AsemconnectVietnam - Attractive profits have led many Vietnam pharmaceutical companies to join an intense competition to gain back market share from units that involve in multi-level business and selling functional foods online.

In the recent reply to Bloomberg, CEO of Hau Giang Pharmaceutical Joint Stock Company (coded DHG) Pham Thi Viet Nga said the company wants to increase the percentage of contribution to the revenue of functional foods by 15 percent in the next five years, from the current eight percent. She refused to provide detailed information on revenue and profitability of this segment.

The report on consolidated business results for the first quarter of DHG shows that out of the 17 subsidiary companies, there are as many as 14 businesses that trade in functional foods.

CEOs of Vietnam leading pharmaceutical companies are hesitating to disclose when being asked about the business and production of functional foods. However, they are quietly participating in this lucrative market.

Traphaco JSC (coded TRA) is showing its capabilities in the new market. With strengths in herbal products, the company is rapidly encroaching into functional food segment. Only two prominent products relating to brain and liver have brought about revenue of nearly 200 billion dong per year for the company. Total revenue of the company increased from less than 900 billion dong in 2010 to nearly 1.7 trillion dong last year.

Mekophar Chemical-Pharmaceutical JSC said this year it plans to develop herbal products and functional foods.

Besides, a series of domestic companies including centre for hi-tech pharmaceuticals, Nha Yen Nha Trang Company Limited, Domesco Dong Thap, IMC, Sao Thai Duong, Thanh Dat Pharmaceutical Company, Binh Nghia health care, Vietnam Pharmaceutical Joint Stock Company, etc. are scrambling to invest in factories and launching a series of new functional foods. The strategy of most local businesses is to have affordable price that suits the majority of domestic consumers.

A market survey in HCM City shows that, functional foods are currently sold widely and most drugstores will not ignore this segment.

Hoa, owner of a drugstore on Xo Viet Nghe Tinh road, Binh Thanh district said, earlier consumers were quite cautious with this product, so the sales volume was not much. The store could only bring in some well-known products on the market to sell with limited quantities. Recently, the widespread promotion of functional food products has made people have more favourable look at these kinds of foods. Many health care and beauty products are highly favoured, bringing pretty good profit to her drugstore.

Lan, staff of a large drugstore on Nguyen Huu Canh road (Binh Thanh District) also revealed, the store sells nearly 300 types of functional foods, up 30 percent from last year. The sales volume is also quite good with a few dozen products a day. More than 50 percent of functional products here come from Vietnamese enterprises while the rest are imported.

“The units that supply functional products recently provided many incentives for drugstores. Besides buy-2-get-one-free products, drugstores also receive discounts, so instead of setting aside only a small corner in the drug shelf for displaying functional foods, now we dedicate a whole shelf to display all products”, said Lan.

According to Prof DrTran Dang, President of Vietnam Association of Functional Foods., in just three years (2011-2013), the market has emerged about 10,000 types of products, of which approximately 40 percent are imported. At the end of 2012, almost all businesses in Vietnam pharmaceutical industry involved in this field with 1,781 manufacturing enterprises. Currently, this number has increased to 3,500.

“The reason why domestic and foreign businesses invest in this field is functional foods have become a trend and need of Vietnamese consumers”, said Dang.

Dang also said the Vietnam market of functional foods is facing many challenges. In fact, there are businesses that publish incorrectly the quality and exaggerate the drug as a “panacea” which have made consumers become suspicious of the whole industry.

While domestic pharmaceutical company leads in quantity, foreign brands still dominate, thanks to their spending on promotion and product advantages.

Amway, Herbalife and Nuskin are the most mentioned names in the functional food business group in the form of multi-level. Having entered the Vietnam market for six years, initially Amway opened a factory for producing household products, including functional foods. But very quickly, from the third place in the sales structure of Amway products, functional foods rose to a leadership position. How Kam Chiong, CEO of Amway Vietnam used to say that the company is trading 13 product categories with the highest growth rates of more than 20 percent and it is predicted that, the sales will increase more than 40 percent since 2013.

Recently, the second plant worth $20 million was built by Amway in Binh Duong Province, which will focus on the production of functional foods. Amway’s sales in Vietnam in 2013 reached $70 million.

Being a follower but Herbalife Vietnam, during the past three years, has attained annual growth at 50 percent or higher, standing at No. 16 of Herbalife global in terms of business development index. The main products of the Herbalife are weight loss products, nutritional supplements, cardiovascular, health and beauty care.

Nuskin has newly opened office in HCM City and Hanoi in early 2013 but with a list of about 20 anti-aging and five functional food products, the company’s revenue has achieved the growth rate of 30-50 percent. Pakapin Leevutinun, Executive Chair of Nuskin Thailand and Vietnam used to affirm the revenue of $15 million in Vietnam market in 2013.

Meanwhile, firms that distribute importedfunctional food products in Vietnam are also big winners. Two types of functional foods for men and women imported and distributed by Eco Pharmaceutical Joint Stock Company also bring about revenue of 20-40 billion dong per month for the company.

Source: Vnexpress