TESCO CASE STUDY

Đặng Huỳnh Tú Anh

Nguyễn Trần Gia Bảo
Đặng Trần Tùng
Nguyễn Minh Quân

Nominal growth đứng thứ 2, sau India → tăng trưởng danh nghĩa
Volume change đứng thứ 2
Unit value change → Normal, stable
Overall, the FMCG sector in Vietnam is experiencing growth with stable market prices,
leading to significant fluctuations in quantity, which presents a positive opportunity
for market entry.

Countries in the APAC region show great diversity in growth rates. While some countries
have achieved high growth rates, others have experienced slower or even declining growth
rates

Vietnam is one of the countries with the most impressive volume growth in the region, at
12.2%. This shows the great potential of the FMCG market in Vietnam

Major markets: Major markets such as China, India and Indonesia have also recorded
positive growth rates, indicating strong purchasing power of consumers in these countries.
Some other markets such as Thailand and the Philippines have also recorded stable growth
rates, contributing to the overall growth of the region
Main: majority,
Pre: grow fast
Pre segment in SEA, grow fast in china and vn
Vietnam's demand is high compared to SEA
CPI up 4.15% YoY

Consumer prices up from December to April

Health and education prices up sharply (48% and 10%)

GDP up 17% YoY

15-17 growth less than

Industry down, services up, agriculture?
Service demand up

Urban consumption is more stable than suburban

2H15, nor increases sharply
3Q16 decreases sharply

MAT in urban increases sharply, rural decreases slightly

Volume (MAT) in urban increases, rural decreases

● Co.op Food and Circle K are the fastest growing chains in these two retail formats.

● SatraFoods, Bach Hoa Xanh, B's Mart, and Family Mart also have notable growth,
but at a slower pace.

● Other brands such as Vissan, Zakkamart, Shop & Go, and Ministop are growing at a
slower pace, while 7-Eleven is still in its infancy.

→ Overall, the retail market in Vietnam is growing strongly, especially in the food minimart
and convenience store formats, with a significant increase in the number of stores between
2015 and 2017.

Overall, the trend of both is increasing or remaining the same.

coop, satra, and bach hoa are leading

Circle K is leading
Growth of bhx most significant
7-11 is penetrating the market
Unit Value Growth has always maintained a positive growth rate, reflecting price stability.
Volume Change has fluctuated greatly between quarters, but since the end of 2016, volume
has gradually recovered.
Nominal Value Growth reflects a strong improvement in early 2017, with growth of up to
17.1% in Q2'17
→ Overall, the FMCG market in Vietnam is developing positively with prices increasing
steadily and consumption volumes starting to increase again after a period of decline. This
creates good opportunities for retailers wanting to penetrate the market

Quantity of goods in 6 major cities fluctuates greatly, generally increasing strongly each
quarter
Unstable product prices
Milk and dairy products are the largest contributors to total FMCG value in Vietnam.
Soft drinks and food have grown strongly, while beer has declined in unit value.
→ The main factors that make consumers choose stores are convenience, reasonable
prices, and attractive promotions.

Food, personal care tops

Alcohol sales up. Other drinks up
Demand for Per.care and food up
Traditional markets still play an important role: Although online shopping is growing,
traditional markets are still the most popular shopping channel for Vietnamese consumers,
especially for daily shopping.

Online shopping focuses on promotions: Online consumers are very sensitive to

promotions and often shop in large quantities.

Opportunities for online sales channels: Despite many limitations, online shopping still
has great potential for development, especially for businesses that can provide diverse
products, competitive prices and attractive promotions.

Suggestions for businesses:

Traditional retail businesses: Should focus on improving service quality, diversifying products
and creating attractive promotions to retain customers.

Online retail businesses: Should focus on building customer trust, ensuring product quality,
fast delivery and providing good customer care services.
Manufacturers: Should have a multi-channel distribution strategy to reach more customers.

● Characteristics of VietNam retail industry

Modern Trade Growth: Urbanization, rising disposable incomes, and a young population
are accelerating the shift toward modern retail formats like supermarkets and hypermarkets,
particularly in cities like Ho Chi Minh City and Hanoi.

Traditional Trade Dominance: traditional retail formats (small family-owned shops and
open markets) still hold significant market share, especially in rural areas. Tesco will need to
manage the challenges of navigating a market where modern and traditional formats coexist.

E-commerce Boom: e-commerce has experienced a surge, especially following the

COVID-19 pandemic. Vietnamese consumers are shifting towards online shopping for
convenience and promotions. As a result, many retailers are adopting omni-channel
strategies, combining brick-and-mortar stores with online platforms.

Diverse Retail Formats: Vietnam’s retail landscape is diverse, with traditional markets,
modern trade, convenience stores, and online platforms all playing a role. There is also an
increasing preference for smaller, more accessible formats such as convenience stores.

