There is a rapid increase in demand for cosmetics. The increase in demand is evident through the 2,000 spas which get opened every year in Vietnam. However, Vietnamese companies are unable to satisfy customers.
To date, 14 Vietnam based cosmetic manufactures focus majorly on hand and face products. Consequently, they leave the gap for international players to fill, resulting in the cosmetic market being dominated by multinationals.
A report done in Vietnam shows that 90% of revenue from the cosmetic market goes to foreign manufacturers like scentbird. People have many different opinions about the quality of products and you can find out if scentbird is really worth it or not.
Recently, there was a conference held at Ho Chi Minh which addressed the issues faced by Vietnam. During the meeting, it was visible that foreign and multinational cosmetic companies are controlling Vietnam’s cosmetic market.
During the recent years, the majority of the leading players in the region, especially the most successful South Korean beauty companies, have profitably expanded their footmark in the market. This is conferring to a report from the Viet Nam News, which is part of the Vietnam News Agency.
What Percentage of the Market Do Multinationals Dominate?
Official statistics show that 30% of the market is dominated by Korean players, for instance, AmorePacific and LG. The EU covers 23%, Japan 17%, and Thailand 13%. The U.S. and other countries dominate the remaining market share.
There are two ways through which Vietnamese buy cosmetics; through friends (70%) and through websites (30%). Bui Ngoc Quynh who comes from Vietnam acknowledges the potential the country holds in retail, with an estimated GDP of $220 billion and a 90-million population.
While the market for personal care and cosmetics is relatively small, that is about to change. The fast economic development in the country is feeding robust growth for most consumer industries, thus making the conditions suitable for early market entry.
According to Mintel, a market research industry, the market for beauty products and personal care is valued at $1.78 billion. With the economic development in the region, it is estimated to rise to $2.35 billion.
The figure represents a 9.7% CAGR in the course of a three-year period, which is among the fastest growth rate the world is experiencing right now. By 2020, Vietnam is projected to have about 33 million average-income earners. This is grounded in the expected growth of more than 6% p.a.
Even if the market remains relatively small, we expect the remarkable growth to change into a double-digit value gain. The change is predicted to be in the beauty category and personal care products such as perfumes and colognes, facial care, body care, color cosmetics, hair care, shower, soap, and sun care.
Who Will Benefit the Most?
Since the beauty industry in Vietnam is run by foreigners, there is skepticism among the Vietnam authority. They are concerned that the high growth potential may be taken advantage of by foreign companies. This will leave small domestic players behind.
Vietnam’s Essential Oils deputy chairman said that the Vietnamese cosmetic products only have a 10% market share. He is positive that the quality of their products can compete with foreign products. He also pointed out that Vietnamese companies tend to focus on quality rather than on the development of their brands.