Socialist Republic of Vietnam

By Amy Kazmin
FT.com site; Dec 02, 2003



As a young girl, Dang Thi Hoa, a 60-year-old native of the Vietnamese island of Phu Quoc, heard stories of how her grandmother used to sail to nearby Cambodia to sell a popular sauce that islanders, including her family, made from fermented anchovies.

Decades on, Mrs Hoa, her close relatives and nearly 80 other island families still prosper by producing and selling the pungent, protein- rich sauce to households across Vietnam. Salty fish sauce, or nuoc mam, is a daily staple and that from Phu Quoc is prized above all others.

To make their traditional sauce, islanders ferment anchovies for a year in massive wooden vats in dark warehouses, a technique that is said to yield a rich, golden liquid with pungent flavour and nuances far superior to rivals from the Vietnamese mainland, where fermentation periods are usually shorter.

But while their faithful adherence to traditional production methods has made Phu Quoc nuoc mam a cherished Vietnamese household name, islanders have begun something new when it comes to peddling their wares, which were once sent in bulk to mainland traders.

Today, Ms Hoa and other producers are selling their prized sauce to Unilever, the Anglo-Dutch consumer products group, which is using Phu Quoc's fame to establish itself in Vietnam's finicky food market.

Unilever began selling a Phu Quoc fish sauce - made by local producers such as Mrs Hoa and bottled on the island - under its own Knorr brand last November, backed by a marketing campaign with slick television advertisements - inviting Vietnamese consumers to "taste the legend". It was an audacious move, given the sauce's deep cultural resonance. But by marketing a product so intrinsic to Vietnam's culinary tradition, Unilever is betting that it can persuade sceptical diners that Knorr has a rightful place in Vietnamese kitchens, paving the way for future expansion in the country's foods business.

"By starting to look at fish sauce and to connect ourselves with fish sauce, we will be seen more as a Vietnamese company and brand than as an international brand coming from Europe," says Michael Van Ettinger, managing director of Unilever Bestfoods Vietnam, the conglomerate's foods division. "It's about getting trust and getting the right to talk about food in Vietnam."

With this strategy, Unilever hopes to replicate the success it has already had in Vietnam's small but expanding personal care and household products market, where its affordable products, un-rivalled distribution, aggressive advertising and deliberate appeal to local tastes have firmly established it as the dominant force.

Unilever Vietnam's total sales last year were $250m, making it the country's biggest consumer products manufacturer.

"They are king of fast-moving consumer goods here," says Ralf Matthaes, managing director of market research group TNS. Yet selling fish sauce, he says, "is the most ballsy move they've made."

Unilever waded into Vietnam's relatively untapped consumer goods market in the mid-1990s, teaming up with production-oriented state enterprises then churning out low-grade products with little regard for the preferences of the country's nearly 80m people.

Yet as it prepared to roll out global brands such as

Omo, Dove, Lux and Ponds, Unilever realised that two of the down-at-heel, state-sector brands it had acquired - P/S, a toothpaste, and Viso, a detergent - still had a "capital of sympathy" among many Vietnamese. Rather than ditch these household names, Unilever revitalised them, building up P/S as its primary oral hygiene line and sprucing up Viso as a low-cost detergent for the large pool of rural consumers.

"They just needed a bit of brushing up - a bit of technology, a bit of a better and more constant fragrance, a bit of advertising, and that's what we did," says Michel Dallemagne, Unilever Vietnam's chairman.

Today, P/S commands a 50 per cent share of Vietnam's approximately $50m toothpaste and toothbrush market, leaving Colgate far behind. The most basic P/S toothpaste is the top seller but P/S offerings also include upmarket salt toothpaste and green tea toothpaste, both of which are based on traditional dental care. While Omo dominates Vietnam's detergent market with a 50 per cent share, Viso - which is about 40 per cent cheaper - holds a respectable 20 per cent market share, about the same as its foreign rival, Tide.

