[Market Analysis]Bright Prospects for International Cosmetic Enterprise in Vietnam

As an important emerging economy Vietnam is now being recognized as a destination offering great potential for investment. For the cosmetics industry one of the most enticing aspects of Vietnam's market is the significant growth in teenage and young adult demographics.

Although Vietnam's younger generation has demonstrated an increased propensity to purchase consumer goods especially cosmetics and personal care products, loyalty and preference to specific brands hasn't been cultivated.

Data from Mintel, a global market research & market insight group, indicates retail of cosmetic and personal care segment was 1.7billion in 2016, and is estimated to reach 2.35 billion dollars in 2017. Statistics from International Trade Center and World Bank shows that from 2011 to 2016, the value of imported cosmetics rose from 500 million dollars to 1.1 billion dollars. The value is estimated to double in 2020. In this article, the advantages of exporting cosmetics to Vietnam will be analyzed and the current promotion methods adopted by overseas enterprises will be introduced.

Status Quo of Vietnam Cosmetic Market

1. Regional differences

Due to the unbalanced economic development in Vietnam, the cosmetic market is stratified based on socioeconomic differences. In general, Vietnam cosmetic market can be divided into three regions:

1), southern part of Vietnam, less developed; most consumers consider price as most important in purchasing decisions

2), cross country tourism: most tourists are willing to accept a higher price for good quality goods

3), northern part of Vietnam (Hanoi, the capital city), where consumers pursue premium quality higher priced goods. This region is the main target for most overseas cosmetic companies

2. Immaturity of domestic cosmetic industry

Vietnam local cosmetics brands show an immature operation mode characterized by a small scale of production, basic product formulation and ingredient selection, limited product variation/differentiation, lack of distribution, plain packages, etc. Although local products sell at a low price they offer little competitive advantage to be feasible for exportation to global markets.

3. Free trade treaty

In addition to having little competition, overseas cosmetic enterprises also benefit from a free trade (no or low import tariffs) in Vietnam.

4. Market share by country 

Statistic from Ho Chi Minh City Society of Cosmetics Chemists indicates that in Vietnam, overseas brands occupy 90% of the market; of this 90% Korean brands occupy the largest share of 30%.

5.Market trends in Vietnam cosmetic sector

There are two kinds of cosmetic products that are extremely popular in Vietnam 1. Nail beauty 2. Hair care products. The number of nail beauty shops has grown steadily and experts predict growth to continue over the next several years. Cosmetic such as nail polish will obviously also be subject to increased demand. The other popular product is hair care product. Hair loss is a significant issue in Vietnam and we can expect anti-hair loss products and hair growth products to be subject to heightened demand. Hair care products which are developed with Vietnam's humid weather in mind would also be expected to do well.

Focus on Current Imported Cosmetic Promotion Measures

In Vietnam, targeting the middle to high-end cosmetic market is common practice for overseas cosmetic enterprises. Generally, imported cosmetics focus on improving user experience and brand image.

Pay Attention to Safety Issues

With the growing wealth of Vietnam citizens, knowledge of cosmetics production and ingredients safety is expanding. Premarket approval for imported cosmetics is easy to get, although Vietnam FDA places the most importance on product safety when conducting post-market surveillance. One Korean cosmetic group revealed that the Vietnamese population is particularly cognizant of information related to cosmetic induced skin adverse reactions. Thus manufacturers should attempt to avoid using ingredients such as Hydroxy benzoic acid ester, artificial fragrance, colorants and mineral oil.