Caution Reigns Among Vietnam’s Business Leaders

Caution Reigns Among Vietnam’s Business Leaders

Darin Williams, Managing Director, Nielsen Vietnam

While most countries would covet GDP growth of 5.9 percent, that figure represents a fairly significant slow-down for Vietnam, where high inflation and sagging consumer confidence were the key themes of 2011. Despite that backdrop, most of the country’s business leaders said they met, or exceeded, goals for the year, according to the latest round of Nielsen’s Business Barometer, conducted between November and December 2011. Nearly two-thirds (62%) said their results came in on- or above-target.

Nevertheless, business leaders believe conditions in Vietnam have deteriorated in the past year. While inflation continues to be a burning issue, the uncertain global economic landscape has entered the list of top five concerns among these executives: the slow recovery in the U.S. combined with the debt crisis in Europe are now affecting the outlook of Vietnam’s business leaders for the first time. Meanwhile, efforts to spur greater domestic consumption are hampered by inflation (and manufacturers’ ability to pass on price increases), the devaluation of the Dong and other competitive pressures in the market.


Looking ahead into the Year of the Dragon

Overall, business leaders remain optimistic, but in the next 6 -12 months, more than 30 percent believe their situation will deteriorate, while 36 percent expect conditions to remain the same.  That said, most believe that double-digit growth is achievable, although a higher percentage than previously seen said single digit growth was in the cards for the year.

How do they expect to meet their goals, in an environment where consumers are expected to cut-back on non-essential goods, purchase more on promotion and trade down to cheaper products?


First, raising direct prices is not one of them; business leaders recognize that consumers are becoming more discriminate and have an allotment of choices; therefore, price increases must be carefully planned.  A shift to smaller pack sizes, as has been done with success in other markets, may gain in popularity. Next, businesses will continue to spend on advertising, including on non-traditional media. More than half of business leaders surveyed said they would look at improving productivity as a solution to inflation. Rural areas also continue to be a key area of focus for many manufacturers. One area of promise is the fact that some Vietnamese consumers are actually trading up to premium products in some categories such as personal care. In tough times, it seems they want to indulge themselves in small ways if it makes them look good or feel good.

Despite a less positive outlook for 2012, there remains real opportunity for growth in Vietnam – it may just take more work to achieve it. The retail market is still expected to post significant growth this year, which explains why several foreign companies are moving ahead with significant investments in the sector – but they are no doubt doing so a little more cautiously than they may have in the past. If time has proven anything, it is that the Vietnamese consumer is resilient and ever-evolving, in spite of whatever challenges may be thrown in the way.