Vietnam is high in population as well as population growth rates, approximately 1.2% per year. Vietnam is also considered a potential market for milk producers. High GDP growth rate, 6-8% per year, increase in average income per capita at 14.2%/ year coupled with concern about health keeps demand for milk and dairy goods always at high level in the country. According to VDA, average milk consumption per capita in Vietnam was 15 litres/ capita in 2010 and is expected to double, reaching 28 litres/ capita in 2020. Euromonitor International said that revenue of the dairy industry in 2014 was 75.000 billion VND, increasing by 20% as compared to 2013. In detail, the revenue growth mainly came from powdered and liquid milk, accounting for 74% of the market share collectively. One notable gap in the Vietnam dairy industry is the lack of input materials in which domestic supply has only met 30% of the demand. Meanwhile, the quality is low and inconsistent because the input mainly comes from small, low-productive producers.
According to the Vietnam dairy industry development plan which outlines strategy to 2020, coupled with the view towards 2025, domestic milk production will reach 660 million tons, satisfying 35% of demand in 2015, 1 billion litres( satisfying 38% of demand in 2020), and 1.4 billion litres (40% of demand in 2025). In fact, about 70% of liquid milk produced in Vietnam is reconstituted milk; meanwhile, demand for sterilized and pasteurized is rising due to the change in consumption habit. Realizing the potentials in Vietnam, many companies have been joining the Vietnam dairy industry. Specially, most of the companies are; nowadays, focusing on developing their own material supply to address the biggest gap in Vietnam- the lack of input materials. Most of the cows in Vietnam are raised separately in small-scale farms by low level techniques and inferior technologies, resulting in low productivity and high price of materials. According to Vietnam Industry Research and Consultant (VIRAC), West Europe has the cost from 45-55 USD. While America has the cost at about 35-60 USD, depending on the development of the area. Countries like Argentina have suitable weather and big farming land, helping reducing the average cost. Cost of production in Australasia is 36.6 USD, while it is 30 -35 USD in Australia and 41-42 USD in New Zealand. The discrepancy comes from food price, land price and the revaluation of NZD recently. NZ used to have the most competitive price in around the year 2000( 12USD/ 100kg) but the revaluation of the currency and rising inputs price trebled the price. In general, the cost of production did not fluctuate strongly throughout the period. Vietnam has the average cost of production because diluted raising and scale, does not achieve the economics of scale, low productivity ( 12-15 liters/day) and high cost of food and veterinary.