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BUSINESS REPORT

deals in the dairy industry. In mid-2020, which would drive consumption growth.
R DAIRY INDUSTRY MARKET SHARE, 2020
Vinamilk officially gained 75 per cent of Vietnam’s new generation FTAs present
shares and took control of the GTNFoods a host of opportunities to companies in the

Joint Stock Company, thereby acquiring Moc industry. “We must face competition from
Chau Milk, which holds a sizable market foreign enterprises during integration, but
share in Vietnam’s north. Vinamilk posted this should motivate domestic companies to
net revenue of VND12.122 trillion ($527 mil- VNM 43.3% restructure their production and business,
lion) in the domestic market, up 3.3 per cent like improving technology and production
against 2019, thanks to it picking up GTN- processes, in order to offer higher-quality
Foods. The Blue Point Joint Stock Company FrieslandCampina 15.8% products at reasonable prices,” said Mr. Hai.
(Blue Point) and the Ban Viet Securities TH True Milk 6.1% “Integration also contributes to the elimination
Company (VCSC), meanwhile, successfully Abbott 5.0% of sub-standard products. This is an oppor-
S purchased shares in the International Dairy Nutifood 7.2% tunity for TH to compete with dairy products
Company (IDP) from VinaCapital last August. Moc Chau Milk 2.1% in foreign markets, proving our capabilities.”
IDP then brought in nearly VND992 billion Vinasoy 6.2% SSI Research said that although milk is
($43.1 million) in net revenue in just the Others 14.3% considered an essential commodity, con-
first six months of 2020 and VND114 billion sumption trends may follow the “K-model”,
($4.9 million) in after-tax profit; growth of which means that only a few enterprises see
2.8-fold year-on-year. Source: Euromonitor, SSI rapid growth while others see the exact oppo-
site. It expects single-digit revenue growth
Opportunities and obstacles for the dairy industry this year, based on an
Dairy companies may be posting solid assumption that Covid-19 will be controlled
results after adopting good strategies, but disasters in the central region, affecting TH by mid-2021 and there will be no more social
there remain obstacles to overcome. Though for a short period of time, according to Mr. distancing periods, while overall dairy con-
dairy products are an essential commodity, Hai. “We had to introduce effective solutions sumption will likely increase 7 per cent.
demand among low-income consumers may to ensure that the supply of fresh milk to Investors are increasingly interested in ESG
well be affected by Covid-19, according to consumers was not interrupted,” he explained. (environment, society, and governance) when
SSI Research. For example, companies like According to the VDA, however, the investing in dairy companies, the company
Vinamilk and Vinasoys saw their product domestic dairy industry will continue to grow added, so dairy companies have begun to diver-
mix shift in the first nine months of 2020 this year thanks to increased consumption, sify their products, for example shifting to plant-
towards low-cost items. Consumers in general as demand for high-value dairy products is based drinks, while consumers are also increas-
will be more sensitive about price at least forecast to rise sharply among young people ingly interested in nut-based dairy products.
until the end of this year, so the premiumiza- and the growing middle class. Mr. Nguyen Exports will also become a driving force
tion process, whereby they trade up to more Anh Dzung, Senior Director, Retail Intelligence, to boost growth at domestic dairy companies.
premium products, may slow down. at NielsenIQ Vietnam, told VET that it has For example, in addition to continuing to
Dairy has been one of the top products in observed strong premiumization across all promote exports to traditional markets,
terms of higher purchasing volume via e- categories. “People are willing to pay more Vinamilk has also seen handy exports to
commerce platforms during the pandemic. for high-quality or superior functions,” he countries such as South Korea, China, Singa-
SSI said, however, that the channel will see added. “Consumers also demand greater con- pore, and countries in Southeast Asia, while
lower profit margins than traditional channels venience due to busier working lives, smaller developing new markets in Africa. With rev-
due to the fierce competition at play. Modern household sizes, and rapid urbanization.” enue growth of 7.4 per cent last year compared
trade channels currently account for just 10- VDA’s analysis also noted that the produc- to 2019, its exports contributed substantially
15 per cent of the revenue of Vietnamese tion of raw milk in Vietnam meets just 40 per to the country’s dairy industry overall.
dairy enterprises. cent or so of domestic demand, so this remains Mr. Dzung believes that with Vietnam’s
Domestic brands still dominate the market an industry of potential. Demand for milk in “golden population structure”, rising middle
but competition from foreign brands is there Vietnam is also still low, standing at just 26- class, the major efforts of manufacturers as
for all to see. According to the Ministry of 28 liters per person per year, while the global regards product innovation to meet rising
Industry and Trade (MoIT), under commit- average is significantly higher. Moreover, the demand, and the consistent push for market
ments in new generation free trade agreements government is considering extending the and channel expansion, Vietnam’s dairy indus-
(FTAs) such as the Comprehensive and Pro- School Milk Program for the 2021-2025 period, try continues to boast potential. %
gressive Agreement for Trans-Pacific Part-
nership (CPTPP), the EUVFTA, and the
Regional Comprehensive Economic Partnership REVENUE STRUCTURE IN VIETNAM’S DAIRY MARKET
(RCEP), dairy import taxes on certain countries
exporting to Vietnam will fall to zero per cent Drinking milk 47.6
within the next three years, leading to fiercer
competition between foreign and local products Powder milk 29.0
in price. International dairy giants such as Yogurt 14.5
Abbott, FrieslandCampina, Mead Johnson,
and Nestlé, as well as many smaller dairy firms, Cheese 1.7
are skilled at marketing and product research
and development and will always be competitive Butter 0.7
no matter where they do business. Others 6.5
In addition to the difficulties posed by
Covid-19, Vietnam was also hit by natural Source: Euromonitor, SSI

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