Emerging Vietnam market draws foreign corporations

On June 1 a new kindergarten opened in Minh Phuong, a hardscrabble village about 50 miles from Hanoi.

It looks like many schools in developing countries, with mustard-painted cinder-block walls and tile floors.

There’s something unique about the classrooms, however.

Each has a silver-colored plaque near its door emblazoned with names rarely found in a textbook:

“Gillette Be Your Best,”

“Pampers Golden Sleep”

and

“Pantene Shine.”

These are all references to brands sold inVietnamby Procter & Gamble, whose employees helped raise almost 80 percent of the school’s $100,000 cost.

The world’s largest consumer-products company is using everything from good deeds to television advertising to hand-washing demonstrations to win Vietnamese customers.

It’s not alone – Anglo-Dutch rival Unilever, which has done business in Asian markets for more than a century, has proved to be a particularly tough competitor.

And others such as Kimberly-Clark andGermany’s Beiersdorf have staked their claims inVietnamas economic growth ripples through southern Asia.

P&G is keen to hook customers while they’re young, a no-brainer in a country where 45 percent of the population is under 25.

Once in the P&G fold, customers can be introduced to an expanding range of products as they grow older – and more prosperous.

Western tastes

While Vietnam’s economy, the world’s 57th largest, according to the World Bank, has cooled in recent months because of inflation, slower labor growth and currency devaluations, per capita income grew more than fivefold from $220 in 1994 to $1,168 in 2010, according to the U.S. Department of  State.

Better yet, the country’s 90 million people increasingly are eager to buy Western brands they deem superior to many local and regional products.

And marketing executives say Vietnamese are more aspirational than consumers with comparable incomes in other developing nations.

That’s one reason many global companies already established in China, Brazil and India are now turning their attention toVietnamas the next great emerging market.

P&G could certainly use a boost.

The company last month cut its profit forecast for the third time this year, as it grapples with flagging growth and market-share losses in the United States and Europe.

Meanwhile, developing markets are expected to account for 37 percent of P&G’s sales this year, up from 35 percent in fiscal 2011.

Although more than half of Unilever’s sales already come from developing and emerging markets, P&G executives believe there’s plenty of room for the Cincinnati consumer goods company to squeeze into places like Minh Phuong.

“Vietnamis a young culture, very interested in trying new things, so you don’t have to be the 100-year incumbent to be able to win,” said Deb Henretta, group president of P&G’sAsia business.

Vietnamand other Asian countries, including potential markets such as Myanmar, are “the growth engines for the company.”

For decades, U.S. companies couldn’t operate inVietnam because of an American trade embargo imposed after the fall of Saigon in 1975.

A year after the embargo was lifted in 1994, P&G entered the country, as did Unilever.

But today P&G, the No. 1 provider of detergent, toothpaste, paper towels and razors in the United States, finds itself in the uncharacteristic position of playing catch-up.

It’s No. 1 only in razors with its Gillette brand.

Vietnam is expected to be one of the fastest-growing emerging markets in coming years, according to Euromonitor International, with consumer spending forecast to jump 42 percent from 2012 to 2016.

P&G is betting on the appetite inVietnamfor premium brands – such as its Olay skin whiteners – and that its larger range of products will give it an advantage over Unilever.

It’s also producing lower-cost merchandise that can be bought by consumers with modest incomes who can trade up later.

The company’s famous marketing studies of its customers – it conducted more than 100 home visits in Vietnamlast year – have uncovered new uses for some brands.

Consider Ambi Pur, the deodorizer sold as Febreze in the United States and often used on upholstered furniture.

P&G realized it might appeal to Vietnamese who ride motorbikes, the country’s primary form of transportation, after the government passed a law five years ago requiring the use of helmets.

In a country with a humid subtropical climate, consumers of all income levels are deodorizing their helmets with Ambi Pur, now one of P&G’s fastest-growing products in the country.

Growing climate

P&G has opened two plants in the country and has more than 900 employees.

And like many global companies doing business inVietnam, it has a charitable arm that brings health, educational and other services to impoverished areas.

In exchange, P&G gets to promote its brands to the communities it assists.

“They have to do this propaganda-esque process to eventually have a consumer who wants to buy their products,” said Sanford C. Bernstein analyst Ali Dibadj.

“It’s a time-tested tool that companies use.”

By Lauren Coleman-Lochner

Source:  SF Chronicle 7-7-2012

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s