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According to comprehensive reports, the market outlook for milk and dairy products is not too positive in 2023. The period of struggling with the Covid-19 epidemic, causing disruption in the global supply chain, has caused supply shortages. The cost of feed for livestock increases leading to an increase in prices. Combined with that, the influence from the Russia-Ukraine war has also contributed to a sharp increase in input materials for the dairy processing industry.
I. Overview of Vietnam dairy market in the first 6 months of 2023
1. General situation of Vietnam dairy market in the first half of 2023
According to the comprehensive report, the import turnover of the milk and dairy products market in the first 4 months of 2023 reached 406.39 million USD, down about 9.7% compared to the first 4 months of 2022.
In April 2023, the import turnover of this product group reached 89.83 million USD, down 26.4% compared to March 2023 and 20% compared to April 2022.
According to the report, New Zealand, the US, France and Thailand are the main markets supplying milk and dairy products to Vietnam. In which, in the first 4 months of 2023, Vietnam dairy market imported the most from New Zealand, with 178.22 million USD. Accounting for 43.9% of the total import turnover of the country’s dairy market, an increase of 23% compared to the first 4 months of 2022.
In addition, imports of milk and dairy products from the US market decreased sharply by 59.4% compared to the first 4 months of 2022. Only reaching 32.81 million USD, accounting for 8.1% of total imports. Imports from Australia of Vietnam dairy market also decreased sharply by 48.8%, reaching only 17.66 million USD, accounting for 4.4%. In addition, the import situation from some other markets such as: from France reached 18.22 million USD, accounting for 4.5%, an increase of 22.7% and from Thailand reached 18.03 million USD, accounting for 4.44%, decreased by 19.4%.
In addition to the decline in imports, domestic milk production also faces a more negative situation. The proof is that, according to data provided by Data Factory, in the first quarter of 2023, the total amount of milk and cream production that was not condensed, not mixed with sugar or other sweeteners, with a fat content of no more than 6%, only stopped at x thousand liters, down 40% compared to the same period last year.
Similarly, the total amount of milk and cream production that has not been condensed, has not added sugar or other sweeteners, and has a fat content of over 6%, also only stops at x thousand liters, a decrease of 32.47% compared to the same period of 2022.
However, in the second quarter, the production and business situation of the dairy market seems to have gradually recovered. According to VIRAC’s report, in terms of the whole market, the output of raw milk supplied in 6 months recorded x thousand tons (an increase of about 8% over the same period in 2022).
Source: According to VIRAC’s report
Also according to VIRAC, fresh milk production will increase by about 6% by 2022, reaching x million liters. Meanwhile, powdered milk output will decrease by about 1% over the same period to x thousand tons in the first 6 months of 2023.
Source: According to VIRAC’s report
Although domestic fresh milk market output has shown signs of increasing, by the end of June 2023, imported milk output is still decreasing sharply. Import turnover of milk and milk products will decrease by x% in the first 6 months of 2023 when:
- Importers actively import at lower costs in terms of both milk prices and transportation costs.
Source: According to VIRAC’s report
New Zealand is still the main supplier to the Vietnamese market, accounting for more than 38% of the market share, up x% over the same period in 2022. Some other strong growth markets include: France (+x% over the same period last year), Belgium (+x% over the same period), Singapore (+x% over the same period).
However, there were also many markets with deep declines, especially the US (-x% y/y) and Australia (-x% y/y).
2. Vietnam dairy industry faces pressure from record high input material prices
In addition to the decline in the domestic dairy market, the world price of raw milk is increasing by 60%, causing domestic enterprises to struggle, to increase prices and find ways to balance costs.
According to the general report, in the first 6 months of the year, the price of dairy ingredients in Europe has twice reached new peaks of 5,100 euros/ton and in South America is 4,300 USD/ton. Compared to the same period in 2022, this year Vietnam has increased the import of raw milk from the US.
As for raw materials imported from New Zealand – the main import source of Vietnam dairy market, is decreasing because output is more limited because of the impact of Covid-19 causing the country to lack labor. This has further contributed to the high price of input materials of domestic dairy enterprises.
Under the pressure of input material prices, many domestic dairy brands have changed their prices to new ones. According to the consolidated report, domestic and imported yoghurt, liquid milk and powdered milk have all been adjusted up by 5 to 10% in the first months of the year.
However, there is a positive signal, according to analysts, that milk powder prices will cool down in the second half of 2023 due to reduced import demand from China and weak demand in the global milk market in the short term. term. Therefore, this will be an opportunity for dairy manufacturers to record gross profit margin recovery in 2023 when pressure from raw material costs begins to ease.
The next good signal is that the price of milk powder (USD/ton) – a raw material for milk production – has cooled down. As of March 21, 2023, milk powder prices have decreased by 29.8% over the same period and are 32.1% lower than the peak in the same period in March 2022.
Milk powder prices are forecast to continue to decline until the end of 2023 due to reduced import demand in China and weakening global milk consumption demand in the short term, while milk powder production will increase in 2023. .
3. Big names in the dairy industry are welcoming signs of recovery after a period of hardship
In 2023, dairy market giant Vinamilk has set a plan to achieve total revenue of 63,380 billion VND, an increase of 5.5% and profit after tax of 8,622 billion VND. However, in the first quarter of 2023, the profits of dairy market businesses tend to go backwards compared to the same period due to pressure from costs. Only Moc Chau Milk reported a profit increase of nearly 18%, reaching 101 billion VND. .
