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Masan Consumer in Vietnam: How a domestic brand can win rural consumers’ hearts

Published: 
14 Aug 2015

Vietnam has been one of the world’s fastest growing consumer markets over the past two decades, attracting worldwide and regional competitors in search of growth. Masan Consumer (Masan), a member of the Masan Group, is on its way to becoming one of the biggest FMCG brand names in Vietnam. Today, approximately 98% of Vietnamese households use at least one Masan product

As Vietnam grows and its consumers develop more affluence, there will be more competition for the consumer both internally and externally. As international companies try to enter the Vietnamese market, and domestic players try to gain market share, the question will be—can a domestic company compete in Vietnam and excel?

One such company that has not only competed but flourished, and is holding a dominant share in a large part of the Vietnamese market is the Masan Group, which has integrated a strategy of customer data, customer insights, a focus on product expansions into growth markets and an emphasis on dominating rural distribution networks.

How did Masan Consumer achieve phenomenal growth?

Established in 2000, Masan Consumer manufactures and distributes a variety of food and beverage products, including soy sauce, fish sauce, chili sauce, instant noodles, instant congee, instant coffee, instant cereals, and bottled beverages under a variety of brand names. Group President, Quang Nguyen, said that it was the desire to discover and meet unsatisfied customers’ demands that led to the establishment of Masan. The company recognised the large potential of rural markets, which account for about 70 percent of Vietnam’s population. Masan currently holds a dominant role in the packaged food industry with top positions in sauces, noodles and dried processed food in rural Vietnam (see Table 1 below). The year 2014 marked Masan’s significant success with the “Vietnam Food Golden Brand” award, jointly issued by the Ministry of Health, Ministry of Agriculture and Rural Development, and Ministry of Industry and Trade.

Table 1. Masan Consumer’s latest market share

Segment

Market share

Rank

Sauces, dressings and condiments

49.2% (75% in fish sauce)

1

Instant noodles

26-30% (up from 17-20% in 2013)

2

Dried processed food

16.8%

2

Coffee (Vinacafe)

32.4% (43.5% in instant coffee)

1

 

Source: Masan, VBPS report (2014)

Today, three of the ten most popular brands in rural markets and two of the ten most popular brands in urban markets belong to Masan Consumer. Among them, Nam Ngu has become the best-selling food brand in rural areas. Before 2007, the business model of Masan Consumer was quite simple. The company built just one brand name – Chin-su – for four main product lines: soy sauce in 2002, and fish sauce, seasoning powder, and instant noodles in 2003, with a turnover of less than 500 billion VND and no dramatic development initially. However, at the beginning of 2005, Masan significantly innovated in its business model by developing each sector separately. As a result, Masan Consumer today is one of the largest local FMCG companies in Vietnam, holding the leading position in the food and beverage industry.

Masan’s strategy to become a market leader

Masan’s long-term strategy was a determining factor that made it the preferred choice of rural Vietnamese consumers. From 2009 to 2014, Masan management maintained three main strategies to achieve positive outcomes, step by step. They went out and got information about their customers; they made the decision to go out to the rural markets where the multinational companies were weak rather than fighting it out in the cities; they chose to develop the logistics and distribution channels into the rural markets; they picked high growth FMCG markets as they expanded from fish sauce to instant noodles and beverages.

1. Understanding and changing consumer behaviour

In the FMCG product space, Masan identified the sectors of spices, instant noodles, and instant coffee to be the essential foundation of the food and beverage sector. Masan management conducted specific research to gain an in-depth understanding of Vietnamese consumer demands. Vietnam market has a high proportion of young people aged 9 to 44 and rural citizens who will potentially consume spices and instant products (see Table 2 below). As they looked at the collected data they divided up their target customer segments, and targeted new opportunities as they presented themselves. Masan was especially successful in orienting the rural consumer towards using healthier products but always with an affordable price tag.

Table 2. The profile of Vietnam’s consumers 2011, 2012, 2013, and est. 2016 (thousand people)

 

2011

2012

2013

2016

Babies/infants (aged 0-2)

4,344

4,289

4,228

4,025

Kids (aged 3-8)

8,332

8,438

8,534

8,627

Tweens (aged 9-12)

5,218

5,263

5,309

5,522

Teens (aged 13-17)

7,642

7,163

6,822

6,526

Young adults (aged 18-29)

21,199

21,304

21,240

20,208

Middle youth (aged 30-44)

20,161

20,547

20,965

22,233

Mid-lifers (aged 45-59)

14,249

14,705

15,117

16,309

Later—lifers (aged 60+)

7,549

8,021

8,443

9,843

Population: National estimates at January 1st

88,792

89,730

90,657

93,293

Male population

43,906

44,388

44,862

46,211

Female population

44,886

45,343

45,795

47,082

Urban population

27,536

28,407

29,289

31,999

Rural population

61,256

61,323

61,368

61,294

 

Source: Euromonitor International 2014

Move toward brands and the quality assurance it brings: For traditional sauce products including fish and soy sauce, Masan realised that this sector in the Vietnamese market contained many small, unbranded local producers whose products were typically sold at low price points in traditional open food markets found all over the country. Those unbranded products had no quality assurance. Masan’s research from 2009 predicted that increasing disposable income and the urbanisation process combined with economic growth would shift customers’ preferences from unknown brands towards well-known and premium brands as a result of improved purchasing power and concerns about food safety. While the market for coffee is highly competitive in Vietnam, the company’s Wake Up Saigon brand concentrated on attracting the rural area segments with a combination of good quality and a persuasive price. This led to the brand being one of Vietnam’s top ten beverages within a year of introduction.

