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1Vietnam’s Consumer Market: On the Frontline of Growth

Executive Summary

Vietnam has consistently been one of the fastest growing

economies in the world in recent years. In 2018, the country

boasted its strongest growth so far with 7.08% GDP growth,

remained under its 4% inflation target and produced a record-

high trade balance. On the back of its domestic political stability,

investor-friendly government policies, young demographics,

rising domestic consumption and high rate of urbanization, the

economy is projected to grow at 6.5% to 7% per year for the

next three years.

Vietnam’s expanding middle class and rising income levels also

pose attractive opportunities for consumers and the retail sector.

This is even more promising considering that private consumption

accounts for nearly 70% of Vietnam’s GDP. Effectively, consumer

purchasing preferences are expected to change over time in

such a growing economy as Vietnamese consumers become

increasingly concerned about hygiene, food safety and health.

A wide range of positive societal and economic features have

cemented Vietnam’s clout as the second largest retail market in

the region, with further room for upside as key market indicators

point to continued growth.

Vietnam Has One of the Strongest GDP Growth Rates In Southeast Asia

Source: IMF, GSO (2018)

Philippines Thailand Indonesia

Vietnam Malaysia Myanmar

(%)

5.0

6.0

7.0

8.0

4.0

3.0

2.02015 2016 2017 2018E 2019F

MIRAE ASSET LENS March 2019

Vietnam’s Consumer Market:

On the Frontline of Growth

Mirae Asset Global Investments (Vietnam)

Equity Research Team

E: expected, F: forecast


An Economy for Growth

Young and Vibrant Consumers

In 2018, Vietnam’s population reached 94.67 million (1.1%

growth from 2017), making it the 14th most populous nation

in the world, while its population continues to grow thanks to

a strong birth rate. A growing population typically expands the

consumer market, and Vietnam is also in the golden period

of social structure with 15 to 64 years olds accounting for

nearly 70% of the entire population. This segment has major

consumption power, and will be boosted further as millennials

age and progress into the peak consumption demographic of 35

to 54 years old. Vietnam’s median age is just 30.7 years, which is

young compared to China’s median age at 36 years, Thailand at

37.7 years, and Indonesia at 30.2 years in 2018.

Rising Disposable Income

Vietnam’s rapid economic growth also results in a higher level

of disposable income and expanded middle class affluence.

Vietnam possesses one of the fastest growing middle-income

and affluent classes in Southeast Asia. The country’s minimum

wage grew at an average annual growth rate of 28.1% between

2008 and 2017, rapidly boosting disposable income, which will

have a positive effect on consumer spending and retail sales.

24,881

24,749

26,584

23,741

28,787

21,871

Vietnam’s Population Structure (Thousand People)

Source: GSO, UNFPA (2018)

100,000

120,000

80,000

60,000

40,000

20,000

02016 2020 2025

0-14 15-19 20-34 35-54 55 & above

Disposable Income per Capita (VND) On the Rise

Source: Fitch Solution, BCG (2018)

60,000,000

70,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

02017 2018F 2019F 2021F2020F 2022F

CAGR = 10.4%

Also boosting Vietnam’s consumption growth is its female labor

force. In 2017 Vietnam had one of the highest female labor

participation rates in Asia at 73%, compared to 61% in China,

27% in India, 51% in Indonesia and 50% in the Philippines.

F: forecast


Steady economic growth and higher levels of income have

provided a backdrop for a steady rise in consumer expenditures.

Over the period of 2010 to 2016, median disposable income

per household rose by approximately 46% from USD 2,613 to

USD 3,822. Total household spending increased at an average

rate of 10.3% per year from 2016 to 2018, with food, housing

and utilities accounting for 48.3% of expenditures. Household

spending is forecast to rise at an average of 12% per annum until

2022. As for the level of consumer sentiment in Vietnam, it has

remained positive since 3Q 2014 and is still on the rise, driving

higher consumption.

elddiM gniworG-tsaF saH manteiVand Affluent Class (MAC)

Source: Fitch Solution, BCG (2013)

2012 Vietnam Myanmar Indonesia Thailand

Affluent

Established

Emerging

Aspirant

Poor

2020

Affluent

Established

Emerging

Aspirant

Poor

Vietnam Myanmar Indonesia Thailand

2.6 0.8 9.1 5.8

9.8 4.6 8.123.2

23.6 13.7 41.6 21.6

18.7 18.9 44.4 13.1

33.9

10.2

22.5

26.4

16.2

20.8

1.6

8.7

19.3

22

15.4

23.4

49.3

68.2

50.5

76.2

10.5

10.5

28.4

11.2

8.2

23.1 129.9 17.7

Vietnam Has the Second Highest Consumer Confidence Index in the World

Source: Nielsen Vietnam (2018)

2Q2018 3Q2018

(%)

80

100

120

140

60

40

20

0Indonesia Malaysia Philippines Singapore Thailand Vietnam Asia Pacific

126 127 126

98

112

129

114

seirogetaC gnidnepS ’sremusnoC esemanteiVafter Covering Necessities

Source: Nielsen (through survey respondents, 2017)

4Q2016 2Q2017

(%)

50

60

70

80

40

30

20

10

0Saving Travel Clothing Tech devices Home

Decoration Entertainment

63

3836

31 30 29

MAC Annual Growth 2012-2020 (%)


Rapid Urbanization

Vietnam is experiencing a significant population migration

from rural to urban areas, evidenced by the percentage of

its population living in urban areas rising from 30.4% in 2010

to 35.2% in 2017. According to the World Bank, Vietnam’s

urbanization rate is 3.2% per year, double the rate of its

population growth and one of the fastest rates of urbanization

in the region. This trend will continue, with the number of urban

households expected to increase by 48% between 2017 and

2030, while the number of rural households will rise only 6%.

