Retailing firms target rural markets

Thursday, Jan 21, 2016 08:14

Drinks comprised 38 per cent of the total sale volume of FMCG and reached the highest increase of 6.7 per cent. — Photo

HCM CITY (Biz Hub) — Many domestic producers have moved their markets to rural areas as local fast-moving consumer goods (FMCG) firms are facing severe competition with imported products in urban areas.

According to the Ministry of Industry and Trade's Light Industry Department, drinks, food, milk and tobacco had stable growth during 2014 and 2015.

Drinks comprised 38 per cent of the total sale volume of FMCG and reached the highest increase of 6.7 per cent.

Beer, tonic and refreshing drinks had the highest growth. Milk and milk-related products increased by 12 per cent in urban areas and 20 per cent in rural areas.

However, other products like detergent and processed food faced difficulties.

According to a recent survey, FMCGs growth rate in the six biggest cities, including Ha Noi, HCM City, Hai Phong, Can Tho, Nha Trang and Da Nang, has fallen.

The rural market is emerging as a new growth market. At least 68 per cent of the country's population is in rural areas. But only 54 per cent of turnover for FMCG products comes from rural areas, which indicates room for growth.

The ministry said during the 2014-2015 period FMCG showed an increase of 2.7 per cent in quantity in rural areas, and growth increase in 1.6 per cent in urban areas reflected by price, not quantity.

More support needed

"Local producers are facing severe competition from imported, smuggled and fake products, and they have limited their market expansion," an official of the Ministry's department was quoted as saying in the Thoi bao Kinh doanh (Business Times) newspaper.

"The situation has also caused a loss of belief in domestic products," he added.

Local manufacturers have many weak points: limited manufacturing capability, weak finance, poor management, imported raw materials, outdated technology, low quality products and unhealthy competition among domestic producers.

To improve the situation, State management offices should increase investment in trade infrastructure, especially for distribution systems, as well as provide expenditures to support high-quality producers's promotion campaigns.

Most FMCG companies are looking for support policies in advertisement, brand name registration, industrial copyright protection, market information and science and technology application.

However, enterprises have been told that they must improve their production capability, reduce dependence on imported materials and improve the quality of their products. — VNS

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