Vietnam loses appetite for domestic sweets

By Nguyen Nga – N. Tran Tam, Thanh Nien News

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A woman checks a can of Danish snack at Co.op supermarket outlet on Cong Quynh Street, Ho Chi Minh City. Photo: Diep Duc Minh A woman checks a can of Danish snack at Co.op supermarket outlet on Cong Quynh Street, Ho Chi Minh City. Photo: Diep Duc Minh


Sweets snacks generate US$1 billion every year in Vietnam and most of that profit gets gobbled up by foreign firms. 
Many local economists worry that outsiders are taking over the market since local consumers appear to have lost their appetite for local cookies and candies.
Business Monitor International reported that Vietnam's sweet snack market generated a revenue of VND24.6 trillion ($1.15 billion) last year that included nearly 10 percent profit.
BMI forecast that figure would increase by around 7.9 percent this year, well above the Southeast Asian average of 3 percent and the global average of 1.5 percent.
The market is expected to generate some VND40 trillion in 2018, the firm found.
BMI pointed to the high market potential in Vietnam, where the average person consumes around two kilograms of sweets a year, compared to the global average of 2.8 kilograms.
That high growth has attracted a lot of foreign businesses.
Kinh Do, Vietnam’s confectionery giant which occupied 28 percent of the market, signed a deal last month to sell an 80 percent stake in its snack business to Mondelez International Inc., the maker of Oreo cookies and Ritz crackers, for $370 million.
The transaction gave Modelez the option to buy the rest of the Ho Chi Minh City-based business after 12 months, according to a release issued during the signing ceremony.
Bloomberg reported last month that Kinh Do’s top-selling biscuits, soft cakes and seasonal moon cakes helped generate $175 million in annual sales.
Lotte now owns more than 44 percent of another major local player, Bien Hoa Confectionery Joint Stock Co., known as Bibica.
The South Korean firm has been buying into Bibica since 2012 and recently filled two key management positions, including Chairman of the Board.
Insiders said Bibica's major shareholders are tempted to sell because they believe there's a high chance that the company will become fully Korea-owned soon.
There are no other major local names left to compete with Tous Le Jours, Paris Bugguettee and Orion from South Korea, Break Talk from Singapore, Mars and Kraft Foods from the US or Euro Cake from Thailand.
The foreign snack brands also import all of their supplies instead of using Vietnamese ingredients.
A representative of Pat’aChou, a French bakery brand with two outlets in Ho Chi Minh City, said they import everything from wheat flour to milk powder from Europe.
Foreign confectioneries enjoy the urban and luxury segments of the market.
At many supermarket outlets in HCMC, Vietnamese snacks enjoy a very small portion of the shelf.
The Korean Lotte chains mostly display Korean products.
Local brands serve a small sliver of the market, which includes mostly low-income and rural consumers.
But even there, they have to compete with brands from China, Taiwan, Indonesia and Malaysia, which vendors say taste just as good and sell at cheaper prices.
Cold cakes
A vendor at Binh Tay wholesale market in HCMC’s District 6 said it’s hard to sell local snacks because they aren't as eye-catching and the selection is poor.

Foreign brands occupy a snack booth at Binh Tay wholesale market in Ho Chi Minh City. Photo: Diep Duc Minh
“Most of my customers prefer foreign brands,” she said. 
Another shop at the entrance of the market only displayed two packages of Kinh Do's Cosy brand cookies.
The rest of the shelf was taken up by foreign products.
Phan Thanh Hien, a snack importer in Ho Chi Minh City, said customers always believe foreign snacks are better.
“They'll try local snacks, but when they don’t taste anything special about them, they'll quickly buy up foreign snacks,” Hien said.
He said foreign sweets in Vietnam are available at every price.
“The middle and low-priced segment doesn't belong to Vietnam yet. In contrast, many local producers have quit and switched to importing or packaging foreign products,” said Hien, who has 25 years in the import business.
Robert Tran, an overseas Vietnamese consultant, said Vietnamese manufacturers only have themselves to blame for not keeping up with consumer demand.
Tran said Vietnamese brands have been slow to change their recipes and packaging.
“Consumer preference is now for lean products which contain less sugar and fat, but most domestic producers rely on the same formulas they were using a decade ago,” he said.
Nguyen Son, the director of a trading company in Hanoi, said of many Vietnamese products are hard to sell because of their “rustic” designs that rely on flashy red packaging.
Son said one Malaysian product changes its shape every year.
He said his company has switched to providing Malaysian and Indonesian products “to be safe.”

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