Prospects of Vietnam’s dairy industry in 2020

Looking back on a year of stable growth for the dairy industry in 2019

Vietnam’s dairy industry in 2019 has relatively good growth, especially liquid milk, yogurt and condensed milk. According to statistics from the General Statistics Office, liquid milk production in 2019 reached over 1 million liters, up 8.32% compared to 2018. The country produced about 390 thousand tons of yogurt, an increase of 17.65%; condensed milk production was over 150 thousand tons, down 4.98% from the previous year.

Regarding sales revenue, liquid milk increased by 8.32%, yogurt increased by 17.8% and condensed milk increased by about 5% compared to 2018. According to VIRAC, the condensed milk market, although growing slowly, will still maintain the growth rate. Stable growth is around 5%/year for the next 5 years.

Import turnover of milk and milk products to Vietnam reached over 1 million USD in 2019, up 8.8% over the same period in 2018, mainly through markets: New Zealand, Southeast Asia, EU and US. The export of milk and milk products of Vietnam has also achieved significant progress, starting from only 3 enterprises exporting to 10 countries in 2015, but now it has sharply increased with about 10 enterprises exporting to more than 50 countries. Nationally, mainly Vinamilk, TH True Milk, Moc Chau Milk… Export turnover of milk and milk products is estimated to reach over 10 trillion VND in 2019, up 13.46% compared to 2018.

 

Typical trends of the dairy industry in early 2020

Choose plant milk like soy milk and barley milk instead of cow’s milk. Thanks to its high protein content, rich in nutrients, the consumption of plant milk has significantly increased in recent years. According to Nielsen, the total value of branded soy milk consumption increased by 13% in the first 10 months of 2019, and Vinasoy’s revenue growth reached 15% after the first 9 months of 2019.

Develop nutritious milk products for the elderly. Although the prevalence of health problems among the elderly in Vietnam is high, the use of nutritional supplements such as milk in this age group is very limited. In 2019, the powdered milk market for adults in Vietnam grows to 11%. This shows the potential for good growth of nutritious milk products for the elderly in Vietnam in 2020.

Proportion of elderly Vietnamese with health problems, 2019

Source: VIRAC

Raw milk prices and average selling prices both increased. Many dairy companies have been planning to adjust the price increase within 5% compared to the previous declared level. Price advantage is important, but for sensitive products like milk, consumers will be willing to pay the extra cost in exchange for quality assurance.

The trend of distribution through e-commerce channels is particularly interested. Specifically, revenue from these channels has grown double digits for many quarters of 2019. Sales through modern trade is a challenging segment for dairy companies, due to fierce competition and low barriers to entry.

Promote exports to potential markets. Typically it is Vinamilk – an active business in foreign markets. In the first 3 months of 2020, Vinamilk’s main export is the UAE (accounting for 75% of export sales). In addition to the Philippines, Cambodia, and Vinamilk markets, Vinamilk has exported 100% Organic milk according to European standards to the Singapore market – a famous capital market, and has been well received.

Particularly in the Chinese market until the end of 2019, Vinamilk’s products are available in these 8 provinces and cities and are present in big supermarket chains such as Hema of Alibaba.

 

Vinamilk export market in the first 3 months of 2020

Source: VIRAC

Prospects of the dairy industry 2020 and future M&A deals

VIRAC forecasts that the dairy industry prospect in 2020 will continue to grow at a high level, increase investment capital in dairy farms to reduce dependence on imported milk and to meet the needs of people’s domestic consumption. The goal for 2020 is to produce 2.6 billion liters of liquid milk, with an average consumption of 27 liters/person/year. Domestic fresh milk will reach 1 billion liters to meet 38% of demand, export turnover will reach 120-130 million USD.

Besides, the dairy industry is an attractive potential market for businesses, but it is also not a “piece of cake”. Up to now, Vietnam milk market has had fierce competition between big and familiar names such as Vinamilk, TH True Milk,… and the “large enterprises about milk” in the world such as Nestle, Abbott,… M&A deals are considered to be the best solution for current dairy companies to strengthen their position in the market.  

In addition, Vingroup and Masan – two multidisciplinary business giants are eager to find opportunities to enter the Vietnamese dairy market with M&A deals. With the promise of huge revenue and profit from the market of nearly 100 million Vietnamese people, as a stepping stone to develop in the market of 600 million ASEAN people, furthermore, it is an opportunity to step into the Chinese billion market, the Vingroup and Masan join the game is just a story sooner or later.


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