the mind and power in the market to truly develop a unique brand proposition.
As consumers are facing en enormous gamut of choice, their needs also continue to expand. For example,
in the health, beauty and convenience trend, we see a range of needs at play: the need for naturalness,
women are seeking products with natural ingredients, no harsh experiences, rather something gentle and
reassuring. Inversely, there is also a strong desire for modern technology to ensure product efficacy,
creating a combination of the two - a natural based product that creates a feeling of security, while
delivering high quality through modern technology. Multi-functional products are also welcomed as they tap
into convenience needs and sound more beneficial. Products from premium brands are appreciated as
they ensure product efficacy, while doubling as a source of pride/a better social image to their customers.
Marketers and manufacturers must ensure they are strongly connected to and cognizant of evolving
consumers needs so their brands can be an easy and strong choice for consumers.
6

A Shift in Advertising Mediums

The Birth of Radio Advertising

Radio is quickly becoming a new and alternative avenue for advertising, especially in urban Vietnam. With
over 80% mobile phone ownership, of which almost 60% of owners using their mobiles to listen to music,
radio is a new avenue for consumer contact. With the addition of over 180,000 new cars on the streets of
Vietnam annually and the swelling congestion caused by this traffic, radio again gains potential audiences.
Ad to this, the first international style Radio station in XONE FM, Vietnamese, especially the young have a
new format of entertainment and thus, advertisers have a new and growing contact with a part of their
integral consumer base. It is not surprising then that in 2008 (January to November) Radio was the fastest
growing media channel in Vietnam, experiencing 54% growth from 2007, compared with the average
industry advertising spend growth of 18%.
Marketers and manufacturers need to better understand their consumer profile in terms of Radio
listenership, in order to reach a new and increasingly captivated urban consumer group, by utilizing this
cheap and effective new advertising channel.
Retail & Modern Trade
Modern Trade development from
a consumer behaviour point of
2008 Modern Trade Household Shopping outlets
view
is
booming.
2008
witnessed a value growth in
terms of dollars spent of 35%
Mini market
Hypermarket
compared to 2007, while total
2%
8%
Cash & Carry
volume of purchases has now
11%
reached 19% of all sales in
urban Vietnam. Half of all urban
consumers have shopped at
Have not shopped
least once at a modern trade
50%
venue,
with
supermarkets
Supermarket
making up the lions share of
29%
30%. By comparing Vietnam to
China, it is safe to say that by
Source: TNS Worldpanel
2020, over 50% of all shopping
in Vietnam will be done in
modern trade outlets, especially if the newly drafted laws on retail and distribution can be implemented
with the WTO framework.
Marketers and manufacturers must take advantage of the modern trade in terms of category selection,
brand placement and most importantly promotional opportunities and Point-of-Sales materials to
communicate to the ever increasing consumer traffic in the modern trade.
Simple & Emotive Communications
TV is still and will still be the King of advertising in Vietnam for years to come. However, with the increased
number of channels, viewing time and advertising clutter, advertisers and manufacturers need to be able to
better place their ads, monitor the effectiveness of their ads and most importantly, use emotive advertising
which is clear and communicates the basic product properties, functions and features: What is it and what
does it do? is still important for product communication.
By utilizing at least some of these SIX MEGA TRENDS and the insight and opportunity they posses,
marketers and manufacturers, should be in a more competitive position, especially with the looming
economic down-turn at our doorsteps.

Ralf Matthaes
Managing Director
TNS Vietnam