Thai products invade Vietnam

By Ngan Anh, Thanh Nien News

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Vietnamese consumers have developed a strong taste for Thai products. Photo: Manh Quan Vietnamese consumers have developed a strong taste for Thai products. Photo: Manh Quan


Pushing her way out of the Vietnam-Thailand trade fair recently organized in Hanoi with a fully loaded shopping cart, Nguyen Thu Trang, 35, of Hanoi’s Hoang Mai District, said her four-person family is fond of Thai-everything -- from fruits to soaps to garments.
Trang never misses a chance to attend Thai trade fairs.
In this way, she's hardly unique. In the past two decades, Thailand has become the preferred country of origin for Vietnam's growing middle-class, which is equally concerned about price and quality.
Trade between Vietnam and Thailand increased to $9.4 billion last year from only $1 billion in 2000. The majority of that trade was goods heading from Thailand to Vietnam.
Supermarkets, outdoor markets and convenience stores are flooded with Thai commodities. Thai electronics account for 70 percent of the market share, while Thai fruits occupy 40 percent of the local market, according to the Ministry of Trade.
Nguyen Ha Thanh, the owner of a chain of bazaars that sell Thai products, said she recently opened a new shop on Minh Khai Street, raising her total number of Hanoi outlets to five.
Thanh said there were only a few places like hers in the city when she opened her first shop a few years ago. Now, such bazaars seem to occupy every corner of the capitol, selling hundreds of commodities, from cosmetic and plastic products to detergents, kitchen tools, garments and footwear.
The representative of one supermarket chain in Hanoi said Thai products are replacing Chinese ones amid a thin supply of competitively priced domestic goods.
Although Thai products tend to be 10-20 percent more expensive than their Chinese counterparts, Vietnamese consumers tend to prefer them because they believe that they are of higher quality.
Subsidized marketing campaigns
Trade fairs selling Thai products have been organized annually in Vietnam, drawing participation from hundreds of enterprises and tens of thousands of local shoppers.
The chairman of the Hanoi Supermarket Association, Vu Vinh Phu, said Thai enterprises have built careful plans to infiltrate the local market and frequently organize events to promote their products nationwide.
The Thai government offers financial support to enterprises looking to organize trade fairs and exhibitions in Vietnam -- sometimes picking up all of the organizing costs.
Pham Ngoc Hung, vice chairman of the Ho Chi Minh City Union of Business Associations, said Thai infiltration has posed a major challenge to local enterprises.
Vietnamese products can't compete with Thai ones, since Thai enterprises enjoy stable supply chains and implement self-contained production which helps them ensure good product quality.
Meanwhile, Vietnam’s production heavily depends on imported materials. Some sectors -- like garment and footwear -- import up to 80 percent of the materials they need for production. Local enterprises typically only participate in select stages of production, so quality is often beyond their control.
Dinh Thi My Loan, chairwoman of the Association of Vietnam Retailers, urged domestic enterprises to rapidly develop their distribution system and step up their game in terms of quality.
Picking up the big retailers
Billionaire Charoen Sirivadhanabhakdi's retail conglomerate Berli Jucker (BJC) recently announced a plan to buy the Vietnam cash-and-carry wing of Germany's Metro AG for 655 million euros ($876 million).
After the purchase is completed in the first half of next year, BJC said it expects overall sales to jump 50 percent. Last year, BJC's sales amounted to 42 billion Baht (US$1.2). The company is the largest glass bottle maker in Southeast Asia and manufactures a range of consumer goods including tissue paper, snacks and soap.
Metro Vietnam is the country's second-largest wholesale grocery store chain and generated sales worth 516 million euros in the 2012/13 fiscal year.
BJC entered Vietnam's $124 billion consumer market through its 65 percent stake in B's Mart convenience stores.
Early this year Thailand's leading retailer, Central Group, opened a Robinson's Department Store in Hanoi.
Central Group's chief executive, Tos Chirathivat, said Vietnam's big purchasing power makes it an attractive target market with major growth potential and an excellent destination for investors in the retail sector.
Central Group plans to open a second outlet in Ho Chi Minh City late this year.
Phu of the Hanoi Supermarket Association said the Vietnamese market will become even more attractive to Thai retailers as the ASEAN Economic Community comes into effect in 2015, lifting tariffs imposed on commodities imported from member states.
The expansion of Thai retailers in Vietnam will facilitate the infiltration of more products into the market, he said.
Local businesses should strengthen cooperation to defend their market share. Meanwhile, the government should encourage Vietnamese people to use Vietnamese products, and regulate the ratio of local and foreign products sold in supermarkets, Phu noted.
Vietnam's retail market hit an estimated $124 billion last year and is expected to grow 12 percent this year.

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