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Vinamilk’s ambition to enter China through yogurt

Vinamilk’s ambition to enter China through yogurt

Wednesday 05, 02 2020
Vinamilk held a "Program to launch Vietnamese dairy products in China" in September 2019.

As the leading dairy company in the domestic market share, in recent years, Vinamilk has been expanding its business activities to the region and the world to promote growth. Notably, the export revenue of Vinamilk in the first 9 months of 2019 reached VND 3,524 billion (up 8.2% over the same period). This growth marks a significant recovery of the Middle East market, currently accounting for 85% of direct export sales of Vinamilk.

In addition, Vinamilk representing Vietnam's dairy industry participated in the "Vietnam Dairy Product Launching Program in China" in September 2019. This event helps Vinamilk yogurt to hit Hema smart supermarket shelf in China.

Expanding export markets - Vinamilk's long-term strategy

With these moves, Phu Hung Securities (PHS) stated that export sales continue to contribute the growth of about 7% to the total revenue of the Company, with approximately VND 8,362 billion in 2019 and increase to VND 8,947 billion in the following year, in which market expansion is Vinamilk's long-term strategy.

​In summary, since 2018, with the consumption trend showing signs of slowing growth, while the main export markets of the Middle East are also affected by the political instability, Vinamilk has been the leader. It is also necessary to change its focus, focusing on developing domestic market share as well as expanding the export system to countries in the region and Africa.

In particular, international business activities continue to penetrate into international markets with the strategy of transforming the model of exporting traditional goods into forms of deep cooperation with distribution partners in new key markets, gradually reducing dependence on the traditional market.

By the end of 2018, Vinamilk exported goods to 40 different countries through 70 customers. Three new markets opened in 2018 in ASEAN, Africa and the recovery of the Middle East market helped Vinamilk's export segment grow well in 2019.

Entering China’s market through yogurt

In particular, in the Chinese market, according to the Chinese Ministry of Agriculture, the country's milk supply is currently only producing enough to meet 75% of demand. In 2019, China is expected to import 39.43 million tons of milk and milk products, of which the amount of imported fresh milk will be about 750,000 tons and about 650,000 tons of milk powder. This will be an opportunity for businesses to boost exports, including Vietnam.

Entering China’s market through yogurt

Taking advantage of this opportunity, Vinamilk held a "Program to launch Vietnamese dairy products in China" in September 2019. This event will give Vinamilk many opportunities to grow its Export segment when the products are distributed by large supermarket chains such as Hema of Alibaba, Dennis Department Store ... Vinamilk aims to increase the structure of milk export to 25% by the period between 2021 and 2022. Currently, Vinamilk is still waiting for China to issue a sufficient number of exported products, expected to be completed in the fourth quarter of 2019. In the meantime, Vinamilk is still building a distribution system in China. However, Vinamilk judges that this market is very fierce in the competition for liquid milk and powdered milk, so initially it will focus on yogurt with its own brand of Chinese market as the product will also be made according to Chinese taste and packaging code is designed entirely in Chinese.

Vinamilk's subsidiaries overseas have experienced positive sales growth in 2018. Specifically, Driftwood's revenue reached more than USD 116.2 million, equivalent to VND 2,674 billion despite the negative fluctuations of the US market. Vinamilk Europe has purchased and exported 21,000 tons of raw materials to VNM and other subsidiaries. Vinamilk's revenue recorded in 2018 was nearly 30.9 million USD, equivalent to VND 711 billion. Angkormilk recorded a good growth rate with a total revenue of US $ 39.8 million in 2018, equivalent to VND 915 billion (up 98.4%).

In the first 9 months of 2019, Angkor Milk's revenue increased by 35% over the same period.

On the other hand, the domestic business of Vinamilk is gradually recovering. It is known that Vinamilk focuses on the output growth of some key product lines with the growth of up to two digits. Moreover, a number of high-end product lines also recorded impressive growth, consistent with Vinamilk's portfolio premium strategy. In addition, Vinamilk has won the National School Milk Program in more than 15 provinces and cities in 17 provinces participating in the bidding, contributing to the physical improvement of Vietnamese children. Net revenue of the Company's domestic business reached VND 35,821 billion (up 5.8%) in the first 9 months of 2019.

Recently, Vinamilk has successfully acquired Moc Chau milk company, raising its ownership from 43% to 75% after purchasing an additional 79.6 million shares of GTN at the price of VND22,800/share, with a total value of nearly VND 1,800 billion on December 18, 2019, recorded by PHS. This deal is expected to bring benefits to Vinamilk in the long term such as increasing market share and expanding land bank of material areas to raise dairy cows.

​>>> Vietnam dairy industry: Increasing domestic demand​

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