Urbanization, coupled with the expansion of the middle class,

is leading the growth of the retail market in Vietnam. Urban

consumers tend to be able to afford more discretionary items

than rural consumers, and are also most likely switch to more

modern retail channels such as e-commerce, in alignment with

their busier lifestyle.

Blossoming Consumer and Retail Sector

66.4

33.636.8

39.943.0

45.748.4

51.153.8

63.260.1

57.0 54.3 51.6 48.9 46.2

People Are Drawn to Urban Cities

Source: GSO, UNFPA (2018)

120,000

140,000

100,000

80,000

60,000

40,000

20,000

02015 2030F2020F 2035F2025F 2040F 2050F2045F

Urban population Rural population

Forecast Sales Volume of the Vietnamese Retail Market

Source: Euromonitor (2018)

2017 2020F 2022F

Store-based retail 96 111 121

Non-store retail 1.4 2.8 4.9

Retail (Total) 97 113 126

Modern Retail Penetration

Source: Euromonitor (2018)

(%)

60

70

80

90

50

40

30

20

10

0

Japa

n

South

Korea

Singa

pore

China

Hong K

ong

Thaila

nd

Malaysi

a

Philip

pines

Indon

esia

Vietna

m

Vietna

m

81 80

72

67

61

45 45

31

17

53

F: forecast

F: forecast, all data in USD bn

Vietnam’s retail market is expected to grow at 5.4% (CAGR)

between 2017 and 2022, with its total sales volume forecast to

reach USD 126 billion by 2022, making it one of the most vibrant

markets in the region. Looking more closely, traditional retail is

contributing 83% of total fast moving consumer goods (FMCG)

revenue. While modern retail channels also seem to be thriving,

growing by 41.2% yoy. However, even with such a high rate of

growth, Vietnam’s retail market is still in its nascent stage of

development and poised for further expansion.

5Vietnam’s Consumer Market: On the Frontline of Growth 8. 3.31 48.8

Emerging trends

Premiumization

Vietnamese consumers are optimistic in general, and their two

most significant concerns are health and job stability. Health

concerns, along with rising income that leads to consumption

of higher-tier brands for self-reward purposes, have resulted in a

proliferation of product premiumization. Surveys found that 62%

of Vietnamese consumers consider usage of premium products

to be one of the attributes of high self-esteem. Premium food

products contributed 20% of the premium product retail revenues

in 2Q 2018 (11% yoy growth).

Premium products made up 23% of personal care product

revenues, and those revenues are growing at 22% per year.

Consumers are rapidly becoming more focused on the

premiumization of beverages, where such products contributed

only 3% of total revenues for the segment, but sales are growing

Two largest concerns include job and health

Source: The Conference Board Global Consumer Confidence (2018)

Living expenditure

Parent's health

Life balance

Health

Job

State of economy

(%)

0 155 2010 25 4035 5030 45

2Q2018 3Q2018

13

11

9

11

25

22

40

42

40

42

27

46

at 103% per year.


E-commerce on the Rise

Growing internet access and smartphone ownership are creating

new consumer habits. In 2012, only 37% of the population

had access to the internet and one-quarter of households had

smartphones, which leapt significantly to 67% and 70%

respectively. This has fueled the 333% increase in internet retail

sales value between 2012 and 2017 (in real terms). Even though

E-commerce penetration in Vietnam by sales value is still low at

1.1%, even when compared to Thailand at 1.8%, Indonesia at

2.3%, Malaysia at 2.7% and Singapore at 5.4%, the total market

size of e-commerce is forecast to rise from $2.8bn in 2018 to

USS$15bn by 2025.

Percentage of the active internet users

in the total population

(+28% vs Jan 2017)

Percentage of the unique mobile users

in the total population

(+0.1% vs Jan 2017)

Smartphone penetration 3G & 4G subscriptions

(vs the total population of 94 million)

30

40

50

60

20

10

0

(%)

E-Commerce Market Growth (Gross Market Value USD Billions)

Source: Temasek (2018)

Vietnamese are well-connected

Source: We Are Social, Internet World Stats VCSC (2018)

2015 2018 2025 CAGR 2015-2025

30

35

40

45

25

10

0

20

15

5

50

Indonesia Philippines ThailandMalaysia Singapore Vietnam

1.7 1 0.5 1 0.9 0.4

12.2

2 1.2 1.8 3 2.8

53

7

10

5

1315

67% 73% 70+% 50million


Bright Outlook on the Horizon

Vietnam is enjoying a wide ranging but closely inter-linked

series of positive economic trends. Its economy is growing,

and its young population is moving to cities, where they earn

more money, and therefore spend more money. The country’s

profile and stature within Asia is rising rapidly due to economic

growth. These factors are predicted to remain in place for

the coming years, putting Vietnam’s consumer market on the

frontier of growth.


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