Opinion

Doing business in Vietnam: Tips for New Zealanders


Opportunities abound for New Zealand businesses keen to enter the Vietnam market. But in a land where 80 per cent of sales still go through “ma and pa” stores, there’s plenty of homework for Kiwis to do, writes Brendon Urlich (Asia and Emerging Markets – Consumer Brands, ZURU Toy Company).

OPINION: When you think of Southeast Asia, you tend to think of Malaysia (population: 31 million) or Thailand (69 million). But Vietnam, with a population size of more than 94 million, holds promise for New Zealand businesses as well.

Vietnam is like two countries culturally. Ho Chi Minh City is the commercial centre; the easiest place to do business is in the south. Hanoi is the government centre and has a completely different culture.

New Zealanders in Vietnam

Before I worked in Vietnam, I was L’Oreal’s Country Manager for New Zealand. I was hand-picked for Vietnam by the Global CEO, I think because Kiwis travel well and Asia is home for us. Vietnam is an emerging market for cosmetics; and I had worked in developing markets before. They can be quite unrelenting. Kiwis are seen as quite adaptable, able to navigate their way in tough markets, quite flexible culturally.

The New Zealand business community in Ho Chi Minh City is a small group, but it’s quite powerful and punches well above its weight. We’ve got really successful Kiwis who have been there for some time – for instance, the head of Visa, boss of AIA, and chief of KPMG. The best foreign law firm in Ho Chi Minh City is owned and run by Mark Fraser from Manurewa. The Kiwis there are the envy of the Australians. We have a wine and food festival every year – it’s the social event of the year in Ho Chi Minh City. We all just muck in.

“If you want to sell shampoo, 45 percent of it is sold in sachets at wet markets hanging from the ceiling. Customers will come in to buy just a single sachet to wash their hair that day.

Now I’m working with ZURU, the toy company set up by Mat, Nick and Anna Mowbray. We’ve been launching a new nappy brand Rascal and Friends in Foodstuffs – it’s been crazy. Nappies are just the first step. We’re going to disrupt a traditional “stodgy category” with a really cool, modern brand, and social and digital marketing.

We’re looking globally and I’m going into Vietnam with that right now. I’m also working on Singapore and Malaysia, and talking to Thailand and Indonesia. Nick’s just been to the United States, Canada, and just arrived in London, so we are getting lots of traction. 

Vietnam’s potential

The big potential is to educate Vietnamese about New Zealand food; about the New Zealand brand.

They’re becoming more sensitive to food security and they always look towards the US or to France for safe food. They look to Japan and South Korea for technological advances. The big potential is to get them to understand that New Zealand is a boutique producer and it’s a high-quality producer.

“The most successful go-to market strategies I have seen focus on the south of Vietnam to build critical mass.”

Access to sustainable nutrition was still a massive issue even as recently as the 80s and 90s. So parents are very invested in education and food for their children. The opportunity in education is massive. Vietnamese students will contribute a billion dollars to the US economy shortly.

The biggest food nutrition brands are not from New Zealand. They’re from the US, because Vietnamese trust the US. This is my big gripe with our industry at home – we’re supplying milk powder up there but it’s not under a New Zealand brand. The Vietnamese have no idea it’s from New Zealand. We need to look at the value-added side of things.

The challenges

Vietnam is still a largely rural country. Yes, there are around 94 million people but the target market might only be 10 million. So you need to have a country strategy, but most likely a city strategy.

The retail landscape isn’t modern and sophisticated. Even the wealthiest Vietnamese still shop in wet markets – they are not going to a mall or a supermarket to get their food as we do. What we know as contemporary retail in New Zealand is only about 20 percent of the market. Eighty percent of sales still go through traditional markets, or ‘ma and pa’ stores.

It’s really hard to get impact on the shelf due to clutter and visual noise. If you want to sell a refrigerated product, your market is limited. If you are selling perishable goods, it’s a very limited market. But it’s going to grow.

Another example: If you want to sell shampoo, 45 percent of it is sold in sachets at wet markets hanging from the ceiling. Customers will come in to buy just a single sachet to wash their hair that day. If you are Trilogy, and you want to come into Vietnam, it isn’t going to be easy.

The spend per customer is still quite low. If you look at the GDP per capita, it’s more than 20 years behind Malaysia (in 2016, Malaysia’s GDP per capita was US$9503, compared with US$2816 in Vietnam).

Tips for Kiwis doing business in Vietnam

A shoe store in Vietnam

It’s really hard to get impact on the shelf due to clutter and visual noise, says Brendon Urlich.

  • Do your homework. Visit Vietnam. You can’t just sell a product the same way in Vietnam. The same format or pack sizes may not work. You have to think how are you going to sell your product in Vietnam today  or tomorrow? Are you better off seeding your product or do you go in all guns blazing? A lot of people have burnt a lot of money by not doing due diligence or making smart decisions.
  • Pick your partner carefully. Do due diligence and find the right people.
  • Talent, talent, talent: There’s a real talent shortage and good talent costs a lot of money. It’s hard to hold on to great staff – the rotation is huge.
  • Don’t compromise on your business ethics – once you fall, there’s no going back.
  • Expect the unexpected – it is a Communist country. There’s bureaucracy, bureaucracy and even more bureaucracy.
  • Find the Kiwi network and get good tips on the ground. Use NZTE to get connected.
  • It is OK to phase your approach. The most successful go-to market strategies I have seen focus on the south of Vietnam to build critical mass. Go to the north only when you are ready, have cash flow and can handle the unexpected.

Brendon Urlich has spent much of his working life in Southeast Asia, including some three years as CEO and Managing Director for French health and beauty giant L’Oreal in Vietnam. Views expressed are personal to the author.

– Asia Media Centre