According to Vinamilk’s board of directors, milk is currently a highly sensitive product because the majority of Vietnamese consumers do not consider milk to be an essential nutritional product. Therefore, demand for dairy market products will weaken as consumers have to tighten their spending habits. Besides, Vinamilk is facing increasing competitive pressure in most dairy product lines, especially in the powdered milk segment.
However, in the second quarter of this year, according to the preliminary report on the business situation, the dairy market giant recorded much more positive business signals when total revenue in the second quarter reached 15,200 billion VND, profit after tax of 2,220 billion VND. Marking growth of 1.6% and 5.6% respectively over the same period in 2022, and an increase of 8.9% and 16.5% compared to the first quarter.
Accumulating 6 months, it is estimated that Vinamilk’s revenue is nearly 29,200 billion dong and profit after tax is more than 4,100 billion dong. Compared to the goals set at the 2023 Annual General Meeting of Shareholders, Vinamilk has achieved 46% of the revenue plan and nearly 48% of the initially set profit after tax target.
Besides Vinamilk, in Vietnam, most dairy businesses are “strained” under pressure from rising input raw material prices, along with inflation causing reduced consumption.
As a leading giant in the industry, Vinamilk said that in the first 6 months of the year, raw milk prices increased by 60-70%, some groups even increased by 100%. Along with that, skyrocketing animal feed and transportation costs have contributed to high production costs.
Obviously, TH True Milk, Nutifood, VPMilk – big brands of the dairy market are not out of the above context. Most dairy companies have adjusted their selling prices on the market. According to experts, this price increase rate is lower than the price of input materials. Therefore, this year’s milk market profits are considered by securities companies to be lower than in previous years.
According to reports compiled from e-commerce platforms, sales of TH True milk products in July 2023 reached the highest level of 8.7 billion VND and 35.8 thousand in output. The market scale of TH true milk in July 2023 also reached 8.7 billion in sales and grew 61.5% better than June 2023.
Another big player in the fresh milk market, Dalat Milk, according to reports on e-commerce platforms, Dalat milk’s market size in June 2023 reached 220.0 million in sales and grew better than May 2023 54.1%. Despite receiving good growth signals, overall in the last 6 months, Dalat Milk’s revenue decreased -39.2% compared to the previous 6 months.
Find out more information: Vietnamese dairy market enterprises.
II. Opportunities for recovery and growth of Vietnam dairy market 2023
1. Is there a chance of recovery equal to the pre-epidemic time of the Vietnamese dairy market?
On average, Vietnam has 1 million children born each year and are also the ones who use dairy products the most in their first years of life. Vietnam’s population also tends to grow, thereby increasing the number of potential customers for the Vietnamese dairy market.
According to VIRAC, the dairy market size is expected to grow from 613.96 billion USD in 2023 to 840 billion USD in 2028, with a CAGR of 6.47% during the forecast period (2023-2028).
Forecasting the milk market in 2023, experts predict that milk powder prices will cool down due to reduced import demand from China and global milk consumption demand may weaken in the short term. Therefore, dairy producers will have the opportunity to record gross profit margin recovery in 2023, when pressure from raw material costs eases.
In order not to be shaken by the sudden price storm of raw materials in the world, the Vietnamese dairy market needs to transform to build farms in the direction of modernization, developing according to sustainable and diverse green trends.
2. The ambition to compete in the growth of dairy giants
According to many forecasters, this year will continue to be a challenging year for the Vietnamese dairy market when domestic channel consumption is facing a decline due to the difficult economic situation. Meanwhile, efforts to promote growth in export markets do not seem to be enough to compensate for the domestic market.
Macroeconomic difficulties can cause milk consumption demand to increase slowly, thereby causing revenue to grow slowly. According to Vinamilk’s assessment, competitors in the dairy market are making moves that gradually threaten Vinamilk’s market share in some product segments, so the company will have to consider increasing product prices.
In 2023, raw milk prices are expected to return to the 2021 price range, which is a condition for Vinamilk’s profit margin to grow again. However, the company will also have to plan to adjust the purchase price of fresh milk from the farm and packaging costs by 1.5% – 5% so that gross profit will increase again, but at a slow pace.
According to the newly published Annual Report, in the period 2022-2026, Vinamilk plans to expand its market share by 0.5%, to reach 56%, and revenue by 5% to reach VND 64,070 billion despite the TH company’s business is still facing many difficulties. Further goals, Vinamilk expects to reach 86,200 billion VND in total revenue and 16,000 billion VND in pre-tax profit by 2026, while achieving the goal of accounting for more than 63% of total dairy market sales.
Meanwhile, another giant – TH Milk is focusing on development and pioneering on the path of green transformation.
The TH Group’s strategy for reducing greenhouse gas emissions begins with the adoption of initiatives and innovations in transformation as well as the use of advanced green technologies in energy management efficiency at TH’s factories, while using renewable energy…
Accordingly, TH Group also set a target to reduce direct greenhouse gas emissions at farms and factories, averaging 15% per year in the scope of direct greenhouse gas emissions. As a result, with a lot of synchronous solutions and drastic actions, in 2022, TH’s farm system has successfully reduced emissions by more than 20% per product unit on average and exceeded the set plan.
The above information is updated from “Vietnam food processing industry report for the second quarter of 2023“. The report provides full information on macroeconomics, trade supply and demand of the dairy market in Vietnam, relevant information and forecasts from the latest updated data.
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