Great opportunities: In the instant food sector, Masan investigated and found Vietnam’s instant noodles consumption to be the third highest in the Asia Pacific region, trailing only South Korea and Indonesia. To combat the traditional perception that instant noodles were junk food, Masan continues to increase product variety and flavors and introduce healthier non-flour-based noodles. Masan was successful in introducing the instant noodle brand Kokomi for the low-income segment with a guarantee of quality but with competitive pricing relative to competitors.

 

2. Consolidation of brands leading to market leadership

Another strategy that brought Masan success in the rural area was the use of brand recognition. With the strategy of constructing an “umbrella brand”, Masan became one of the most popular brands in the overall domestic market. The umbrella brand strategy helped them reach a broad range of consumer groups and penetrate adjacent segments.

By leveraging on the reputation of the principal product lines as premium brands (Chin-su for sauces and Omachi for instant noodles), Masan continues to develop mass-market brands (Nam Ngu, Tam Thai Tu and Rong Viet for sauces and Tien Vua and Kokomi for noodles) to meet the demands of customers of different income levels; specifically, low-income rural customers. This maximises the value of their brands, establishes a reputation for premium quality across their products and generates economies of scale in advertising and promotion.

3. Deepening of distribution

By 2014, Masan had developed a nationwide distribution network with 230 distributors, covering approximately 230,000 points of sale—one of the largest and deepest in Vietnam’s FMCG sector (see Table 3 below). In addition, they also implemented a state-of-the-art Distributor Management System (DMS) across all of their distributors, which provided them access to real-time data across the distribution network. To support the distributors throughout Vietnam, Masan provided geographical exclusivity and worked closely with them to ensure the effectiveness of their sales forces and smooth coordination.

Table 3. The top 10 manufacturers in Rural Vietnam 2014

Rank 2013

Rank 2012

Manufacture

Consumer Reach Points 2013

Penetration (%)

Frequency

1

1

Unilever

407,009,306

99.8

25.2

2

2

Masan

297,556,856

87.8

18.8

3

3

Vinamilk

212,873,299

81.7

16.1

4

4

Vina Acecook

142,707,986

80.9

10.9

5

6

Asia Foods

113,258,816

72.9

9.6

6

9

Calofic

95,686,739

79.9

7.4

7

7

Ajinomoto

95,280,533

78.5

7.5

8

5

P&G

94,751,331

86.1

6.8

9

9

Liwayway

76,933,265

41.7

11.4

10

10

Friesland Campina

76,620,923

55.7

8.5

 

Source: Kantar Worldpanel’s Brand Footprint 2014

Notes:

(a) Measures how many households are buying a brand (penetration x population) and how often (frequency) they purchase that brand
(b) Number of households buying the brand / Number of households in a country
(c) Number of times each household purchase the brand on average in a year

Still much room for growth

The success of Masan Corporation is a useful lesson in long-term vision. Rather than seeking short term profits, management concentrated on investing building sustainable brands, caring about customers, while helping them achieve a higher standard of living, and developing a strong system of distribution channels.

Compared to other emerging markets in the Asia-Pacific region, the Vietnamese households spend relatively less on packaged food and beverage products; therefore, the growth potential of the Vietnamese market is still expected to be rather high. By using effective marketing strategies, and expanding into growth categories and rural markets, Masan has in essence increased its addressable market for branded consumer products from US$1.1 billion in 2013 to US$9.0 billion in 2014. Moreover, the growth of retail channels such as hypermarkets, supermarkets, convenience stores and independent small grocers in rural areas is expected to improve the distribution of Masan’s FMCG products and increase proximity to customers.

Last but not least, Masan has inspired new hope for Vietnamese enterprises in the context of upcoming free trade agreements and communities such as the Trans-Pacific Partnership and ASEAN Economic Community.

Continuing on his message in the annual report, Nguyen announced, “Above all personal motives, we have seen an opportunity to contribute to the country and become the pride of Vietnamese people as ‘the champion’ in the domestic private sector, showing the world that a Vietnamese corporation can reach great achievements, and more importantly, improve Vietnamese people’s lives”.

So can a domestic company continue to grow in Vietnam and can they succeed? The answer is yes, but they will need to take bold and forceful decisions to do so.

This article was written by Nhi Hien Xuan Dang and Uyen Hoang Phuong Phan at the School of Business, International University, VNU – HCMC, Vietnam

 

 

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