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Vietnam Skin Care Market overview

Vietnam cosmetic market is regarded as a potential market amongst Asian countries. The increase in cosmetic consumption I last four years is reported as average of 7 percent wit per consumer expense of $3 per annum on cosmetic products (Euromonitor 2014). Hence, this steady growth has attracted the global cosmetics and skin care brands like Unilever, P & G, L’Oreal, and Johnson & Johnson to Vietnam and generated a competitive landscape. Chemical Cosmetic Association Vietnam reported that over 430 leading local and foreign cosmetic companies are operated in the country, in which around 90 percent are known foreign brands (NDHMoney 2012). Furthermore, Vietnam consumers have shown an increase in purchasing power after gaining economic prosperity due to increase in trade in the region. Vietnamese consumers spent approximately 45.34 billion USD in 2012 on consumer goods shown a rise of  20.8 percent as compared to the year 2011 (People Army’s Newspaper 2012). This growth has encourage youth and young professionals to invest more in personal grooming products with more expandable income and can afford high quality international brands (Pitman 2012). As Vietnam is relatively young country with more than 45% youth population is attractive for international brands like Unilever, and L’Oreal to penetrate in this small market in last decade with an offensive strategy.

 

 

Though, US brands like L’Oreal are well penetrated in Vietnam cosmetic market but the consumers are still not familiar with US brands as compared to the oriental Japanese brand Shisiedo and UK based brands of Unilever. Yet the brands of L’Oreal like Maybelline, Body Shop, and Garnier have performed well in the market as Vietnamese consumers are still not exposed to the premium end cosmetics brands like Estee Lauder, Guess, and M.A.C. Also, the ranking of US brands like Revlon and L’Oreal is still not clear to Vietnamese consumers. Therefore, a clear and visionary marketing communication strategy is required for the case company L’Oreal Paris in Vietnam.

L’Oreal Paris Vietnam

L’Oreal Paris operated in more than 130 countries globally with a broad focus on products categories of hair care/ styling, cosmetics, and skincare. L’Oreal Paris is the second largest personal care and hair care products manufacturer across the globe, and popular in Vietnam for good quality brands with reasonable price in cosmetics market of Vietnam. In skin care, L’Oreal is the second largest market share holder after Unilever in Vietnam and growing at a faster rate due to heavy expenditure of R&D and promotion. The cutting edge technology of skin revitalizing creams brands of Youth Code and Hydra Fresh, and whitening solutions of White Perfect™ has enabled fast penetration in this market. Furthermore, Market Line (2014) concluded that the company is engaged in manufacturing and marketing of the skin care products with the well known brands Maybelline and Garnier, Lancôme, and NewYork. This growth of skin care is a global phenomenon as Euromonitor (2014) reported that in the period of 2011 till 2015, the global skin care brands market grew at about 4.4% due to the increase in ageing population and more concern towards the use of organic and natural ingredients in skin care products.

Political

Vietnam has followed a system of mixed economy with still an important role of government in regulating the state affairs. The market economy is still not well organized even after its signing the WTO announcement of free market economy in year 2006 (Pham 2011). The National Party Congress announced the running of free market under the social orientation. Therefore, a part from the freedom given to the operations of multinationals, the State Owned Enterprises (SOEs) still have the prominent role in market controlling and policy formation.

Economic

Vietnam cosmetics industry’s annual growth rate in the period o 2007 till 2012 was around 5.35 with 90% share of foreign cosmetic brands in the country. These international brands are concentrated more in urban areas and cosmopolitan centers of Ho Chi Minh City (Ken Research 2014). The economic growth of Vietnam was also stable at around 7% in last decade. The local business has been facing the financial and credit management challenges as compared to their foreign counterparts. Also, Vietnam business are facing high inflation rates of 9% to 11%. In cosmetics market, US brands share is around 10% as compared to EU share of 23% and Japan share of 17%. The following comparison shows 11% share of cosmetic products in Vietnam GDP (Mintel 2014)

Source: Mintel (2014)

Social

Around 46% population in Vietnam is young and in working age, with one million new workers entered every year in labour market. On the other hand, the productivity level of work forces are even lesser that that of ASEAN countries. The positive sign is the inclusion of Vietnam in top five countries Happy Planet Index (HPI) of year 2009, that shows that Vietnamese are fun loving, social, and optimistic nation. The social life is peaceful due to stable government and economic growth in the country (Vietnam General Statistic Office 2012).

Technology

The technology is advanced in urban areas of Vietnam with wide exposure of population to telecommunication, but remote areas and villages are still lacking latest technology. Therefore, the technology revolution still needs some more time to create advancement in landscape of media and communication.  The availability of internet is widely accessible in urban areas at normal price. Counterfeit products are also widely available in cosmetics market acting as a threat to foreign brands.

