VietnamCredit
VietnamCredit About Us Cafe€redit Contact Us
Login
0
USD
Go to cart
Checkout
Overview of Vietnam’s dairy industry in 2020

Overview of Vietnam’s dairy industry in 2020

Wednesday 26, 08 2020
Since the beginning of the year, Vietnam’s dairy industry has experienced continuous growth. In addition, there have been several M&A deals between businesses within the industry.

According to Nielsen, domestic demand for dairy products is not largely affected by Covid-19. In particular, it decreased by only 4% in value while FMCG consumption growth decreased by 7.3%. Milk currently accounts for 12% of total FMCG sales in Vietnam, which is similar to that in 2019. Notably, the retail sales of milk recorded a 3.4% growth in the first 6 months of 2020.

There have been many M&A deals

There have been many M&A deals
At the end of last year, Vietnam's largest dairy company, Vinamilk, acquired Moc Chau Milk through its parent company GTNFoods. Right after being a subsidiary of Vinamilk, Moc Chau Milk recorded a domestic revenue growth of 9.7% in the first 6 months of 2020, outperforming the industry average. Vinamilk itself also benefited from achieving a growth rate of 2.5% over the same period. With other big players in the industry, such as Vinasoy, recording a 6% decline in sales in the first half of the year, chances are high that Vinamilk’s market share will be expanded.
So far, there has been a new M&A deal in the dairy industry when Blue Point and VietCapital acquired International Dairy JSC (IDP). Continuously suffering from losses due to negative equity, IDP suddenly enjoyed large profits after it belonged to new investors.
In the second quarter of 2020, the company recorded revenue of VND 1,114 billion, which doubled revenue for the same period in 2019. IDP gross profit margin soared to 36%, on par with the profit margins of leading FMCG players such as Masan Consumer and Vinasoy.
Thanks to a sharp increase in profit, and an additional VND 332 billion mobilized from selling shares, IDP's equity increased from negative VND 41 billion at the beginning of the year to VND 441 billion. However, IDP still has accumulated loss of VND 428.5 billion.
On the contrary, Quang Ngai Sugar’s business results for the second quarter of 2020 were quite negative. Its revenue was VND1,761 billion, a decrease of 12% over the same period last year. In the first half of the year, the company recorded revenue of VND 3,122 billion, 20% lower than that in the first half of last year. Its after-tax profit dropped by 16.5% to VND 488 billion.

Retail sales of milk is on the rise

Retail sales of milk is on the rise
SSI Research said that the dairy industry is changing its structure due to the Covid-19 pandemic. Specifically, the modern trade (MT) channel continues to outperform the traditional channel. Milk is one of the products with increased purchase volume through e-commerce platforms during the pandemic. Sales through MT have grown double-digit for many quarters, but only account for 10-15% of total sales of dairy companies.
Being aware of this trend, F&B companies have been actively increasing penetration into the MT channel. However, this channel may have lower margins due to high selling and discount costs. On the other hand, a saturated domestic market may motivate firms to export more milk. Currently, all domestic dairy products are exported to China, which benefits leading firms such as Vinamilk, TH True Milk, Vinasoy, Moc Chau Milk.
Meanwhile, the strategy to premiumize products is being stalled. Although milk is an essential consumer commodity, demand from low-income consumers could still be affected by the negative impact of the Covid-19 pandemic. 
According to the General Statistics Office, the average income of the people has decreased by 5.1% during the pandemic, and rural people are more severely affected. This prevents an increase in the prices of dairy products. Consumers are becoming more price sensitive in the period 2020-2021, so premiumizing dairy products in order to increase the prices is impossible at the moment.
According to SSI Research, if the Covid-19 pandemic is completely controlled in mid-2021, it will be possible for large dairy firms such as Vinamilk or Vinasoy to maintain their steady growth and gain more market share.

Source: theleader

You may also like

50 leading brands in 2019
Friday 18, 10 2019

50 leading brands in 2019

Forbes Vietnam announced the 50 most valuable Vietnamese brands in 2019,...
0
1
+84 981861066