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Vietnamese FMCG brands squeezed out

News, 28 March 2017
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HANOI: Retail ownership is becoming an issue in Vietnam, where the growing domination of "foreign-invested" chains is said to be squeezing out local manufacturers.

According to Le Thi Thanh Lam, deputy general director of Saigon Food, many Vietnamese enterprises are finding it increasingly difficult to get their products distributed via foreign-owned retailers which are demanding excessively high discount rates.

In one example, reported by VietNamNet Bridge, the Vietnam Association of Seafood Exporters and Producers felt compelled to ask Big C, a Thai-owned chain, to stop raising discount rates which ranged from 17% to 25%.

"The required high discount rates will force Vietnamese enterprises to seek profits from other distribution channels and accept losses when selling products via foreign-invested supermarkets," Lam said.

"This will help foreign-invested supermarkets reduce the selling prices of goods to compete with Vietnamese owned supermarkets," she added. "If Vietnamese-owned supermarkets do not develop, Vietnamese enterprises will suffer."

Last summer, Inside Retail Asia noted how international retail brands, from US franchise 7 Eleven to the South Korean Lotte chain, were contemplating expansion in Vietnam, where modern trade channels account for a quarter of retail business and new opportunities have opened up as trade agreements remove barriers.

At the time, local retailers were seeking government help – a call that has now been repeated.

Economist Tran Hoang Ngan said the government should pay greater attention to developing the Vietnamese-owned retail network, and warned that if overseas businesses ended up controlling distribution channels, that would become a major problem for Vietnamese production.

Figures quoted by VietnamNet suggest that foreign-invested supermarkets claimed 58% of the local retail market in 2015 and could take more than 70% by 2020.

Data sourced from VietnamNet Bridge; additional content by Warc staff

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