Local brands tumble as a middle-class grows

As our top 100 brands ranking for Vietnam shows, foreign companies tightly contest Asia's fastest growing market.

Native Vietnamese brands may feature 11 times in the Top 1000, but they’re feeling the squeeze at home. Online shopping and a growing middle class are seemingly giving the international competition a temporary leg-up over local names.

With a GDP growth of 6.2 percent for 2016 and consumer confidence on the rise, Vietnam is one of the fastest growing economies in APAC. It is therefore strange that out of Vietnam’s 100 top performing brands from 2016 to 2017, most the ranking shifts averaged at around five places or less.

Indeed, it would be safe to say that the 10 leading brands in Vietnam have had more of a gentle stir than any major mix up. For the sixth year in a row, Samsung is still sitting pretty at number one, with rivals Apple and Sony placed right behind. The closest thing to a major upset in the winners' pool came from Panasonic climbing up to fifth place from ninth and LG knocking Adidas out the top 10 by climbing up five spots.

Getting the elephant out the room, the greatest loser from the Top 100 brands list was, of course, Nikon. Plummeting a whopping 67 ranks, this really comes as no surprise. Nikon’s predicament worldwide has little to do with its branding in Vietnam, as traditional camera brands have fared poorly in rankings worldwide. Barring some kind of miracle, it is undeniable that advances in smartphone image-capture technology will continue to hurt consumer perceptions of standalone cameras.

But while most the other position moves this year were—as mentioned—sluggish, large-scale shifts did take place.

Not only were the vast majority of these leaps, leaps downwards but they include several domestic brands. These are symptomatic of a bigger, perhaps more shocking pattern: almost every Vietnamese brand in the Top 100 has tumbled in the rankings.

What makes this fact more astounding is that those worst hit aren’t obscure brands by any measure. Ruling mobile and internet providers, Viettel and MobiFone, each took bafflingly giant drops, as did the Petromilex fuel group. Inexplicably, the only Vietnamese brand to make any positive headway at all was the instant noodle manufacturer Hao Hao, jumping up 21 places.

Commenting on the current struggle, Ian Brown, group executive creative director of Havas RIverorchid, said, “Taking the fight to the international brands is almost mandatory if you want to exert dominance and gain credibility in the local market.”

Yet local brands have faltered in 2017 and a number of foreign brands have made huge gains. Specifically, brands catering to the growing number of affluent millennial consumers.

In 2014, Boston Consulting Group (BCG) named Vietnam as possessing the fastest growing middle class in Southeast Asia, with an expected 30 million consumers—ranked middle class and above—by 2020.

So, even though the World Bank lists 1.9 percent credit card use within Vietnam (the lowest in the region), both MasterCard and Visa have made massive gains in brand ranking. Reports claim that a new generation of consumers now wishes to purchase Western prestige products online and therefore require the online purchasing power to do so. This theory goes hand in glove with the surge in ratings that Amazon and Paypal likewise experienced this year.

Luke Janich, CEO at Vietnam’s Red 2 Digital Agency told Campaign, “People are becoming more affluent year to year and so with more disposable income people are more likely to purchase luxury global brands. Much of the younger generation also like Western culture and will buy into global brands.”

Hewlett-Packard and Microsoft’s rankings have also benefited from whirlwind class development. Growing demand for affordable (home and startup) office computers, increasing tech sphere investment by both companies, and the formation of Vietnam’s own Silicon Valley mean that Vietnam has been pipped to become an Asian tech giant, staffed by high-spending white collar consumers.

Other international brands who are reaping ranking rewards in this year’s chart include:

• McDonald’s Since their first Vietnam branch opening in 2014, McDonald’s has been expanding its network of branches while cultivating a localised Banh Mi inspired menu.
• Tropicana Taking advantage of a 2015 tax exemption on carbonated drinks, Tropicana has since been focused on establishing itself as a leading brand through experimenting with new fruit drink launches and positivity-focused campaigns.
• Yamaha Capitalizing heavily on the overwhelming popularity of the scooter as the nation’s favourite mode of transport, Yamaha debuted and promoted several new models in Vietnam to widespread coverage and positive reaction.
• Grab/Uber Debuting on the chart at 20 and 23 respectively, ride sharing apps still face stiff resistance from local drivers. However, recent government legalization of their services demonstrates public support. Both companies also embraced localised scooter/bike lifts over traditional automobiles.

Now though these figures may make Vietnam resemble a Mecca for brands to race to and plant their flags, the local Top 100 does signify that certain supposedly burgeoning markets in Vietnam may already be too crowded.

For instance, studies have concluded that Vietnam is quickly becoming the leading Southeast Asian country for infant milk consumption. This has since led to intense competition. And while dairy brands Dutch Lady and Mead Johnson have made significant rank gains this year, it came as a loss to Vinamilk (yes, another local company), and Dumex. In September 2016, extremely poor sales actually led Dumex to announce a complete withdrawal from Vietnam.

Oversaturation is also adversely affecting the strength of international coffee brands. Though Vietnam continues to act as one of the world’s biggest Java suppliers and boasts a booming hipster coffeehouse industry; Starbucks, Coffee Bean, and Trung Nguyen have been dropping in the rankings. Corporate coffee shops have found it especially difficult to build strong domestic footholds due to an abundance of cheaper, seemingly more “authentic”, local cafes that have a stronger appeal. Faced with this congestion of challengers, gourmet outlet Gloria Jeans announced their own full-scale departure from Vietnam in April 2017.

The lesson from this year’s survey seems abundantly clear. There are fantastic opportunities in Vietnam for brands willing to market to a fresh upscale audience that has recently developed the means and taste for higher quality goods and services. The problem is that it’s no longer a secret. Companies wishing to stand out before the crowd arrives will find their window is rapidly shrinking.