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Rural areas new source of FMCG growth

Released at: 20:00, 23/02/2017

Rural areas new source of FMCG growth

More than half of all FMCG sales in Q4 2016 were in rural areas, latest Nielsen report reveals.

by Quynh Nguyen

Vietnam’s rural areas have been rising as a new source of growth for many fast-moving consumer goods (FMCG) manufacturers, with growth of 7 per cent in the last quarter of 2016, 0.3 per cent higher than in urban areas. 

The latest report from market researchers Nielsen on Vietnam’s FMCG growth in 2016 showed that rural areas bounced back strongly in the final quarter of 2016, coming in at 7 per cent and contributing 51 per cent to total FMCG sales nationwide.

FMCG growth in urban areas was 6.7 per cent, with growth in both urban and rural areas primarily driven by volume increase.

“The build-up and positive sentiment towards the Tet holiday was one of the key drivers of FMCG growth,” said Mr. Nguyen Anh Dung, Director of Retail Measurement Services at Nielsen. “This momentum was enhanced by a willingness among consumers to spend, together with an improvement in sentiment among retailers.”

Growth in the year as a whole slowed down due to unfavorable weather conditions in the northern, central, and southern regions. Rural areas are expected to bounce back, as seen in the fourth quarter.

“Rural areas are still the largest consumer base and these consumers have increasing incomes that provide higher spending power,” Mr. Dung said. “They also have better access to the internet and smartphones in seeking information on products and quality.”

Given its importance, manufacturers should capture the opportunities in rural areas by equipping themselves with up-to-date knowledge on emerging consumer demand and market trends, he emphasized.

FMCG growth in the six key cities in Vietnam (Hanoi, Ho Chi Minh City, Hai Phong, Can Tho, Nha Trang, and Da Nang) saw a strong improvement in the last quarter of 2016, with 7.3 per cent growth versus a year ago; the highest for the last three years and mainly driven by an impressive increase of 6 per cent in volume growth.

The recovery was reflected in positive growth in six out of seven super categories, with Baby Care being the exception. FMCG growth saw major momentum in the Food category, with 11.6 per cent growth, and the Personal Care category, with 9.6 per cent growth.

Both Home Care and Cigarettes saw 8.1 per cent growth, while the Milk-Based category recorded 3.2 per cent growth. Beverages, including beer, continued to dominate FMCG sales in the quarter, accounting for 40 per cent of turnover and growing 7.3 per cent.

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