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Difficult for dairy enterprises to recover without a new strategy

Difficult for dairy enterprises to recover without a new strategy

Wednesday 07, 10 2020
Competition in the Vietnamese dairy market has always been tough, while the needs of the new generation of consumers always require innovation from businesses.

➢   The "newbies" are still overshadowed by the big brands

Domestic demand for dairy products was less influenced by Covid-19, a mere 4 percent drop in value compared with a 7.3 percent drop in FMCG consumption growth, according to Nielsen. Milk consumption also accounts for 12% of total FMCG consumption in Vietnam in the first half of 2020, unchanged from 2019.
 
"The game" is still in the hands of the big names. Even Vietnam Dairy Products Joint Stock Company (Vinamilk) also gained more market share during the pandemic. Vinamilk and Moc Chau Milk, respectively, achieved domestic sales growth of 2.5% and 9.7% in the first 6 months of the year, outperforming the whole industry and its peers. Vinamilk currently holds 75% shares of GTNFoods Joint Stock Company, thereby holding dominant power in Moc Chau Milk.
 The
The reason why Vinamilk is able to gain more market share is thanks to its diversified products and extensive distribution network. SSI forecasts that Vinamilk's revenue growth in 2020 will be 6% and Moc Chau Milk will be 8% in the domestic market, while the revenue from overseas markets will increase by 5-7%. It is estimated that Vinamilk will achieve steady growth in net profit of 8.8% by 2021.
 
Meanwhile, most of the "recruits" in the dairy market have "lived with" losses in the past few years, typically Anova Milk belonging to Anova Corp Agriculture Company owned by Bui Thanh Nhon (founder of Novaland). In 2019, Anova Milk's revenue reached 52 billion VND, a decrease of 27% compared to 2018.
 
The company continues to suffer losses, accumulated losses are at 200 billion dongs, negative equity is tens of billion dong, while the brand has not had a foothold in the market.
 
Previously, in 2015, Anova shook hands with Kerry Group (Ireland) to enter the dairy market, with the first product being baby formula - Anka Milk, then expanding liquid milk and functional milk products. … Anova's goal in the first 3 years is to hold a 5% market share in the dairy industry in Vietnam.
 
Phase I (2015-2017), Anova's subsidiary, Anova Milk, commits to invest over USD 50 million in the entire supply process, from quality control of Irish Green Farms to formula research. nutrition, production, and transport, thereby forming a closed traceability process.
 
The first powdered milk products will be sold domestically under the Anka brand, developed, produced, and packaged exclusively by Novaland and Kerry Group at the ILAS factory (Spain).
 
However, choosing to hit the baby formula segment has caused this rookie to pay the price. Because this is the most volatile and sensitive segment; Consumers can be easily receptive, but eliminated, also very fast.
 
In addition, powdered milk is a segment with fierce competition, with the presence of more than 300 brands, of which foreign milk accounts for 75% of the market share. That is the reason why Anova Milk's name, after years of steep investment, is still overshadowed.
 
Not only Anova Milk, but a number of new companies joining the dairy industry are also at constant losses. Choosing a niche market with nutritional products for children, Vietnam Professional Dairy Products Joint Stock Company (VPMilk) has continuously suffered losses in the past 3 years, accumulated losses as of the end of 2019 are more than 80 billion VND.
 
Or the case of International Dairy Joint Stock Company (IDP), recently, VinaCapital Fund Group VOF and Daiwa PI Partners have officially divested from this business after 5 years of joining with the ambition to make IDP become a new force. on the dairy market.
 
IDP has huge losses in the period 2016-2018. As of June 30, 2020, IDP's profit increased sharply, plus VND 332 billion raised from selling shares, equity increased from negative VND 41 billion at the beginning of the year to VND 441 billion, but to Currently, IDP still has accumulated a loss of 428.5 billion dongs.
 
However, Blue Point and Viet Capital Securities Joint Stock Company (VCSC) quickly completed the transfer of shares of IDP from the VinaCapital group.
 
At that time, Mr. Tran Bao Minh, former CEO of IDP, affirmed that no one was crazy to buy a company with big losses like IDP, even VinaCapital sold IDP with profit, and investors who bought it also made a big profit. According to Mr. Minh, having lost a trillion dong to build a dairy company like IDP today, there will be a lot of Vietnamese giants willing to pay money to do it right away.

➢   Establish a "new playing field"

The constant loss of many recruits has shown extremely fierce competition in the Vietnamese dairy market. However, according to an expert in the dairy industry, if businesses have the patience and resources to pursue, they can still squeeze in to win this attractive "piece of cake".
 
Because, the existing names on the market still play mainly on the "old playground", no one has really created a new more attractive playground, from meeting the increasingly different needs of consumers. use the new generation.
 
The "old playground", according to this expert, is fresh milk and milk products from dairy cows in paper boxes, while the "new playground" includes a variety of milk made from seeds, from oil, without animal and vegetable fats, in line with the natural new lifestyle of the modern consumer generation.
 Establish a
In addition, the packaging also has many new types, which are both good for the environment, and have more attractive designs than the paper milk box, which is already very boring to consumers, especially children.
 
“There are many new consumer trends that will emerge, creating opportunities for new players in the market, if they see these new opportunities in front of others, and dare to invest capital and human resources to follow. the same time until success, "this expert said.
 
It can be seen that human resources, capital, relationships, knowledge, experience, and a deep understanding of the industry that the enterprise determines to join are the factors that will determine success.
 
Ms. Nguyen Thi Thu Phuong, General Director of VPMilk, showed no fear when entering the big game of the dairy industry. The capital market is always open and no one has the power to decide which firms the market belongs to, except for the consumer. Meanwhile, she has the experience, has made quality products.
 
Entered the dairy industry in 2014, but it was not until 2 years later that VPMilk launched formula products for babies and pregnant mothers under the brand's IQLac Pro and IQLac Pro Mom.
 
By 2017, when shaking hands with Hoang Anh Gia Lai Group and promoting marketing campaigns, VPMilk launched many product lines branded IQLac Pro to consumers such as children, teenagers, and mothers. elected, the elderly, the malnourished, the people in need of rehabilitation ...
 
Another "competitor" Vitadairy is also quite eager in this market. Vitadairy products focus on nutritional products for the elderly, sick people (such as CaloSure, CaloSure Gold, Nepro 1, Nepro 2, Gluvita…), nutritional products from goat's milk or nutritional products. care for children.
 
Recognizing the efforts of these recruits, industry experts still affirm that VPMilk and Vitadairy can only play in the "village pond", not enough to "set sail" to the big sea, and catch big fish.
 
"To control the game, it is necessary to redefine the needs of the old consumer generation and create a new consumer generation", the expert said.
 
Recently, Nutifood, after a long time focusing on specialties milk, decided to explore a new field with the daily use of milk products for all families, the same quality as imported milk - NutiMilk fresh milk.
 
After this move, it is speculated that about a year from now, Nutifood will become a "ranked" player in the dairy market. The reason is that Nutifood has many unique, or interesting, "weapons" that even the number 1 brand on the market today does not have or know how to exploit to turn advantages into weapons.

Source: Vietnam Finance - Translated by Vietnam Credit

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