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Vietnam Market Watch: South East Asia Challenged While Vietnam’s economy is set to pick up, gaining growth in beauty remains complicated by Alex Wynne fter two years of slower growth, Vietnam’s Aeconomy is expected to pick up this year and again in 2016 on the back of economic reforms and increased domestic demand. Yet, the country’s beauty market, especially in prestige, has its share of challenges. Beauty and personal-care sales grew 14.3% to $1.12bn last year, according to Euromonitor International. Skincare accounts for 70% of the market, according to data from Kantar WorldPanel, while make-up represents 5.1%. Consumer spending on beauty is also increasing, according to Kantar, with average spend per buyer growing 2.3% in the second quarter to 574,000 VND ($23), compared with the prior- credit: istock year period. complex, and can change overnight, Tran says. but expanding beyond this is complex without Mixed results for prestige For example, in June this year, he explains that local partners. In the prestige segment, however, industry the law on shelf-life for cosmetics was changed, As prestige business has slowed again in players report varying results in recent months. stipulating that only products with a shelf-life of recent years, some brands are considering “Most retailers are reporting very low growth in more than 12 months could be sold. exiting the country. La Mer, for example, their cosmetics department, ranging from mostly Another law, banning parabens in cosmetics, reportedly exited Vietnam in June this year, and low single digit to [a high of] 10% for year-to- was announced in late July, with brands and several luxury fashion brands are also reported to date July 2015,” says Luxasia Vietnam country retailers given only 15 days’ notice to remove have left the country. But at the same time new manager Caron Chan. Among the brands products containing parabens from store shelves. brands are also entering the market. Phuong the frm represents, Guerlain has seen a sales Such rapid changes make doing business in Phat Co, which represents brands from P&G, increase of 33% and Dior 15% in the same Vietnam both expensive and chaotic, despite the period, Chan says. situation having eased slightly since the country’s Others claim that business has dropped accession to the WTO in 2007. more dramatically. Distributor Phuong Phat Co During the country’s boom years, from 2000 Vietnam beauty and personal-care sales* by managing director Tran Quoc Chung cites a to 2012, many brands entered the market but category 2014 sales decline of 25% in prestige beauty sales failed due to economic factors like fuctuating Category Sales $m % change in 2014 and again the frst half of 2015. While exchange rates and high rents, as well as 2014/2013 skincare—which represents an estimated 55% fckle consumer behavior. When Shiseido Skincare 232.5 +17.5 of the prestige market— and fragrance have established Shiseido Cosmetics Vietnam in 2010 both declined signifcantly, make-up has seen by taking over the business from its former Fragrance 74.8 +13.3 less of a drop, at 10%, he says. Although very distributor, it reportedly suffered because of the Color cosmetics 75.1 +15.9 few prestige make-up players are currently country’s complex legal framework on foreign Beauty & 1 ,124 +14.3 present in Vietnam. ownership—foreign enterprises are allowed personal care The regulatory situation in the country remains to operate a single retail outlet, for example, Source: Euromonitor International *Retail sales 90 November-December 2015 - N°24 - BW Confidential