nhiên

ORGANIC SKIN CARE PRODUCTS

Part 3 | Situation Analysis | PhVy

Industry Sector Description
The beauty and personal care industry has always been observed as highly complex and
competitive to retailers throughout the world, and the Vietnamese market is no exception.
Its characteristics are formed due to the diverse expectations and high demands from the
consumers, fierce competition from the opponents, and a multifaceted combination of
other factors including both direct and indirect ones.

Although no exact classification can be given for the beauty and personal care market, it
can be grouped into the following categories based on their functions:

− Baby care

− Bath and shower

− Color cosmetics

− Deodorants

− Depilatories

− Fragrances

− Hair care

− Men’s grooming

− Oral care

− Skin care (including body care, facial care, and hand care)

− Sun care.

In this marketing plan paper, nhiên has decided to establish the business as an online
skincare retailer. Specifically, the core product line for nhiên to launch is organic skincare
products.

MARKET GROWTH
It has been almost 10 years since the negative impact from the 2008 regression wore off.
The consumer confidence in spending has been quickly recovered from the time, which in
turn boosted the consumption of beauty and personal care market. Particularly, 2016 has
observed a rapid adoption of sophisticated beauty products, especially skin care. In 2016,
the skin care market witnessed a strong revenue growth of 15.3% and amounted to almost
US$450m (Statista, May 2017).

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 Revenue in Skin Care market (2010-2021)
900 35

800
30
700
25
600

500 20

400 15

300
10
200
5
100

0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenue (million US$) Revenue Growth (%)

Source: Statista, May 2017

Over the forecast period (CAGR 2016-2021), skin care market is expected to grow annually
by 10% at a constant value of 2016 due to the increasing consciousness of consumers in the
need of taking care of their skin (Euromonitor, 2017). However, this figure shows a slight
slowdown comparing to the review period performance. What seems to have been holding
this market growth back is that the skin care segment has been gradually reaching its
maturity stage. The majority of the urban consumers are already aware of their skin
conditions and using skin care products daily. Moreover, there exists a small shift of
consumption from mass to premium brands in the urban areas. This change makes it
challenging for the manufacturers to expand their consumer base in the rural areas where
most of the personal incomes are low and the living standards are moderately poor.
Another reason behind this slowdown is the term “grey market”. Unauthorized parallel
imports remain a threat to beauty and personal care growth in Vietnam and the skin care
segment makes no difference.

MARKET TRENDS
Growing influence of multi-step skin care regimes
Since 2013, Vietnamese consumers, especially those living in big cities, have been
increasingly updating their knowledge towards the need to take care of their skin thanks
to the booming of information from both mass and interactive media. Key players have
also been educating consumers repeatedly about having skincare products in their daily
routines. As a result, urban consumers are more interested in skincare items nowadays,

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posting a rising demand for more diverse product lines targeting at different needs. They
tend to shift their simple practice of cleansing their face with just facial foam to multi-step
skin care regimes involving oil cleansers, facial masks, whitening cream, moisturizers,
toners, essences, serums… Some well-known trends of multi-step skin care routines that
can be named are “double-cleansing” or “Korean 10-step skin care regimens".

Slight shift from mass to premium brands in big cities

Mass skin care had reached the larger share in the skin care market with 57% of the value
share in 2013 (Euromonitor, 2014). However, premium skin care has witnessed a robust
development regarding product availability and consumer awareness. Attributable to the
higher living standards and increasing disposable incomes, Vietnamese consumers tend to
shift their interests from mass skin care towards more premium ones, as they believe
premium brands are better and more effective for their skin. In 2016, this trend continued
to expand its foothold over lower-tiered products in big cities such as Ho Chi Minh and
Hanoi.

Increasing demand for organic and natural products

At the time, there exists a huge attention towards health and wellness. Most of the
Vietnamese consumers had already experienced negative impacts from low-quality
products in the past. As a result, product safety becomes one of their top concerns. Along
with the higher purchasing power and better awareness towards their beauty needs,
consumers are putting their trusts in products that can ensure their health and wellness.
Organic and natural product category is perfectly aligned with those demands. It marks
the strong presence in the consumers’ minds by using extracts from natural and herbal
ingredients such as green tea, olives, sea salt, aloe... Therefore, it becomes one of the
product trends in Vietnam despite its higher price.

