Macro forces shaping consumer behaviour
in 2025

1. The next
Asia tiger

Often hailed as the next "Asian Tiger," Vietnam demonstrated strong economic resilience in 2024, achieving a GDP growth rate of 7.1%, exceeding government targets while keeping inflation under control. This robust performance, driven by a recovery in foreign investment, exports, and manufacturing, strengthened Vietnam's position as one of the fastest-growing economies in ASEAN and globally. Despite facing challenges such as natural disasters and slower growth in key trading partners, the economy remained resilient. This growth translated into a significant increase in GDP per capita, rising from USD 4,346 in 2023 to USD 4,700 in 2024, further solidifying the country's burgeoning middle class.

While the overall economic outlook promises to be positive, with the government setting an ambitious 8% growth target for 2025, challenges persist. Notably, food inflation remains elevated, impacting consumer spending. According to VinaCapital, retail revenue growth, excluding inflation, slowed to 6% in 2024, compared to the typical 8-9% growth rate. However, the retail sector witnessed significant growth in e-commerce, with the market projected to exceed

USD 22 billion in 2024, reflecting a 18% increase year-over-year, according to Google’s SEA eConomy 2024 report. This robust growth positions Vietnam as the third-largest e-commerce market in Southeast Asia, surpassing the Philippines.

Looking ahead to 2025 and beyond, Vietnam's economic trajectory is promising. According to the UK-based Centre for Economics and Business Research (CEBR), Vietnam's GDP could reach USD 1.41 trillion by 2039, on track to become the 25th largest economy globally and the third-largest in Southeast Asia. Furthermore, CEBR projects that Vietnam's growth will outpace its regional peers, such as Thailand, Malaysia, and Singapore in terms of economic growth.

2. The Vietnamese consumer:
A portrait of change

2.1 The silver lining

Vietnam, with its population of nearly 101 million is Southeast Asia's third most populous nation, after Indonesia and the Philippines. However, ageing population and declining fertility rates are gradually shifting the country's demographic landscape. While currently enjoying a "demographic dividend" with a large working-age population until 2036-2039, Vietnam is poised to enter an era of an aging population. By 2036, projections indicate that one in five Vietnamese will be a senior citizen, according to the Ministry of Health.

This demographic transition will significantly impact the social and economic fabric of the nation. The rising silver population presents unique needs and preferences, necessitating a shift for certain brands in strategies and product portfolio. Recognising the diversity

within this silver segment – with varying levels of education, income, and lifestyles across regions in Vietnam – is crucial. Their media consumption and channel choices also vary. Brands must tailor their offerings and communication strategies to effectively engage with these distinct variations in this consumer group.

Winning the senior demographic requires brands to adopt a consumer-centric approach, prioritizing the creation of 'ageing-adaptive' products and services tailored to their specific needs and preferences. Building strong intergenerational relationships and fostering meaningful connections with both old and young audiences will be key to long-term success.

2.2 Beyond replacement levels

Furthermore, Vietnam's historically low birth rates, falling below replacement levels in recent years, pose long-term challenges for sustainable economic development. Having dipped to a level of 1.9 births per woman nationwide, this rate is even lower in urban areas. This trend mirrors those in developed East Asian countries like South Korea, Japan, and China, as well as neighbouring Southeast Asian nations like Thailand.

The decline, driven by socioeconomic factors like the rising cost of living and changing social norms, will lead to a shrinking workforce and strain on social services.

Smaller families and a shrinking youth population will inevitably impact demand for baby-related categories and products in the long term. It also leads to rising demand for smaller and individual pack sizes, as well as convenient solutions to cater to the new family structure.

FMCG brands must adapt by catering to the changing needs of consumers. This includes a greater emphasis on smaller pack sizes, single-serve options, and convenient solutions to cater to the needs of smaller households and individuals. Furthermore, the trend in will drive demand for personalised products and services while household incomes continue to improve. This presents an opportunity for brands to innovate and offer customised solutions that cater to individual preferences and lifestyles.

2.3 The path to high-income nation

Both urban and rural Vietnam are experiencing a continuous rise in average incomes. This growth is driving a substantial expansion of the middle class. In 2024, families in the high and mid-high-income brackets accounted for 60% of total contribution of urban households and nearly 50% in rural areas, a considerable leap from 56.5% and 47.2% in 2019, respectively.

This expanding middle class, with its growing disposable income and evolving consumption patterns, is not only fuelling consumer spending but also transforming consumer preferences. The pursuit of higher living standards and unique experiences is steadily increasing. This shift in consumer behaviour encourages businesses to innovate, develop new products and continuously improve their offerings to meet the evolving needs of a more discerning and sophisticated consumer base.

While urban areas have long been the primary drivers of consumer growth, rural Vietnam also presents significant opportunities for FMCG brands. FMCG spending per household in rural areas has exhibited a higher CAGR growth rate of 6% in the last five years compared to the 2% growth rate in urban areas, indicating a strong and growing demand for consumer goods in rural regions. This rapid growth is narrowing the spending gap between urban and rural consumer groups.

In essence, the rise of the Vietnamese middle class is not just a demographic shift; it is a critical driver of economic growth and a cornerstone of Vietnam's aspiration to become a high-income nation by 2045.

2.4 Tapping the rural market

Despite rapid urbanisation, rural Vietnam represents a major buyer pool for FMCG brands, accounting for over 61% of the total population as of 2024 – that's over 60 million people. This vast population presents a significant opportunity for FMCG brands to tap into a highly potential and relatively underserved consumer base.

Rural consumers are experiencing a significant shift in their economic and social realities. Rising income levels and faster growth rates in FMCG spending compared to urban areas make rural markets a lucrative opportunity. However, significant category penetration gaps still exist between urban and rural areas. FMCG brands need to strategically address these gaps to maximise exposure to rural consumers.

Higher education levels and increased employment opportunities, particularly in white-collar professions, are contributing to a rising standard of living and evolving consumer preferences. This demographic shift is bridging the gap between rural and urban lifestyles in terms of aspirations, consumption patterns, and product choices.

To succeed in the rural market, brands must adapt. Understanding how consumption trends in rural areas both emulate and diverge from those in urban centres is crucial. This requires expanding distribution through local partnerships and leveraging consumer-preferred channels, such as traditional trade and the rise of specialty stores. Furthermore, focusing on products that offer excellent value for money, considering both price and perceived quality, is key to capturing this potential market.

3. The state of consumer

Since the onset of the pandemic in early 2020, Vietnamese consumers have had to constantly face numerous external stressors including an economic downturn, inflation, and most recently natural disasters. These ongoing concerns and uncertainty about the future have prompted them to adopt price-consciousness as part of the collective consumer mindset.

As of Q4 2024, the number of families reporting they are struggling financially has not recovered to the pre-Covid level. This suggests a reset in the benchmark of consumer confidence, with consumers always on the lookout to protect themselves from uncertainty.

While household incomes have risen, the cost of commodities also has increased. Overall household expenditure in 2024 closely resembled pre-pandemic levels in 2019, albeit with notable shifts in spending priorities.

During the initial stages of the pandemic in 2022, households prioritised stocking up on FMCG and fresh food to prepare for potential lockdowns and disruptions. However, with the easing of restrictions, this heightened focus on pantry stocking has diminished. While FMCG and fresh food still constitute a significant portion of household budgets, their share has decreased over time.

Instead, consumers are increasingly prioritising education and travel. As the cost of living rises, households are also allocating a greater portion of their budgets towards essential utilities. This trend is particularly pronounced in rural areas, where households are allocating more budget to housing, education, and utilities to improve their overall living standards.