VietNamNet Bridge – Being inferior to foreign manufacturers, domestic enterprises have been trying every measure which can bring money to them.

Doing the outsourcing for foreign brands to make money

Since 2000, Lix began doing the outsourcing for Unilever, providing thousands of tons of detergent to the foreign brand, which has helped Lix obtain the revenue growth rate of 25 percent per annum.

In the first period, the volume of outsourced products amounted for the majority of the total output, but the value was not high. Later, while still making products under the outsourcing contract with the foreign partner, Lix has been trying to expand its production and business scale,

In 2005, Lix bought a factory of Unilever in Hanoi. Since then it has been making every effort to increase the amounts of products bearing its own brand Lix and reduce the outsourced amount of products from 70 percent in 2000 to 34 percent in 2011.

Lix has also been trying to boost export with the export revenue of the company amounting to 44 percent of the total revenue of the company. It has reported the 46 percent growth rate of exports in comparison with 2010. Japan, the Philippines and Cambodia were the biggest export markets.

In 2011, Taiwan, Australia and South Africa also became the main export markets of the domestic brand, which helped it obtain the export turnover of $22 million, up by 30 percent over 2011.

Lix has also been making products to provide to supermarkets which then sell them as their private brands. Most of the detergent products available at Big C, Metro and Co-op Mart have been provided by Lix, which estimates that it makes out 30-40 products for every supermarket.

Meanwhile, My Hao Cosmetics has been following its way. The private enterprise has been resolute in refusing to do the outsourcing for Unilever, or making products for supermarkets’ private brands.

Unilever many times repeated that it wanted to buy My Hao brand at several millions of dollars in 1995, then 10 million dollars in 1998 and 30 million dollars three years ago. However, Luong Van Vinh, My Hao Cosmetics’ Director still refused the deal.

“If I sell the brand, or do the outsourcing for Unilever, at first, My Hao would have a lot of orders at attractive prices. However, later, if the market demand decreases and the partner stops cooperation, it would be impossible for us to regain the market,” Vinh said.

“Two years of doing hired work for others would be enough to lose your market,” he added.

However, Vinh’s decision on continuing developing the production with My Hao brand has made it lose a considerable number of distributors. Since 2008, the company has invested one million dollars a year to upgrade the production line and develop the My Hao washing liquid. It has also been re-organizing the distribution network, paying much attention to traditional distribution channels.

Currently, My Hao washing liquid accounts for five percent of the market share. This is also the kind of products Unilever and Procter & Gamble plan to develop.

Who decide the market prices?

According to CAD, the prices in the detergent market have been defined by Unilever and Procter & Gamble. Domestic manufacturers have to set lower prices for the same kinds of products, if they want to sell their products in the market.

The detergent products bearing Omo, Tide, Viso (Unilever) and P&G are always 30-40 percent higher than the prices of Lix, Net, Vi Dan and My Hao products.

DNSG