Selling Coconut Oil Beauty Products Vietnam

Value Prop
Most emerging economies will eventually transition from being an import-dominated market to one where domestic firms hold sway – we intend to be that company for the Vietnamese cosmetic industry.
VietCoco is a holding company that performs two functions. First, we operate coconut plantations, as coconuts are easy to grow in Vietnam. We have adopted a vertical integration strategy (Investopedia, 2018), where the coconuts we produce are then used to produce beauty products, which will be built as a local Vietnamese brand that can compete with imported brands. At present, the beauty product industry in Vietnam is dominated by foreign companies, but the typically progression of market development is that a domestic business, position slightly below the luxury foreign company, and earn market share by offering equivalent quality at a slightly discounted price.
Value Proposition
A value proposition is that we are going to offer the equivalent quality of product as the international luxury brands but at a discounted price. A value proposition should reflect was you will do uniquely to meet market needs (Skok, 2013) and we believe that we have accomplished that. The international brands bring two things to the table – they have great products and they have great brands. There is a bias towards foreign companies, mostly because high quality is often associated with the foreign companies. Foreign companies pay high costs to import raw materials, produce goods, and then ship them and market them around the world. The prices are set based on an internationalization price strategy, where the product needs to cost the same anywhere in the world to avoid people attempting to arbitrage the price of the good (Ebrary.net, 2018).
Our company has brought in manufacturing talent from Europe to work in Saigon, and will produce beauty products locally. The cost of goods sold is much cheaper in Vietnam, because the cost of labor is much cheaper, and so is the cost of some of the key ingredients. We are specifically going to focus on virgin coconut oil as a major ingredient in our beauty products. In fact, the use of coconut oil in beauty products has been increasing a lot recently (WebMD, 2017).
So the value proposition for the company is basically to put these two things together, where the company has easy and cheap access to coconut oil, and then creates beauty products with this. The company will have a significantly lower cost of production than its foreign rivals, and yet will be able to deliver a quality that is almost as good. For the consumer, the end product will not be quite as good as the best foreign brands, but will be of high quality. The math is something like a product that is 90% as good but at 60-70% of the price. This creates superior value that we feel will convince the Vietnamese consumer to purchase a Vietnamese product, which in this business they have not really felt like they want to do (Euromonitor, 2017).
Innovation
There is absolutely nothing innovative about virgin coconut oil. This is a product that has been used by human beings since long before written records existed. Literally, if you are thinking that virgin coconut oil is an innovation, or that innovation is necessary to succeed in business, you are wrong. This is why innovation and value prop are two different things – an innovative technology is great, but the reality is that whether what you have is innovative or not, the way that you put something together and present it to the market, aka the value prop, is what matters.
The funny thing is that sometimes you don't need to be innovation in order to have a great value position – just doing something that other people do, but better, or in a different market, is enough. In this case, Vietnam is one of Asia's fastest-growing economies (Euromonitor, 2017). The market for beauty products is strong, but divided between cheap stuff, and high-end foreign brands, with the market holding a preference for the foreign brands when they can be afforded (Euromonitor, 2017). In other markets, when they begin to emerge on their own, the foreign companies dominate early, but then domestic competitors start to emerge. Japan and Korea are two major beauty product manufacturers, but when those markets first started to emerge from poverty it was all foreign brands. China is following in their footsteps, and soon so too will Vietnam. In that sense, we aren't reinventing the wheel. We aren't pretending that we're doing something that's never been done before. We certainly are not going to spout a bunch of babble about how coconut oil as a beauty product is a new invention when people have used it for literally thousands of years. What we are doing is positioning ourselves to be the first emergent Vietnamese beauty products company, following the pattern set in many other emerging Asian economies before us.
The Opportunity
