Ho Chi Minh City— Thirty-five years after the war’s end, many people still associate Vietnam with conflict, not beauty.
This story first appeared in the October 8, 2010 issue of WWD. Subscribe Today.
But this country, one of the fastest-growing economies in the world, has experienced massive changes over the last few decades. Since Vietnam ended its self-imposed isolation in 1986, there has been a substantial and ongoing liberalization of the country’s economy and social freedoms. What’s more, foreign investments are pouring into the country, and its very young population’s income levels are rising.
According to a 2009 Nielsen report, Vietnam is one of the fastest-growing economies in the world (second only to China) with growth averaging 7.5 percent a year since 2000. Even though the growth slowed last year, the country still saw its gross domestic product leap 5.3 percent when most of the rest of the world was mired in economic crisis.
It is difficult to say precisely how much of this economic action is taking place in beauty, because up to 60 percent of the cosmetics market consists of gray imports and fakes, according to the U.S. Commercial Service in Vietnam. However, Euromonitor International believes the official beauty and personal care market in Vietnam increased by 41 percent between 2004 and 2009 to reach a total value of $598 million and is expected to swell to $925 million by 2014. Meanwhile, the hair care market grew by 19 percent over the same period to $147 million and is expected to reach $196 million by 2014.
“Vietnam’s burgeoning beauty market offers interesting opportunities for foreign investors,” says Euromonitor analyst Carrie Lennard. “It posted a solid current value CAGR [compound annual growth rate] of 10 percent over 2003 to 2008, double the 5 percent achieved by the global personal care market over the same period.”
This dynamic performance is set to continue despite the global recession. Vietnam’s beauty and personal care market is forecast to achieve a similar CAGR over 2008 to 2013 to that of China, with only Peru and India set to see stronger performances. The demand for cosmetics and toiletries is likely to remain high as consumer affluence continues to rise, which should result in strong sales.
“In terms of competitive environment, multinationals are expected to continue to grow at the expense of domestic players, as the consumer obsession with premium brands shows no sign of abating,” Lennard says.
Euromonitor estimates that the market leaders in Vietnam in terms of beauty and personal care product sales are Unilever, Procter & Gamble, Colgate- Palmolive, L’Oréal and Johnson & Johnson.
When it comes to the sales of international cosmetics, Ho Chi Minh City (also known as HCMC or Saigon) is where the action is. According to the U.S. Commercial Service, up to 95 percent of the market is centered in the country’s most urbanized areas, especially HCMC in the south and Hanoi in the north, and relatively few sales of international cosmetics occur outside of these urban areas. Furthermore, it estimates that the cosmetics market in HCMC is about five times larger than Hanoi.
Age demographics are another important factor shaping the beauty scene. Vietnam has become a nation dominated by youth, with more than 50 percent of its 86 million people under 25. So it is this fresh, new generation that is driving many trends in beauty, hair care and fashion.
In bustling HCMC, the young are blissfully disinterested in their country’s turbulent past. Most under-30s in this crowded metropolis are obsessed with money, brands, karaoke, coffee shops and restaurants. Myriad factors such as widespread access to the Internet; cheap pirated DVD movies; satellite television, especially Korean movies and TV dramas, and a burgeoning Vietnamese popular-culture scene are inspiring a new interest in personal consumption, self-expression and foreign prestige brands. This has provoked some from the more conservative and traditional north to characterize young Saigonese as a generation of shortsighted hedonists.
The rigid conformity of the past has given way to a stunning diversity. On almost any downtown HCMC sidewalk, you can see street hawkers wearing garishly colorful day pajamas teamed with the iconic Vietnamese conical hat, office workers in bespoke business attire, young men in shorts (rare even four years ago) and T-shirts and fashionable twentysomething girls clad in figure-hugging dresses and high heels. In just the past couple of years, tattoos and piercings have become an emerging trend with the more adventurous, as well.
Pierre Lauzeral, L’Oréal’s Vietnam country manager, says Vietnamese women have similar beauty ideals to their counterparts elsewhere in Asia. They desire long black hair, pinkish skin and oval-shaped faces, he said, adding that they usually prefer a natural look when it comes to makeup.
“Vietnamese women tend to like products which are widely used and liked by women in Japan, Korea, China and Singapore,” he says.
Revlon Vietnam spokesman Le Quoc Tuan says the brand’s international spokesmodels, such as Halle Berry, Jessica Alba and Jessica Biel, resonate with consumers here. “Vietnamese consumers are influenced by the fashion and grooming styles depicted by these stars,” he says, adding that homegrown celebrities are also influencing beauty and fashion trends.
“There are Vietnamese stars who are idolized and followed by young people,” says Tuan, mentioning actress-singer Ho Ngoc Ha, supermodels Thanh Hang and Huong Giang and male model Binh Minh as primary examples.
HCMC’s unbelievably chaotic roads are dominated by motor scooters, which create a challenge for Vietnamese women who are usually obsessive about keeping their skin pale. So to protect themselves from the harsh tropical sun, they wear hats, masks and sunglasses to cover their faces, and jackets or opera gloves to conceal their arms. By day, they look like bandits trying to hide their identities. Whereas by night many of these same women ride around flaunting their slim, toned bodies in transparent blouses, short shorts and stilettos.
