Vietnam’s dairy game hits next level

Macroeconomic struggles and the sharp increase in input material prices since the beginning of this year have not reduced the ambition of foreign enterprises to enter the Vietnamese dairy market.

According to the announcement made more than a week ago, South Korean bakery company Orion Food Vina (OFV) decided to join the Vietnamese dairy industry after cooperating with Thai dairy company, Dutch Mill. The result of the joint venture is the appearance of two new brands, Choco IQ milk and ProYo drinking yogurt, which are being launched this month.

OFV is a member company of Orion Group, which currently owns confectionery brands such as ChocoPie, Custas, and O’star with the top market share in the bakery industry in Vietnam. Dutch Mill has 70 per cent of Thailand’s market share.

“Making a quality dairy product is not something that can be done quickly, which is why Orion chose to cooperate with a big Thai brand. The two sides have a similar mission,” an OFV representative said.

Vietnam’s dairy game hits next level

Continuing to expand

Possessing abundant potential, Vietnam’s milk and dairy product market has consistently been an attractive destination for foreign brands.

In June 2022, the market welcomed Morinaga Milk Industry, a Japanese enterprise with 100 years of experience in developing dairy products, after the acquisition of shares of Elovi Vietnam JSC.

Morinaga Milk aims to increase sales outside of Japan to more than 15 per cent of total sales by 2029. In Vietnam, the company also aims to achieve around $73 million in sales.

According to a research report on Vietnam’s dairy industry 2022-2031 published by Research and Markets in July 2022, the value of milk and dairy products imported into Vietnam reached nearly $12 billion in 2021 and is forecast to increase by about 12 per cent per year until 2031.

There is room to expand, as the demand for milk consumption per capita in Vietnam will reach 40 litres by 2030, along with the middle class and people’s awareness of healthcare increasing. The report also said that in spite of the high demand, domestic fresh milk production could only meet about 40-50 per cent of the domestic demand, with the rest relying mainly on imports.

Anchor Food Professionals (AFP), a dairy brand familiar to Vietnamese consumers, said that they consider the country a key market and will continue to seek opportunities to expand its business here. “We would like to encourage Vietnamese businesses to use our high-quality ingredients for their businesses,” an AFP representative told VIR.

Currently, this brand supplies over 3,000 food and beverage outlets across the country. AFP is an ecosystem brand of Fonterra, one of the largest dairy manufacturers in the world, originating in New Zealand. Fonterra has been supplying the Vietnamese market for over 30 years and is a major supplier of dairy ingredients to key Vietnamese manufacturers.

“Vietnam is New Zealand’s seventh-largest dairy export market by value and its products account for approximately 40 per cent of total dairy imports in Vietnam,” the AFP representative added.

Domestic dairy dominates

The entry of more foreign enterprises is creating a competitive market to give Vietnamese consumers the opportunity to choose various products with increasing quality. However, the weakness of these enterprises is that they lack their own raw material areas, and have to depend mainly on imports to ensure the quality according to their own formula.

“We import high-quality materials from overseas or buy from the appointed local distributors for our products to ensure the best quality for our products,” said Yoshinobu Matsumoto, marketing director of Elovi Vietnam.

Meanwhile, the domestic dairy market is still under the control of Vietnamese enterprises with about 65 per cent of the market share held by Vinamilk, TH Group, Nutifood, and Vinasoy, according to Euromonitor. The remaining market belongs to foreign enterprises including FrieslandCampina, Nestlé, and around 10 per cent is there for the taking for new brands.

Even though they have the advantage of understanding the market and customers, domestic groups have to change and improve service quality to protect their position.

Vinamilk, which holds up to 40 per cent of the dairy market share, continues to expand cooperation, invest in factories and farms with an estimated investment capital of up to $600 million to be ready for the future.

In order to enhance product quality, Vinamilk keep investing in R&D through strategic cooperation with nutrition expert groups such as Chr. Hansen, DSM, Beneo, AKK… to develop products of international standards.

The company uses raw fresh milk from domestic farms and through association with local dairy farmers. Vinamilk has made investments to maintains a system of modern farms meeting international standards such as Global G.A.P. and Organic Europe, raising the bar of high-quality raw materials to build firm foundations for innovative and safe fresh milk products.

The powdered products owned by the company are also used with imported ingredients from reputable partners from countries with strengths in powdered materials, such as the United States and New Zealand.

“Vietnam’s dairy market is not saturated. Vinamilk will focus on meeting the needs of consumers in three aspects: quality, price, and service to increase sales and market share,” said CEO Mai Kieu Lien.

Vinamilk brand value has achieved a remarkable valuation of $3 billion, showcasing a notable 6 per cent growth compared to the 2022. This result has affirmed Vinamilk as the Vietnam's most valuable food brand and the sixth largest dairy brand globally.

What is more, Vinamilk is also active and effective in the export segment, with the company’s total accumulated export revenue up to now reaching as much as $3 billion with products present in 60 different countries and territories.

Another enterprise in the domestic dairy field, TH Group, also did not miss the opportunity to develop when building more organic dairy farms, providing raw materials for organic milk products in line with the new consumption trend.

Besides investing in a $1.2 billion state-of-the-art dairy cow farm and fresh milk processing plant in the central province of Nghe An, with a capacity of 500,000 tonnes of fresh milk a year, and with three clusters including nine farms, about 70,000 cows, and a meadow area of nearly 8,100 hectares, TH Group is also developing a concentrated large-scale high-tech dairy cow production project in Russia, with total investment capital of $2.7 billion.

Le Nguyen Doan Duy - Director of Business Development Asia Ingredients Group Investment in their own material areas is the most effective way for Vietnamese dairy producers to gain competitive advantage over foreign counterparts. With more than 20 years of experience in the field of food ingredients supply and also a strategic partner of many large dairy enterprises in Vietnam, we focus on expanding the organic ingredients areas in untapped potential places. AIG aims to become one of the leading producers and suppliers of ingredients in the dairy industry in particular and food ingredients in general. One of the top typical ingredients that AIG brings to the market is coconut, an agricultural product that Vietnam ranks top 10 in terms of production in the world. Coconut is currently grown in the raw material areas of Ben Tre, which accounts for 40 per cent of the total coconut production in the country. For the past decade, Asia Coconut Processing JSC (ACP), a member of AIG, with the latest technology and equipment and together with experienced human resources, has deeply invested in building organic material areas in Ben Tre province and launched a chain of quality raw materials for processing enterprises. After Ben Tre, ACP has also rapidly expanded the area of organic coconut areas in Tra Vinh province.

Domestic dairy groups enlarge capacities to meet fresh demand After years of applying high technology and global standards towards green and sustainable manufacturing trends, dairy businesses in Vietnam are showcasing their innovative, high-quality, and safe products to enhance domestic sector performance.

TH Group employs state-of-the-art technologies in production Over the past many years, locally-invested TH Group has been applying high tech to its dairy farm and milk processing project in the central province of Nghe An, making the initiative one of the most modern in the world.

Dairy segment showing off potential with fresh launches Milk and other dairy products are emerging as a strong segment in the food and beverage industry, with an estimated average annual growth rate of over 12 per cent over the next few years.