HO CHI MINH CITY: Private label currently accounts for a fraction of retail sales in Vietnam but that is set to change as modern retail spreads across the country.

Around 8% of FMCG sales are through modern retail channels, including supermarkets, hypermarkets, convenience stores and mini supermarkets, according to figures from Kantar Worldpanel and Nielsen cited by VietnamNet.

And sales are growing more than twice as fast through convenience stores and mini supermarkets (26%) as through supermarkets and hypermarkets (10%).

That is largely because of the rapid growth of the former as foreign retailers pile into a market that ranks sixth on A.T. Kearny’s Global Retail Development Index.

The scale of the shift underway was detailed recently by ASEAN Today: Japan’s Family Mart plans to add another 700 stores by 2020 to the 130 it already operates; Japan’s 7-Eleven will open 1,000 stores in the next decade; South Korea’s GS25 is about to opened its first stores and plans another 2,500 in ten years.

While this opens up new opportunities for FMCG brands, it also brings the new challenge of private label rivals: research for Kantar Worldpanel Vietnam found that 39% of Vietnamese shoppers at modern outlets preferred private-label products, VietnamNet reported, with the top ten including toilet paper, box tissues, table napkins, loose leaf teas, floor cleaners, liquid detergents, frozen foods, dishwashing liquids, detergent powders and cooking oils.

“There is huge potential for private-label development in Vietnam,” said Vo Hoang Anh, private-label director at Saigon Co.op. “Consumers are growing fond of private-label products since they are quality products at good prices.”

Not only will such products help the retailer attract and retain customers, he added, they also help manufacturers better utilise production capacity.

LOTTE Mart Vietnam only started to develop private-label products about a year ago and already has more than 1,000 lines, some of which exported to neighbouring Myanmar and Laos.

“The LOTTE private-label products are meant to increase choices for customers, so [we] choose to invest slowly but surely,” explained Doan Diep Binh, head of PR and events at LOTTE Mart Vietnam,

“We will expand certain private-label products, with a focus on essential food items serving consumers’ daily needs.”

There is plenty of headroom for growth, as Kantar Worldpanel data indicate private labels accounted for only 2.4% of sales at supermarkets, compared to between 20% and 30% in the US and EU.

Sourced from VietnamNet, ASEAN Today; additional content by WARC staff