Q&A: Local versus global brands in Vietnam

We asked five in-market experts for their take on the prospects for local versus global brands in Vietnam.

Participants:

• Ian Brown, Group Executive Creative Director, Havas RIverorchid
• Alan Cerutti, CEO, Happiness Saigon
• Tarun Dhawan, Managing Director, Moblaze
• Luke Janich, CEO, RED2 Digital
• Hung Vo, CEO, Redder Advertising

How much growth opportunity is there still for global brands in Vietnam?

Brown: There is a lot. Absolutely so, one might almost say necessarily. It’s hard to see how with the rise of Vietnam a brand could genuinely call itself “global” if it doesn’t have resonance and presence in Vietnam. Clearly, this country is no China or Indonesia or Japan in terms of size, but it’s sizeable now with close to 100 million people and remains one of the fastest growing economies in the world.

Cerutti: I see huge growth opportunities for global brands in Vietnam; not only in urban areas but in rural ones too, where more than 60 percent of the Vietnamese population lives. Incomes are on the rise and there is greater access to product information than ever before through the internet and their uptake of smartphones. Indeed, according to Nielson Vietnam, rural areas have constantly grown as a new source of growth for many manufacturers during the past years, which contributes 51 percent of total FMCG sales nationwide. Additionally, in Nielsen's Retail Index report – April 2017, rural grew at a better rate than urban (+8.5 percent and +2.2 percent, respectively).

On the other hand, in urban areas, consumers are willing to pay more for products that give them “convenience” and are “good for their health”. The urban lifestyle has become steadier, and working adults are strapped for time, leading to a shift of shopping behavior: convenience stores and minimarts become a choice for not only young consumers but also white-collar workers thanks to the “convenience” value. Moreover, in recent years, the environment and food hygiene have received great attention from consumers. With that background, consumers are willing to purchase organic or high-quality products with a triple or even quadruple price.

Dhawan: While Vietnam continues to be an attractive growth opportunity for global brands, it is wise to follow a ‘sooner rather than later’ approach. The playing fields are getting competitive, not just amongst global brands but also by virtue of local brands getting stronger.  Today, most categories in Vietnam from FMCG to Airlines, have a mix of global and in many cases, strong local brands.

Janich: There’s a market to tap into, clear critical mass and expendable income; but there needs to be a strong investment in fine-tuning brand positioning and truly connecting with Vietnamese consumers. 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. Vietnam has recorded significant achievements in socio-economic development, lifting nearly 30 million people out of poverty. Knight Frank estimates there will be a considerable increase in the number of these super-rich individuals in Vietnam.

Vo: For a market with over 90 million people with a young population, and with many categories still at very early stages of development, there are huge spaces for growth, not just global brands but also local brands.

However, FMCG is quite competitive now, but still many other categories have huge opportunities to enter and gain growth.

How are local brands trying to take on big brands in this country and what are the key rules / best practices for those trying to do so?

Brown: In some cases, local brands are big brands - even dominant market leaders: Vinamilk for example. Other examples might include Viettel in telco, Vietjet Air in LCC airlines, Massan in foods or Trung Nguyen in coffee. Taking the fight to the international brands is almost mandatory if you want to exert dominance and gain credibility in the local market.

Cerutti: Indeed, local brands gain more and more advantages on their own strengths and on their readiness to new things. The current strengths can be listed with local or even national bond, heritage value and wide distribution network maintenance. Not only that, they have been changing the way they communicate with consumers: from story-telling to story-doing, as Vietnamese consumers are no longer passive when receiving advertising messages. I was amazed by their creative and influential engagements. For example, in our latest work for Nivea in the International Women Day, 8th of March, we invited young ladies to share their photos about their Moms, in order to meaningfully surprise them. Out of our expectation, the campaign achieved the KPI – number of participants – in just three days, making Nivea one of most discussed brands on social in March.

Janich: I would say local brands are typically far more focused on connecting with the customer. Take Mobile World: fantastic customer experience, quick delivery and always a wow factor (either a gift or an extra something you were not expecting).

Vo: Value for money is the popular proposition strategy adopted by local brands to fight against the global brands. Another strategy, relevant with the limited resources of the local brands vs the global brands, is the focus strategy. Some brands just play in some specific parts of the country to keep competitiveness in terms of distribution, marketing &  logistics management. 

More insightful and locally relevant marketing is another good practice – local brands have been doing a better job of marketing than 3-5 years ago.

 

What can global brands learn from local brand marketing?

Brown: One size doesn’t always fit all.

Cerutti: Sharing emotion in a local way. For the last two consecutive years, according to Google, the top search for Vietnamese consumers is entertainment, such as humorous content and music events/songs. Indeed, music videos and music events have been utilized, not only to build brand engagement but also to increase sales. Consumers routinely purchase products and redeem them for the tickets.

Triggering relevant story-doing also helps. Coming from the solid local base, various advertisers have found ways to inspire their consumers to create their own content. For the past two years, there is one long time shoemaker who has organized a very interesting activity for young consumers. Titled, "Travel and Love, Travel for Going Back", the campaign encourages youths to share their travel photos and feelings. Undeniably, highlighting the product's role with emotional story-doing, the brand has stepped further into their consumers’ minds and hearts.

Finally, being humorous is useful as Vietnamese people do enjoy that. Various short funny ads has received great attention from local audiences, such as Dien May Xanh or Castrol ads  at Lunar New Year.

Janich: Local focus, no frills: they are very good at adjusting to the “Vietnamese standard”. What does that mean? Take the craziness of the wet market, and proneness of consumers to haggle; that’s what local brands try to emulate. It might not meet the expectations of US or EU shareholders and brands, but it meets the markets’ needs.

How to appeal to niche markets. How to take a local culture and build on it to create a global platform. Take elements of a local culture and adapt them to suit a more global audience. E.g take Vietnamese culture – family, tradition – and package it to appeal to the West in a way that doesn’t directly contradict their more independence-focused culture. Find a way to make it not a binary – one or the other- but a way to market it so you think the consumers can have both