Urbanization: increasing urbanization in cities like Hanoi and Ho Chi Minh City is driving
demand for modern retail formats. This makes these areas key targets for Tesco’s expansion
strategy

● Challenges for Tesco

Intense Competition: The market is highly competitive with both local players (e.g.,
VinMart, CoopMart) and international entrants (e.g., Circle K, 7-Eleven). Adapting to local
preferences is crucial.
Regulatory Environment: Navigating Vietnam's complex regulatory landscape, including
foreign ownership restrictions and local partnership requirements, can pose challenges.
Cultural Preferences: Understanding local consumer preferences is vital. Vietnamese
shoppers often favor fresh and locally-sourced products, which may differ from Tesco’s usual
product offerings.
Supply Chain Management: Establishing an efficient supply chain that aligns with local
logistics and sourcing capabilities is essential for Tesco's operational success.
Market challenge: While rural areas account for half of the market share in Vietnam, their
nominal growth is unstable, presenting challenges for Totorus in entering the Vietnamese
market.
Consumer behaviors:
+Used to wet market (Accounting for 21,3%), Rural ( underdeveloped areas) are accounting
for 51%
+

● Strategy Tesco should pursue: Transnational strategy

Why pressure for cost reduction?
- Intense Competition:
In markets like Vietnam, where both modern trade (supermarkets, convenience stores) and
traditional trade (small family-owned shops, open markets) coexist, competition is fierce.
Tesco would need to compete with both local players (e.g., VinMart, Co.opmart) and
international competitors (e.g., Big C, Lotte).
To offer competitive pricing and attract price-sensitive consumers, Tesco will need to control
its operational costs tightly.

- Price Sensitivity of Consumers:

In emerging markets like Vietnam, many consumers are price-conscious. Offering low prices
is crucial to attract middle-income and lower-income customers who make up a large portion
of the population.
This creates a need for businesses to lower costs to offer attractive pricing without sacrificing
profitability.

- Local Adaptation Costs:

As part of a transnational strategy, Tesco must adapt its products, marketing, and services to
meet the preferences of Vietnamese consumers. However, these adaptations—such as
sourcing local products, changing packaging, and modifying the product mix—can increase
costs. To balance this, Tesco would need to reduce costs in other areas (like global
procurement and logistics).

- Top 5 attributes for store selection

+ Convenient Accessibility: Stores that are easy to get to, allowing customers to save
time on travel.
+ Competitive Pricing: Offering low prices on most items to attract price-sensitive
consumers.
+ Easy Navigation: Store layouts designed for quick and easy product location, helping
customers find what they need swiftly.
+ Attractive Promotions: Providing compelling deals and promotions that encourage
repeat visits from customers.
+ Product Variety: A wide selection of products that meets diverse customer needs and
preferences.

Why pressure for high local responsiveness?

Food,beverages, milk products accounts for respectively 38,6%, 16% and 11.5%
while this figure for personal care is 22%
Spend trend is different between urban and rural
BHX,Satra Food, Co.op Food, Circle K rose significantly and getting similar to local
customers
Vietnamese people are likely to go to wet market (avg 21,3 times/ month)

1. Diversity in consumer preferences:

Cultural differences: Vietnamese consumers have different tastes, preferences and shopping
habits compared to other markets. They often prioritize fresh food, traditional goods and
local brands. To be successful, Tesco must tailor its products to local preferences, including
providing locally relevant products and brands.
Regional differences: Even within Vietnam, consumer preferences can differ between major
cities such as Ho Chi Minh City and Hanoi compared to rural areas. Shopping habits,
product preferences and price sensitivity can vary significantly. Tesco needs to adapt its
product mix and store formats to reflect these differences.
2. Dominance of traditional trade:
A large part of the Vietnamese retail market is still dominated by traditional trade – including
small family-run shops, street vendors and wet markets, especially in rural areas.
Consumers in these areas are used to personal relationships with local vendors and
negotiating prices. Tesco needs to adapt by creating a shopping experience that suits these
customers, while also competing with traditional trade.

→ Tesco may also need to find ways to integrate or coexist with these traditional markets
rather than replace them, which requires adapting its business model to local retail
dynamics.

3. Price and promotion sensitivity:

Many Vietnamese consumers are very price sensitive, especially in rural areas. Tesco needs
to adjust its pricing and promotion strategy to reflect local economic conditions, ensuring
products are priced competitively and offering attractive incentives.
Offering local promotions that match Vietnamese consumers’ preferences for discounts,
offers and loyalty programmes can help Tesco build a strong customer base in this market

4. Shopping Habits and Store Formats:

Shopping formats in Vietnam are diverse, including traditional markets, modern
supermarkets, and convenience stores. Vietnamese consumers in major cities are shifting
towards modern retail formats, but many still prefer small neighborhood stores for
convenience.
Tesco will need to adapt its store formats, possibly focusing more on small, local stores such
as convenience stores to serve different segments of the population. Customizing store size,
layout, and location to suit local needs is crucial to meeting customer expectations.

● In which aspects Tesco should customize their operations

- Channel distribution: Prioritize local suppliers for fresh produce and other
products to reduce costs and align with consumer preferences for local
products. Building relationships with local farmers can enhance Tesco’s brand
image.

- Market distribution (rural vs Urban)

- Provides in-need products like healthcare and food for a affordable price
because of main share of the market is price mainstream products

- Pricing Strategy: Implement a pricing strategy that balances affordability with

profitability and considers local competition.

- Marketing and Promotions: Tailor marketing campaigns and promotions to

resonate with Vietnamese consumers.

- Customer Service: Train staff to provide excellent customer service that meets
local expectations.
- They can consider changing online because of the growing need for people to
have convenient access to goods, low prices, and good deals,...