According to various analysts in the Asia-Pacific region, the cosmetics industry in Vietnam, although having established many cosmetics brand names, has been overshadowed by multinational brands, due to a lack of innovation and promotional strategies.
According to Vietnam’s Chemical Cosmetic Association; during the period of 2009-2011, average revenue from the cosmetics sector in the country reached US$130-150 million, of which more than 90 percent is said to have come from foreign companies, due to widespread distribution channels.
"Vietnamese cosmetic manufacturers have strived to upgrade technology; however, most of them are small and medium companies so they were not able to catch up with technology of larger groups," says the Association's Nguyen Kim Thoa.
In fact, regional analysts reckon that the quality of Vietnamese-made cosmetics are not far from that of foreign-made ones but rather that manufacturers are not investing in strategies to develop their products as well as advertising campaigns that local consumers can relate to.
State of the market
Meanwhile, it is regional newspaper, ‘Sai Gon Giai Phong’ that reckons in that same timeframe (2009-2011) there were up to 430 Vietnamese companies and units that produced and traded cosmetics, but merely accounted for 10 percent of the market share.
“Many Vietnamese well-known brand names have gradually vanished from the market while some fell into the hands of foreign companies because of poor competitiveness,” they wrote.
The government run publication further pointed out that at one stage, brands like Da Lan and P/S toothpaste were trademarks that accounted for up to 95 percent of market share in Vietnam but have disappeared from the market, due to 'strategic moves' by foreign companies.
It highlights for example the deal between Unilever offering $5 million to franchise the P/S toothpaste trademark as being one of the biggest business deals of the time, yet the personal care brand lost its foothold in Vietnam as a result.
"After the deal went through, P/S started to lose its foothold in the domestic market as its quality, design, and price was no longer suitable to local demand. Eventually, Unilever took over the company and P/S became a wholly foreign-owned company."
However, Le Thi Chau Giang, former president of the ASEAN Cosmetic Scientific Body disagreed telling Saigon Giai Phong that Vietnamese cosmetic brands have many advantages over international brands.
Those highlighted were the fact that the domestic brand owners understand the market and the consumers’ needs, and more specifically the growth potential from the younger and increasingly affluent population.
Likewise, the former president also pointed to opportunities for ingredients suppliers, underlining the fact that country’s tropical climate is perfect for growing crops to produce extracts of peppermint, cajuput and citronella.