Investors eye on dairy industry

Thanks to average annual growth rate of  15-20 percent the dairy industry has potential to attract investment despite the ongoing economic crisis in the country.

Consumers are choosing dairy products in a supermarket (Photo: SGGP)

Last month, Vinacafe Bien Hoa Company, known as a coffee manufacturer, announced its intention to join in dairy industry. Economists said that the coffee manufacturer’s ambitious plan to “encroach” dairy industry will make the market more excited as food producer Masan, which reportedly obtain 53.2 percent of Vinacafe Bien Hoa’s shares, always surprises its counterparts and competitors.

Meanwhile Vinacafe Bien Hoa is nurturing the plan to encroach the dairy industry, property developer Hoang Anh Gia Lai Company officially participated into the industry by cooperating with Nutifood, a local milk producer.

Hoang Anh Gia Lai spent around VND6.3 trillion (US$ 297 million) on milky cow farms to raise 120,000 cattle. Nutifood will consume milk to make dairy products to the market. Accordingly, Nutifood also invested in VND5 trillion (US$236,150,000) milk processing plant imported  from German and Sweden.

Nutifood’s has tiny market share. Currently Vinamilk has a 50 percent market share, next followed by Friesland Campina with 25 percent, TH True Milk with 7 percent and Dalat Milk, Ba Vi, Longthanh Milk, Nutifood and Vixumilk take up little market share.

It is questioned whether Nutifood will make a breakthrough in gaining market share with the assistance of Hoang Anh Gia Lai as other manufacturers are trying to keep or even expand its market share.

Vinamilk planned to increase its selling costs to 30 percent though it has raised the selling cost to 40 percent in 2013 compared to 2012’s.

The announcement of Hoang Anh Gia Lai or Vinacafe Bien Hoa’s encroachment into dairy industry will come as no surprise for everyone as the industry is so attractive to investors. Vietnamese consume little milk than other Asian countries.

For instance, in 2013, Vietnam consumed 15 liter of milk per person per year while it is 35 liter per person per year in Thailand and it is 45 liter in Singapore. Vietnamese parents will cut down upon over other expense to buy milk with the hope of improving their children’s height.

To maintain and expand market share, most of enterprises have their own strategies to invest in milk cow farms, production and marketing. Vinamilk is nurturing the ambition for US$3 billion turnover in 2017 and becoming one of 50 world biggest milk manufacturers.

From 2007, Vinamilk has invested in VND800 billion (US$37.7 million) building five big milk cow farms to raise around 8,000 Australian-imported cattle which produce 90 tons of milk everyday. In the future, the company will build more farms worth VND3 trillion (US$ 141.6 million) in the southern province of Tay Ninh, the central province of Ha Tinh and two farms in the northern province of Thanh Hoa. In addition, Vinamilk also promoted its investment projects in abroad.

The TH True Milk planed to operate Mega Plant with capacity of 1.700 tons of milk  per day or 500 million liters a year. The TH Tru Milk has reached turnover of VND6 trillion after three year operation. It targets to capture VND15 trillion (US$ 708,450,000) in 2015 and VND 23 trillion in 2017 and take up 50 percent of dairy market share.

In addition to investment in farms and plants, these companies will boost advertising campaign.

By Duc Manh - Translated by Uyen Phuong

Other news