Consumption always ramps up several notches prior to Tet and is a great time of all food producers and retailers. Many fast-moving consumer goods (FMCG), especially savory snacks, enjoy a significant sales peak because most young Vietnamese and especially children think of Tet as a time for parties, and snacks are always on the table.
The Sweet and Savory Snacks market report on Vietnam’s snack food segment released recently by leading global market researcher Euromonitor International revealed that total sector revenue was estimated at around $535 million in 2017, up from $479.5 million in 2016 and $432.6 million in 2015. Average per capita consumption stood at 0.8 kg, or $5.66 in spending. Savory snacks are projected to have seen a retail compound annual growth rate (CAGR) of around 5 per cent last year and this is forecast by global statistics portal Statista to be up around 6.3 per cent between 2018 and 2021.
A recent report from Japanese consultants Corporate Directions (CDI) noted that Vietnam has been among the most-developed snack markets in ASEAN, joining Thailand, Indonesia, and Malaysia in the $3.5-billion market. The snack market has also become increasingly attractive to both local and international investors in Vietnam thanks to changes in spending among the younger generation, rising incomes, changing lifestyles, and higher purchasing power, which all led to snacks becoming part of young people’s everyday life.
The snack product format, according to Statista, can be broadly classified into three main categories based on processed materials: potato chips, nuts and seeds, and snacks processed other ingredients like fruit or starch. Revenue structure by product in Vietnam is clearly divided, as snacks made from flour account for more than 58 per cent while those from potatoes are only about 6 per cent.
Children and young people will continue to be the target customers for savory snack makers. In addition, “the rising health and wellness trend, the trend of building trust, and the rising influence of Western culture, as well as increasing premiumization, are likely to continue to impact consumer demand for savory snacks and influence products and packaging,” said Mr. Nguyen Huy Hoang, Commercial Director at Kantar WorldPanel. In contrast to the development of modern snacks, traditional snacks are expected to continue to gradually lose share. Expected declines in import taxes may also increase the number of international brands, intensifying the competition.
Japanese snack maker Koike-ya announced in early November it would officially enter Vietnam by setting up a production base in southern Dong Nai province and introducing its Karamucho spicy snacks in three product lines. “This is the company’s first overseas factory, although the brand is already present in many developed markets,” said Mr. Inoue Atsushi, Deputy CEO of Koike-ya Vietnam. “With investment capital of around $8.7 million and output at 4,200 product tons per year, our production will mainly serve the local market and be targeted at young customers aged from 15 to 29.”
Snack market size, by country
Snack consumption per capita
Just a month or so after being launched, some 30,000 packs of Karamucho spicy snacks were sold in Ho Chi Minh City. The company’s target is to record nearly $18.5 million in sales in Vietnam in the first two years. “With Japanese standards and advanced technology producing snacks with high levels of hygiene, we have seen solid sales over the last few months and hope our products find a niche,” Mr. Atsushi told VET. “Along with a strategy of product diversification and expanded distribution channels we will not only grow in Ho Chi Minh City but also cover other southern and Mekong Delta provinces in both traditional and modern channels.”
The local snack market is now dominated by a raft of foreign brands. The launch of Karamucho comes as other foreign brands have been in Vietnam long term already, such as Oishi from Liwayway, Poca from PepsiCo, and others.
In the annual Brand Footprint report released by market researcher Kantar Worldpanel, Oishi was the only snack brand to appear among the Top 10 most chosen FMCG food products in Vietnam in the four years since 2014. The study used Consumer Reach Points (CRPs) in measuring the strength of brands, in which it measured how many households in Vietnam were buying the brand and how often they were doing so.
In Vietnam for more than 20 years, Oishi, made by the Philippines’ Liwayway, holds the highest market share in the local snack market, closely followed by PepsiCo’s Poca and Orion’s O’star products.
Orion Food Vina, according to Euromonitor, also held the leading position in savory snacks with an 18 per cent share of sales value in 2016 and 2017, with popular brands including Ostar, Toonies, and Khoai Tayo! targeting children and young consumers. The company’s revenue, at around $175 million in 2016 and with growth at about 24 per cent, saw a major contribution coming from its snack products. Good flavors and product quality, clear origin, reasonable prices, strong brand presence, and wide distribution network are some of the company’s competitive advantages. Furthermore, colorful packaging and active promotional activities, such as small gifts, have also supported its success.
Its large and young population and growing FMCG market were the main reasons for Koike-ya deciding to take on Vietnam. Consumer demand for savory snacks, however, continues to be affected by rising consumer awareness about health and wellness. Products made from brown rice, green tea, or nuts are becoming popular among Vietnamese, and industry players are paying more attention to building trust among consumers, especially via packaging.
The words “natural” and “vitamins” are now more readily found on the packaging of savory snacks than in the past. For example, on the front of the packaging of AFC - a popular brand of biscuits from Mondelez Kinh Do Vietnam - “x2 Calcium” appears in an eye-catching design. Moreover, “no” is now also quite common, as in “no preservatives” and “no cholesterol”.
A study by Kantar WorldPanel in Vietnam in 2017 found there were nearly two new snack products released every day on average but the consumer basket has not changed a great deal over the last three years. On average, each household in urban areas only buys about 12 types of snacks a year while those in rural areas buy about nine types. Though the snack industry reaches more than 90 per cent of consumers, purchases actually remain low, at less than once a month on average. The snack market accounts for just a small share of total FMCG consumption in Vietnam compared to developed countries like South Korea and China, and are not considered essential foods so are not prioritized in local consumer spending.
Mr. Atsushi from Koike-ya acknowledged that the local snack market is becoming tighter, with the entry of many rivals with long histories pushing up the competition. “Originally, Vietnamese people would purchase snacks for their children,” he said. “Nowadays, children themselves and also students, young people, and even office workers buy snacks as comfort food.”