"Vietnamese are proud of what's made in Vietnam and about their brands but they are also very critical about the quality of what's made in Vietnam, and they love foreign technology," Mr Dallemagne says.

Unilever's international brands were also tailored to reflect Vietnamese customs. The local version of its Sunsilk shampoo - the market's top seller, with an estimated 18 per cent market share - includes extracts from a seed known locally as bo ket, which Vietnamese women have long used to keep their hair a shiny, jet black.

Unilever's embrace of bo ket was in stark contrast to the approach adopted by Procter and Gamble, which inflamed local sensibilities with claims that its shampoo would repair hair damage caused by bo ket. P&G subsequently apologised for its cultural insensitivity.

Yet, for all Unilever's success in health, beauty and home cleaning products, catering to the well-developed Vietnamese palate has been a tougher proposition - with costly mistakes. The company invested $22m in a state-of-the-art ice-cream plant but found appetite for its Wall's ice-cream smaller than expected, as local ice-cream was just a quarter the price of the cheapest Wall's Popsicle. Unilever tried to re-launch ice-cream with more familiar flavours and lower prices but later sold the plant at a steep discount in July to Kinh Do, a fast-growing local confectionery company. The deal allows Kinh Doh to use the Wall's brand for at least a year, while developing its own products.

A Unilever initiative to sell pre-packaged green tea fell flat too, as Vietnamese consumers - long accustomed to loose tea leaves - turned up their noses at tea they could not see or smell before buying. Cay Da tea was relegated to the small niche gift market. "What's very clear is that the Vietnamese consumer had not been sitting around waiting for Unilever to develop a very, very good quality, tasteful food culture," says Mr Van Ettinger.

Selling Phu Quoc fish sauce is Unilever's biggest food gamble so far and could either make or break its flagship Knorr brand, depending on public tastes. "It could make a real uphill climb for them if this fails," Mr Matthaes says. "People may think twice about a Unilever seasoning."

Vietnamese consume an estimated 330m litres of fish sauce each year - about three to four litres per person - though only about a third of that is branded, while the rest is sold in bulk. Phu Quoc producers estimate their island's current production capacity at a mere 15m litres a year.

Initially, Unilever's Phu Quoc foray sparked a furore, with traditionalists accusing the multinational of grabbing a national treasure. But in reality, much of Phu Quoc's fish sauce was being sold in bulk to bottlers on the mainland - an eight-hour boat journey - who routinely diluted it with lower-quality sauce.

Unilever persuaded many islanders and local authorities that bottling the sauce on the island would protect the good name and purity of Phu Quoc fish sauce. The company also vowed it would never "touch" the production process, which Mr Dallemagne likens to "what cognac and champagne must have been at the beginning of the last century". "In this business, the savoir-faire has been transmitted from generation to generation in dark places, like a wine cellar," he says.

The protests have since died down. The Phu Quoc fish sauce sold under the Knorr name - a blend of sauces from many of the island's producers - is mixed and bottled at a plant built by 17 of the local producers, using a $900,000 interest-free loan from Unilever.

Nevertheless, it remains to be seen whether Knorr's Phu Quoc fish sauce will be able to win over exacting Vietnamese consumers, who still have a host of local brands to choose from.

The company's ambitious goal is to secure a 10 to 20 per cent share of Vietnam's branded fish sauce market by the end of 2007. Mr Van Ettinger says sales so far have been "up to our expectations". "People have habits," he says. "They are not going to suddenly switch. It's a long-term game where, consumer by consumer, we have to convince them."

For Mrs Hoa - now selling 70 per cent of her fish sauce production to Unilever - the days when her grandmother paddled off in a boat to sell sauce on the mainland are now just a memory. Yet she is delighted by the change, especially the television advertisements linking Knorr to the past of families like hers.

"I am very happy. My fish sauce is being advertised to all the people in the country," she says. "It's the common happiness because it's my product, but it's also the fish sauce of the whole island."