SWOT Analysis
STRENGTHS
Although nhiên is only a new-arrival in the organic skin care market, the brand is
confident enough to foresee itself growing its business in the segment:

− Attractive and contemporary packaging. Middle and affluent class has a strong
preference for well-designed products. It would give a feeling of being treasured
and respected, and moreover, a trendy and premium vibe.

− Founder’s expertise in cosmetics field. This is nhiên’s competitive advantage where

not so many competitors can have as Ms. Anh Tuyet, the founder and also the
CEO, had a very impressive background in the cosmetics market some years

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 before. Therefore, she has a very deep understanding in knowing and serving the
consumers’ beauty needs and demands.

WEAKNESSES
Beside all of the above strengths, nhiên also has some foreseen drawbacks:

− Limited financial capacity. nhiên’s financial capacity is fairly limited since the
initial investment was only 100,000,000 VND.

− No physical store. Due to the limited financial capacity, a physical store will not be
included in the first-year plan. This is one of nhiên’s major weaknesses since there
is a high chance that customers would not trust nhiên fully considering the brand
only sells online.

− Limited product ranges. This is also a weakness of nhiên as nhiên cannot diversify
its product ranges widely in the first year. Comparing to other players competing
in the skin care market, consumers may find themselves lack of choices for their
complex demands when shopping at nhiên.

OPPORTUNITIES
As being one of the newcomers in the organic skin care market of Vietnam, nhiên may
find the following opportunities as external leverages:

− Diverse material sources. The greatest opportunity that nhiên can take from
Vietnamese tropical climate is the profuse ingredients. Oil extracts, peppermint,
lemongrass… are some of the materials favored by Vietnamese consumers.

− “Health and wellness” is a Vietnamese key concern. According to Nielsen’s research

data on February 2017, health and wellness is reported to be among the top 2
Vietnamese consumers’ key concern, right after job security. This points out a
major advantage for nhiên as being a brand providing healthy treatment for
women’s sensitive skin.

− Fast growing middle class in Vietnam. According to Boston Consulting Group

report in 2013, Vietnam is having a rapid increase of the middle and affluent class
(MAC). MAC consumers are projected to be not only growing in numbers but also
spreading out to other provinces and cities beside Ho Chi Minh City and Hanoi.

THREATS
In contrast to the listed opportunities above, nhiên may also face some of the following
threats existing in the Vietnamese market:

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 − Low barrier of entry. Due to heat up from foreign trade agreements such as Trans-
Pacific Partnerships, lower import tariffs are already come into effect. This would
ease the barriers for international players like Japan, Thailand, and Korea to enter
into Vietnam.

− International brands remain key players. The “Skin Care in Vietnam” report in 2014
from Euromonitor International has shown that the Vietnamese skin care market
has been suffering through an intensive competition where international brands
are dominating. Some well-known international brands that can be listed include
Pond’s, Shiseido, Olay…

− Unauthorized parallel imports limit the growth in beauty and personal care segment.
As mentioned above, the “grey market” has been continuing to slow down the
growth of beauty and personal care market, especially of the cosmetics and skin
care segments.

References
Boston Consulting Group (BCG). (2013, December 17). Vietnam’s middle class set to double
by 2020: BCG. Retrieved from Amcham Vietnam: HoChiMinh City Chapter:
http://www.amchamvietnam.com/vietnams-middle-class-set-to-double-by-2020-
bcg/

Euromonitor International. (2010). Beauty and Personal Care - Vietnam.

Euromonitor International. (2014). Skin Care in Vietnam.

Euromonitor International. (2017, May). Skin Care in Vietnam. Retrieved from

Euromonitor International: http://www.euromonitor.com/skin-care-in-
vietnam/report

Statista: The Statistics Portal. (2017, May). Retrieved from

https://www.statista.com/outlook/70020000/127/skin-care/vietnam#

The Nielsen Company. (2017, February 20). News Release. Retrieved from
http://www.nielsen.com/content/dam/nielsenglobal/vn/docs/PR_EN/PR_Vietnam
%20CCI%20Q4%2716_EN.pdf

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