Drivers remain strong for consumer sector

Local groups that offer fresh ideas are targets fo bigger players to acquire, Photo: Le Toan

In late October, Coolmate, a direct-to-consumer men’s apparel brand, announced the completion of its Series B funding round. Led by Vertex Ventures for Southeast Asia and India, the investment aims to accelerate Coolmate’s international expansion, product innovation, and omnichannel retail presence across Southeast Asia.

Pham Chi Nhu, CEO and co-founder of Coolmate, said that the fast-growing middle-class consumer segment in Vietnam had a clear preference for quality and customer service, paired with eco-conscious values and affordability.

“Coolmate aligns closely with these emerging consumer trends while leveraging Vietnam’s strong local supply chain,” Nhu said.

According to a report by KPMG Vietnam released in late November, merger and acquisition activity in the first nine months of 2024 was robust across key sectors, with real estate (53 per cent), consumer staples (14 per cent), and industrials (21 per cent) collectively accounting for 88 per cent of total deal value.

The consumer staples sector saw a notable $255 million investment by Bain Capital in Masan Group through a private placement. Additionally, Masan Group repurchased a $200 million stake in VinCommerce from SK Southeast Asia Investment.

Data from Index Partners revealed that Vietnam’s consumer sector recorded 31 deals in the first nine months of 2024, accounting for one-quarter of total transactions but only 3 per cent of total deal value, or approximately $100 million.

Key transactions included Kido Group’s acquisition of Nutifood, Marubeni Corporation’s increased stake in Asia Ingredients Corporation, and Coolmate’s fundraising from GSR and Do Ventures.

This represents a decline from previous years. In 2022, the consumer sector recorded 53 deals (21 per cent of transactions) worth $1.8 billion (29 per cent of deal value). In 2023, it saw 66 deals (19 per cent of transactions) valued at $600 million (11 per cent of deal value).

The drop reflects investor caution as consumer sentiment and spending remain subdued. While Vietnam’s economy showed resilience in Q3 2024, inflationary pressures and economic uncertainty have led consumers to prioritise essential spending and value-based purchases.

Despite these challenges, the consumer sector’s growth drivers remain strong. Christophe Péron, partner at Index Partners, highlighted key trends such as the expanding middle class, rapid digital transformation, and booming e-commerce, all fuelling consumer market growth at a compound annual growth rate of 8 per cent, led by food and beverages, beauty, and personal care sectors.

“Given these fundamentals, dealmaking activity in the consumer sector is likely to rebound in 2025 as investors focus on high-growth opportunities,” Péron said. “Dealmakers will adopt a strategic approach, prioritising companies with predictable cash flows, strong profitability, and scalability potential. Businesses aligned with regional trends, such as tech-enabled operations and omnichannel models, are expected to pull in significant interest.”

Péron also noted that companies with strong brand equity capable of fostering loyalty and generating consistent revenue streams will stand out. “These priorities reflect a cautious but opportunity-driven investment outlook, ensuring that the sector remains dynamic despite external challenges,” he added.

Ralf Matthaes, managing director of IFM Research, stated that Vietnam’s current economic slowdown is cyclical, driven by pandemic impacts, manufacturing challenges, and a slumping real estate market. “Signs point to an upswing in 2025, with projected consumer growth of 6-6.5 per cent,” he said.

Matthaes further noted that Vietnam’s fast-moving consumer goods market, as well as food and beverages, is expected to grow by around 10 per cent in 2025, driven largely by increased in-home consumption and inflation. “The beverage market, excluding alcohol, is outpacing food. Local players offering fresh, health-focused products are ideal targets for acquisition,” he said.

He also observed that Vietnam’s dairy market is slowing due to declining birth rates, market saturation, and alternative beverages. “Consumers are shifting towards beverages enriched with vitamins, great taste, and refreshing flavours. Meanwhile, there’s growing demand for fresh, healthy, and preservative-free foods over packaged options,” he added.

Matthaes identified key factors for targeting acquisitions in fast-moving consumer goods, including whether the product or brand is essential or discretionary, offers health benefits, or provides convenience. He also emphasised the importance of transparency, financial stability, and logistics capabilities for both sourcing materials and for distribution.

Vietnamese consumers careful amid economic volatility Vietnamese consumers are becoming increasingly cautious with their spending amid economic uncertainties, shifting their focus towards essential items while cutting back on non-essential purchases.

Hanoi CPI climbs 2.08 per cent on-year in November Hanoi's consumer price index (CPI) decreased by 0.05 per cent in November from the previous month, but rose 2.08 per cent from the same period last year, according to the city's Statistics Office.