Vietnam’s cosmetic industry struggles to revive brands

The cosmetics industry in Vietnam has many established brand names, but lack of promotional strategies and innovation of products to meet with current market trends led to these cosmetic brands being overshadowed by aggressively marketed multinational brand names.

According to data from the Ho Chi Minh City Chemical Cosmetics Association, during the period 2009-2011, average revenue from cosmetics across the country was around US$130-150 million, of which more than 90 percent came from foreign cosmetic companies, thanks to widespread distribution channels. While in Vietnam there were upto 430 companies and units that produced and traded cosmetics but merely accounted for 10 percent of market share.

Moreover, 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.

Earlier, Da Lan and P/S toothpaste were trademarks that accounted for upto 95 percent of market share in Vietnam. However, in just a few moves by foreign businesses, these Vietnamese trademarks disappeared from the market.

For instance, once the multinational group, Unilever, tapped the Vietnamese market, it promptly carried out negotiations to franchise the P/S toothpaste trademark for $5 million. This was an appealing price for a Vietnamese company and was considered as one of the biggest business deals at that time. However, after being franchised, P/S started to lose its foothold in the domestic market as its quality, design, and price was no longer suitable to local demand. Eventually, Unilever took over the company and P/S became a wholly foreign-owned company.

As for Da Lan toothpaste, after establishing a joint venture with Colgate Palmolive under a 70:30 percent stake, the brand continuously ran into loss and had to sell its 30 percent stake to its partner.

Meanwhile, other brand names have been dragging out a miserable existence. As a well-known and favorite brand in the domestic cosmetics market, Thorakao was seen to have much potential. Nevertheless, amid a flood of foreign brand names, Thorakao failed to run alluring advertising campaigns or improve quality and design of products. As a result, although Thorakao had developed and distributed 70 product lines, its market share remained low. Whereas, with the same product lines, Nivea, Hazeline and Ponds have almost dominated the entire Vietnamese cosmetics market, even in rural areas.

According to Nguyen Kim Thoa, chairwoman of Ho Chi Minh City Chemical Cosmetics Association, Vietnamese cosmetic manufacturers have strived to upgrade technology; however, most of them are small and medium companies so they were not able to catch up with technology of larger groups.

Currently, Vietnamese cosmetic products, such as Thorakao turmeric face-cream, Saigon, Cindy, Miss Saigon perfumes, and Fresh shampoo, were for consumers in the low and average-income segment. However, consumption remained poor because many medium-price foreign brand names have already rooted in the low-end market.

In the high-end segment, foreign companies have almost dominated the market share, while local companies merely stood on the sideline due to shortage of capital for product development and advertisement.

Even at supermarkets like Co.opMart and Big C, where Vietnamese products account for a large proportion, cosmetics displayed are mainly foreign-made or by multinational corporations. Vietnamese-made cosmetics account for a modest amount. Besides, Vietnamese-made cosmetics are not being sold at bigger shopping centers.

A recent research by Lan Hao Cosmetics Company showed that more than 80 percent of consumers are willing to buy Vietnamese-made cosmetics if the price is low.

In his own experience, Huynh Kien Nam, director of Gia Dinh Cosmetics Company, shared that low-income consumers accept a price of VND60,000 for a large-size shower cream, but refuse to pay VND90,000 for the same bottle of higher quality. Meanwhile, consumption of foreign products of the same kind which were sold at a double price remained strong.

According to experts, the quality of Vietnamese-made cosmetics was not far from that of foreign-made ones. However, the shortcomings existing among Vietnamese manufacturers were that they did not build strategies to develop their products as well as advertising campaigns to be more familiar with local consumers.

Foreign cosmetic manufacturers usually use natural ingredients in their products, which is their unique selling point. Vietnamese brands such as Lana, Saigon Cosmetics, and Thorakao, also have many products made from natural ingredients such as coconut oil, lemon, citronella, mint, turmeric, Gleditsia, and pomelo. However, with more attractive designs and aggressive marketing leading to higher visibility, foreign-made cosmetics are more familiar and preferred by consumers.

Therefore, Vietnamese cosmetic manufacturers should review their business strategy and upgrade their products to meet market demand so as to revive their brand names once again.