Legal

The laws available in Vietnam are Investment and Enterprise Law, with provision of global agreements like WTO and regional agreements like ASEAN and APEC. Though, the legal structure is strong, but implementation of these laws and agreements is still challenging in the country. The high rate of corruption and poor quality of human resources are some major obstacles.

Environmental

High natural disaster risks and very long coastal border of around 2500 km create more serious environmental concerns in Vietnam. Rapid climate change, and rises in sea levels are needed to be considered in planning of organisations for manufacturing and marketing of products. People are also more concerned about the eco friendly approaches of foreign and local brands. 

Matrix of PESTLE Analysis

Factors	Indicators	Opportunity / Threat
Political	·       Stable government. ·       Less political Risk ·       Favourable policies multinationals	O/T O O
Economic	·       Increasing GDP ·       Large skin care sector ·       intense competition	O O T
Social	·       Youth market tends to cosmopolitan lifestyle ·       High international cosmetic products demand ·       High loyalty to international cosmetic brands. ·       Increased personal care and social activeness ·       Internet savvy young population	O O O O O/T
Technology	·       Internet is less accessible. ·       More international brands in the urban areas. ·       Revolution in digital media	T O/T O
Legal	·       Less effective intellectual property rights. ·       Less measures for problem of counterfeits. ·       More eco-friendly and natural products demand	T T O

 In conclusion, L’Oreal has great opportunities in stable political and economic growth environment of Vietnam. Also, environmental and legal challenges counter the growth potential of the company in this new social and cultural environment.

Competitive Landscape

According to NDH Money (2012), Chemical Cosmetic Association reported that the major brands in Vietnam’s cosmetic market for the urban areas are Shiseido, Ponds, L’Oreal, Estee Lauder, Maybelline, Olay, The Body Shop, and Oriflames. The production bases of Olay, Shiseido, and Pond’s are also available in Vietnam with L’Oreal is going to start its production base in near future. Saigon, My Hao and Thorakao are some of the leading local cosmetics brands in Vietnam Market. The major challenge for L’Oreal is from the market leader Unilever and P&G as strongest and long standing players.

	Unilever Dove, Ponds, Vaseline Intensive Care	Max Factor, Olay	Integrate   Revital
Branding	Global brand act as Unilever Vietnam, less lines in skin care product include Ponds, Dove, and Vaseline Intensive care the most prominent. R& D and product innovation has made it the market leader.	Global skin care brands of Olay and Max factor are managed by P&G Vietnam. High quality and innovation focus with large line of variants in Olay brand.	Japanese origin global brand, in top five international brands in Vietnam. Skin care products target is both men and women with oriental and innovative skin care range. The company has more than ten skin care brands line with Shiseido Ultimate is the latest inclusion. The global net sales are around $10 to $50 billion yen per annum for these brands.
Target market	Women of age group 20 years and above. Mass consumer market and focus on middle and upper middle class.	Female target market of age group 20 years till 65 years. Income range from middle to high income families and individuals. Professional and skin conscious women are major target.	Target men and women, broad product range available for youth, middle, and elderly age groups. Low to middle income groups target.
Product	Large product line from face washes to revitalizing skin creams and lotions.	Premium line of products, with R&D based skin care solutions in Olay. Anti-Ageing and whitening solutions are available.	Large product line ranges from routine moisturizers, uplift creams, and revitalizing solutions.
Price range	Middle to high   price	Middle to high price	Low to middle prices
Distribution	– super stores and  Retail markets – Beauty spots and parlors – Online and franchised stores	– Convenience stores – super stores and  Retail markets – Beauty spots and parlors – Online and franchised stores	– – Convenience stores – super stores and  Retail markets – Beauty spots and parlors – Online and franchised stores
Promotion & Communication	TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships	TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships	TVC, Website, digital media, newspapers, magazines, , billboards, Events sponsorships

 

Product portfolio

	Current Performance
Skin care	Skin care supplements and solutions are available to all age groups for males and females.  The cream jars, bottles, and tubes are available in the sizes vary from 30 ml to 200 ml.
Product	White Perfect	Hydra Fresh	Men Expert	Youth Code
Price	Low, middle and high price range is available in different variants.
Placement	Supermarket, convenience retail stores and online sales from the website.
Promotion	Less use of TV and print media, except the women lifestyle and beauty magazines, and point of sales displays. More billboard and digital campaigns Less promotion and TV advertising, billboard or event campaign, however, there are some print ad in women magazine.