Distribution network determines success in FMCG sector

  • 05:37 - 2018/06/06

Besides quality of products, distribution networks determine who will win the competition in the FMCG (fast-moving consumer goods) market.

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According to Nielsen, a market analysis firm, in 2017 the FMCG revenue in urban areas increased by 5 percent. However, in an emerging market like Vietnam, FMCG manufacturers will meet difficulties if they don’t spend money to brand and develop distribution networks.

Branding and expanding distribution networks is the strategy followed by Digiworld, a digital product distributor, which bought into Lion Corporation and officially joined the FMCG market. According to Doan Hong Viet, chair and CEO of DGW, the biggest advantage of Digiworld is the existing large retail network. 

In 2017 the FMCG revenue in urban areas increased by 5 percent. However, in an emerging market like Vietnam, FMCG manufacturers will meet difficulties if they don’t spend money to brand and develop distribution networks.

With the advantage, Digiworld is developing a network of 6,000 drugstores and plans to open 20,000 stores by 2019. If the plan is fulfilled, Digiworld will hold 50 percent of total drugstores nationwide.

Digiworld said the middle class is growing rapidly and has increasingly high demand for healthcare.

Meanwhile, Lion Corporation is a big consumer goods manufacturer, though revenue in Vietnam remains modest. In Thailand, the corporation’s revenue is $500 million a year. A senior executive of Kido Group commented that in the FMCG market the competition is from chains, not separate business, and that the biggest advantage is the distribution network. 

The cooperation with Thanh Thanh Cong JSC, which has over 200,000 points of sale (POS) in 63 provinces/cities brings a great advantage to Kido. The manufacturer now can sell products through 450,000 dry goods and 70,000 cold goods POS. Kido’s CEO Tran Le Nguyen said with the large distribution network, Kido can extend its list of products monthly, weekly and daily. 

Masan Consumer Corp also understands what a large distribution network can bring. A large network can help reduce transportation costs, thus improving competitiveness, especially when 70 percent of Vietnamese live in rural areas and the retail industry still heavily depends on traditional retail channels.

After taking over Vinh Hao Mineral Water and Vinacafe Bien Hoa and integrating the distribution networks of the two brands, Masan’s network was enlarged significantly with 190,000 food retail points, 130,000 beverage POS and 3,000 salespeople.

A senior executive of Masan said the distribution network not only helped it become superior to rivals in the rural market, but also helped it quickly access the market when launching new products and running sale promotion programs. The beverage revenue of Masan in 2017 increased by 24.5 percent compared to 2016, partially thanks to Wake-Up, a product distributed through 75,000 POS.

Thanh Lich

Source: VietNamNet

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