FMCG names attempt to circumvent virus hurdles

11:00 | 08/04/2020
The coronavirus public health emergency is presenting both opportunities and challenges for manufacturers to handle a pick-up in the demand for fast-moving consumer goods.
1486p12 fmcg names attempt to circumvent virus hurdles
Essential items like instant noodles have not seen a dip Photo: Le Toan

Tran Thi My Van, chief of staff at Acecook Vietnam’s General Director Office, told VIR that the company posted growing sales and revenue due to the increased demand amidst the COVID-19 pandemic. Specifically, Acecook’s March revenues rose by 29 per cent on-year and 10 per cent against February.

The Japanese instant noodle maker has prepared a plan to deal with the crisis in terms of materials, human resources, product quality, and distribution. This plan has helped the company to maintain operations and better serve consumers during the crisis.

“Acecook has ramped up manufacturing with production capacity to be up by 30 per cent during the pandemic. At present, the company produces around 12-13 million packages per day, equalling 400,000-450,000 boxes of instant noodles a day. Therefore, it is expected to meet the market’s demand if consumers are not panic-buying and stocking up on supplies,” Van added.

Vietnamese meat processing company Vissan is also experiencing some gains and losses from the situation. Nguyen Ngoc An, the company’s general director, said that border closures around the world have slowed down the import of frozen meat used for Vissan’s meat processing operations. Meanwhile, the purchasing power of its fresh meat has declined by 20 per cent due to shrinking demand in schools, industrial kitchens, and out-of-home consumption. Therefore, Vissan has stepped up its frozen food production by 20 per cent to compensate for the slump in fresh meat sales. The company also prepared sufficient raw material reserves like meat, additives, and packaging to maintain production till the end of 2020.

He noted that food producers are not hit as hard by the pandemic as they are specialised in manufacturing essential products. As processed food remains in high demand, Vissan has focused all of its resources on this area and, although the COVID-19 crisis continues to disrupt businesses, the company is expected to achieve stable growth, revenue, and profit targets this year.

Similarly, Vinamilk, Vietnam’s largest dairy company, may not be affected by the health emergency. According to a report by Ho Chi Minh Securities Corporation (HSC), Vinamilk has a positive revenue outlook for 2020 thanks to the rising demand for its dairy products.

Yoghurt and formula powdered milk for seniors and children are considered healthy and good for the immune system. The demand for these dairy products have spiked in the past two months since the coronavirus outbreak, a trend that is expected to continue into the future.

Ralf Matthaes, managing director of market research firm Infocus Mekong Research, told VIR that almost all essentials such as water, packaged goods, instant noodles, frozen foods, and personal and home care products have seen a large spike in purchases, as consumers stock up for the immediate to mid-term impacts.

Negatively, soft drinks, fresh meat, seafood, and vegetables have seen a decline as they are seen as potentially either unfavourable to keep long term, or as non-essential items. Beer, however, may see an upswing as consumers who are at home or out of work look for ways to while the days away.

“Historically in times of recession, the consumption of tobacco and alcohol see a rise in consumption. Though COVID-19 is not a recession, it is likely to lead to one as it has the same impact, as consumers have more time on their hands and hence look for ways to bide their time,” Matthaes said.

As the pandemic rages around the world, consumer goods manufacturers are also feeling the pinch of supply chain disruptions. The continuation of the supply chain is critical to all manufactures, fast-moving consumer goods (FMCG) and otherwise. Maintaining ample supplies of ingredients for such products to be manufactured is critical, as is shipping finished products to the shelves of stores.

“With nationwide social distancing, the shipping of goods will be slowed and in some instances stopped altogether. So, supply will be the key challenge. We have already seen a rise in inflation for some FMCG categories brought on by dwindling supply, and also the increase in cost of getting goods to market. Thus, keeping product prices and profit margins in place will be another challenge,” Matthaes added.

According to the expert, after SARS was defeated in Hong Kong in 2003, the single biggest impact was the sanitation and cleanliness of its city and citizens. An immediate impact of COVID-19 will be Vietnam’s overall heightened awareness of cleanliness and sanitation, which will benefit any FMCG company making related products.

“In the past three of five years a major trend was consumers eating, dining, and entertaining more and more out of home, versus in home. This trend shall be reversed, as social distancing will encourage more and more consumers to stay at home and hence consume at home,” Matthaes said. “This could create opportunities for larger stock-keeping unit formats, new packaging innovations, and more convenient storage concepts from FMCG manufacturers in the near future.”

According to research by market research firm Kantar Worldpanel Vietnam, the pandemic has a profound impact on FMCG purchases with movements within each sector. Stock-up behaviours have been witnessed among Vietnamese consumers in both urban and rural areas, amid the rising fear and anxiety. As a result, growth has been posted across sectors except for beverages.

Specifically, Vietnamese consumers in the four key urban cities show a tendency to stock up on three groups of categories. Firstly, they spend more on categories that offer personal and family hygiene in order to remain clean and kill germs. As a result, handwash, bar soap, and household cleaning products are all seeing double- and even triple-digit rises.

Convenience foods and cooking aids also surge during the outbreak, probably due to the fear and anxiety amid the increasing number of confirmed cases as well as the extended homestay of children away from school. Frozen food, canned food, instant noodle, and cooking oil are a few categories enjoying impressive growth.

The final group of categories that consumers seek for during this time are immune-boosting and nutritional products, especially for seniors and children who are at a higher risk of infection. Therefore, specialty milk powder and drinking yoghurt are more favoured to stay healthy.

Moving forward, Nguyen Anh Dzung, head of Retail Measurement Services at Nielsen Vietnam, said that although there are obvious impacts of COVID-19 to consumer life, people can expect a quick recovery given the high level of consumer confidence in Vietnam.

“Consumption can bounce back relatively quickly after the outbreak,” Dzung said. “So retailers and manufacturers need to prepare enough supply for this time.”

By Thanh Van

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