The Vietnamese beauty industry is rapidly growing, which has created this situation where there is some degree of industry stratification. This stratification basically coincides with the socioeconomic stratification of Vietnamese society. It is well established that Vietnam's economy is growing rapidly, and with that growth comes a society that not only has rich and poor, but middle-class, and then after that different types of middle class. Our product is going to target the upper middle class. They are wealthy enough to afford it. They might prefer to buy a foreign brand, but are pragmatic, and willing to accept certain trade-offs, because they are not so rich that cost doesn't matter. This segment of the market tends to emerge in rapidly growing economies as more economic opportunity exists for people. In that sense, Vietnam makes for a great market and will continue to do so if the recent demographic trends are any indication (Euromonitor, 2018).
Market Identification and Analysis
As noted, the target market is Vietnam. This is where our coconut plantations and manufacturing facilities are located. The market is beauty products, and this industry is both large and rapidly growing in Vietnam. The total market is worth over 29 billion dong in 2016, and has a growth rate of 10.7% (Euromonitor, 2017), which is a faster than the growth rate of the Vietnamese economy as a whole (CIA, 2018). This indicates that the beauty care market is one that will increasingly capture a share of disposable income, as disposable income in the country grows.
There are many different segments to this market, but coconut oil is good for the skin, and most beauty products involve the skin in some way, so the market in general is a great market because many different products can be developed using roughly the same formulations of ingredients, just slightly different. Since we are basing our brand on the one key ingredient of coconut oil, this is a positive for the company, as it will allow us to target the overall beauty products market, rather than just one particular niche within the broader market as a whole.
The major trend worth noting is the rapid growth. As Vietnam's economy improves, people have more disposable income, and that has fostered the development of a far more sophisticated market. There are more channels for distribution, more market segments, and greater stratification along the cost/quality paradigm of different brands. This trend is what will allow our company to find its niche in the Vietnamese market. The market is typically segmented by buyer, and then distribution channels are chosen that will reach the targeted buyer.
Targeting Segment
The moisturizing effects of coconut oil are in particular popular with middle-aged people, and it is typically urban dwellers who can afford our product. Thus, our target market is the 35-55 year old woman, middle class or upper middle class and living in the city. This woman either has a professional career herself or her husband does – either way is fine, the woman does the purchasing. The total market size is roughly the 29 billion dong, which will grow to more like 35 billion by 2018 given the trend in market growth. This market is still relatively small on a per capita basis, and dependent on the ongoing development of the Vietnamese economy.
Competitors
There are many competitors. The beauty product space is highly competitive, because it is quite profitable. Many foreign companies have entered or are planning to enter the Vietnamese market, because it is a country with rapid growth and a large population. Beauty product companies have increasingly targeted Asia in recent years, and with great success. Direct competitors will compete vigorously for distribution spaces, and this competition only gets more intense as the market increases in sophistication. We will need to embrace that.
There are also indirect competitors, in the sense that there are a lot of ways that companies try to part people from their money, especially people who are experiencing unwanted aging. The indirect competitors are anything that will take away the money that people would otherwise use to buy our product, so any beauty concoction, spa treatment, exercise regime or diet will be a potential threat – we're in the business of helping people look and feel younger and there are a lot of other industries that compete with us along the same principle.
References

CIA (2018). Vietnam. Central Intelligence Agency. Retrieved April 3, 2018 from https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html

eBrary.net (2018) International pricing strategies. EBrary.net. Retrieved April 3, 2018 from https://ebrary.net/21431/management/international_pricing_strategies

Euromonitor (2017). Beauty and personal care in Vietnam. Euromonitor. In possession of the author.

Euromonitor (2017). Economy, finance and trade: Vietnam. Euromonitor In possession of the author.

Euromonitor (2018) Vietnam in 2030: The future demographic. Euromonitor. In possession of the author.

Investopedia (2018) Vertical integration. Investopedia. Retrieved April 3, 2018 from https://www.investopedia.com/terms/v/verticalintegration.asp

Skok, M. (2013) 4 steps to building a compelling value proposition. Forbes. Retrieved April 3, 2018 from https://www.forbes.com/sites/michaelskok/2013/06/14/4-steps-to-building-a-compelling-value-proposition/#5638d62a4695

WebMD (2017). Healthy skin and hair guide. WebMD. Retrieved April 3, 2018 from https://www.webmd.boots.com/healthy-skin/guide/coconut-oil-as-a-beauty-product