Visitors at the Mekong Beauty Show held in HCM City from June 15 to 17. (Photo: VNA)
 
HCM City (VNA) - With double-digit growth annually, Vietnam has a promising cosmetics industry for foreign firms seeking to expand overseas, experts have said.

Vietnam’s cosmetics industry, where imports make up 90 percent of sales, saw revenues estimated at 1.2 billion USD last year, said Nguyen Van Minh, Vice Chairman of the Vietnam Essential Oils, Aromatherapy and Cosmetics Association.

Fourteen domestic cosmetics firms are confined to the low-end segment and mainly export to neighbouring Asian markets, Minh said.

Around 90 percent of cosmetics firms are distribution agents for foreign cosmetic brands, he said.

Most foreign cosmetic brands operate out of modern malls across the country.

The Sai Gon Cosmetic Corporation, one of the most popular domestic brands, sold around 500,000 perfume bottles of 50ml at traditional markets and rural areas, he said.

More than 40 percent of the company’s revenues comes from exports to Cambodia, Laos and Thailand.

Its perfumes and beauty products are yet to find their way into malls in Vietnam.

Lan Hao Cosmetics Co Ltd has been achieving annual growth of 30 percent in the domestic market. Exports still account for a major portion of its revenues.

The cosmetics sector is made up primarily of small- and medium-sized firms that match large corporations in terms of finance and technology.

In the high-end segment, foreign brands account for a lion’s share of the market as domestic firms remain weak also in terms of innovation, packaging, marketing and promotion.

The demand for beauty products in Vietnam is still modest, with per capita spending being 6 USD a year on cosmetics compared with 20 USD in Thailand, Minh said, citing figures from market research firm Nielsen.

But with increasing disposable incomes, rising living standards and a young population, demand is rising, he said.

Vietnam’s beauty industry is even more attractive because the country has signed a series of free trade agreements under which import duties on beauty care goods would fall to 0-5 percent, he said.

Vietnam is an emerging opportunity for the beauty industry driven by development of modern trade, rising demand for premium products and brands, and shoppers looking for health and quality and ready to pay for it, Roberto Butragueno head of retailer vertical at Nielsen Vietnam, said.

The consistent emerging trend of modern trade continues with double digit growth in 2017, he said.

Millennials who make up 30 percent of Vietnam’s population are a demanding generation and include 1.6 times more college and university graduates than average, he said.

The country’s middle class is forecast to reach 33 million by 2020, he said.

As the new middle-class urbanises, it seeks to experience premium brands.

Vietnam imported cosmetics worth 1.1 billion USD last year, more than double the 500 million USD in 2011, according to reports from Trade Map of the International Trade Centre.

Many cosmetics brands from the Republic of Korea and Japan are seeking a foothold and expansion opportunities in Vietnam.

“Over the years, the Vietnamese market trend has been expanding to consumption goods, especially cosmetics-related industries,” Dominic OH, director of KINTEX, a leading K-beauty show organiser from the Republic of Korea, said.

With GDP growth of more than 6 percent for many years and people aged less than 35 accounting for 60 percent of its population, Vietnam is ranked number one in the region by Korean cosmetics companies, he said.

The four emerging Mekong countries - Vietnam, Cambodia, Laos, and Myanmar - are expected to have a combined GDP of 441 billion USD by 2020, he said.

“There are more than 2,000 small and medium Korean companies who are competitive enough to expand to overseas markets.”

Nearly 300 Korean brands were showcased at the Mekong Beauty Show from June 15 to 17 where they also looked for importers and distributors, he said.

Last year 10 Japanese cosmetic brands came to Vietnam looking for agents and official partners. They included Kose and Menard, which are well known among local consumers.-VNA