“Vietnam is primarily a skin care–orientated market where the consumers are highly conscious toward quality, safety and efficacy based on technological background,” says Tatsuki Nagao, general director of Shiseido Cosmetics Vietnam Co. Ltd., who adds that the Japanese company is seeing success with lines such as Shiseido Future Solution LX, Revital and Clé de Peau Beauté.
L’Oréal’s Lauzeral says Vietnamese women are particularly keen on night creams and “all-in-one” products that combine UV protection, makeup base and other properties. Like in other Asian countries, oily skin is a problem, too.
“Due to the climate and the fact that women are exposed directly to the environment [by riding motorbikes and spending more time outside than indoors] they are cautious to use products with a rich, creamy texture,” he says.
Hair care is another area of explosive growth. “Vietnam’s dynamic hair care sector should prove a draw for hair care players seeing stagnating sales elsewhere in the world,” says Euromonitor’s Lennard. “Vietnamese consumers are evidently becoming more willing to fork out for higher-price hair care products, thanks to increasing disposable incomes and the wider availability of pricier hair care items.
The men’s market in Vietnam is limited but also worth keeping an eye on, according to Tran Xuan Hoa, marketing manager for the Estée Lauder Cos Inc.
“The market is very small now, but young Vietnamese men are increasingly taking an interest in fashion and their personal appearance. There’s good potential for growth in the years to come,” he says.
Nguyen Hoang Yen, a 36-year-old Web designer, says she buys most of her personal care products from supermarkets and likes to keep her makeup and beauty regime simple. She says she looks for quality and value in a brand. Her cosmetics are mostly from Avon. She also uses Olay Total Effects face cream, Dove body wash and L’Oréal hair care products.
“I don’t care much about brand prestige. I just want something that works,” Yen says. “Some of my friends will only use expensive brands like Chanel or Gucci, but I suspect that often they’re fakes. A lot of people with money are also turning to locally manufactured prestige brands like Shiseido because they’re competitively priced and you can feel confident that the product is genuine.”
Counterfeiting is one issue foreign companies are attempting to combat. L’Oréal’s Lauzeral estimates that about half of the products being sold in the market are fake, noting that consumers have become conditioned to buy fakes after experiencing so many years of shortages of the real thing. Low purchasing power in some cases prompts shoppers to opt for the cheaper copy, he adds.
“The market faces the counterfeit issue that is impacting both sales and brands’ reputations,” he says.
But despite all this, clearly there is demand for genuine products in Vietnam. Both L’Oréal and Shiseido expect the market to continue to grow at a double-digit pace.
Like the Chinese, the Vietnamese are rapidly demolishing large swaths of their cities (including beautiful French-colonial architecture) to make way for new buildings, which nowadays include massive apartment blocks, office towers, supermarkets and shopping malls.
While a big percentage of personal care products continues to be sold in traditional Vietnamese wet markets, the rapid construction and increasing popularity of supermarkets and shopping malls, especially in HCMC, is where the greatest opportunities are likely to lie.
A spokesperson for Diamond Plaza in HCMC, Vietnam’s first high-end shopping center, Pham Nguyen Thai Huy says the best-selling brands include Lancôme, Estée Lauder and Shiseido.
“Our cosmetics customers are typically twentysomething or thirtysomething middle-class women. The single ones are often eager to look their best, so that they can find a handsome and successful fiancé, while the married are eager to show off their financial success and good taste.”
Other upmarket shopping centers include Vincom Trade Center in Hanoi, plus HCMC’s brand-new 621,121-square-foot Vincom, claimed to be the biggest commercial center in Vietnam; Malaysian Lion Group’s Parkson (five centers), and Japanese-owned Zen Plaza in HCMC. Several other major shopping centers are under construction including HCMC’s 484,376-squarefoot The Crescent scheduled to open in 2011, and the 172,223-square-foot Grand Plaza in Hanoi, which should begin trading later this year.
Some of the biggest supermarket players include Co.op Mart, Citimart, Big C, Maximark and German wholesaler Metro Cash & Carry.
Beauty companies aren’t just viewing Vietnam as an important market for their products—it’s also a bustling manufacturing hub.
Just this year, Shiseido opened its first factory in Bien Hoa City in southern Vietnam. Right now, the $42 million factory primarily manufactures men’s cosmetics, hairstyling agents and facial cleansers for the Japanese market. But that will change over the next few years. “As the main production base of Shiseido’s masstige business…the factory will manufacture products targeting the middle-income group in Asia,” says Shiseido Cosmetics Vietnam’s Nagao.
Largest City: Ho Chi Minh City
Official Language: Vietnamese
Area: 127,881 square miles (total)
Currency: Vietnam dong (VND)
Population: 86 million (2008)
GDP per capita: $2,900 in 2009
Inflation: 7 percent
Unemployment: 6.5 percent
Source: U.S. Commercial Services