Milk producers enter into tough rivalry on saturated market

According to the market research firm Kantar World Panel, in the first quarter of 2018, sales of the dairy industry in Vietnam decreased by 4.4 per cent in urban areas. 

Although sales in rural areas increased by 4 per cent, the dairy demand in urban areas dropped gradually indicating the dairy market has saturated, especially the demand in the powdered milk has decreased in recent years.

This is a bad news for dairy enterprises like Vinamilk. 

The powdered milk segment contributed 26 per cent and 28 per cent of Vinamilk’s revenue and gross profit, respectively in 2017. 

Vinamilk is leading in the powdered milk segment with a 27-percent market share followed by Abbott with 17 per cent and Friesland Campina with 12 per cent.

While the market share in the high-end powdered milk segment of both Abbot and Friesland Campania has remained stable for the past three years, Nutifood emerged as a major risk to Vinamilk in the low-end powdered milk segment.

Nutifood’s powdered milk products target to a certain group of customers. They are often referred to as ‘specialized milk’ for children suffering from anorexia, malnutrition or the elderly.

According to Nielsen’ statement, NutiFood’s GrowPLUS + is the leading brand in terms of market share in the specialty powdered milk segment for children in the country, made up for 39.3 per cent.

NutiFood’s GrowPLUS + Ready to drink Milk is the leading brand in terms of market share in the nationwide Ready to drink milk segment with a market share of 37.4 per cent compared to the second brand with 19.1 per cent.

Thanks to the specialty products and their prices 10-15 per cent lower than those of Vinamilk, Nutifood is gradually gaining market share in the powdered milk segment.

In 2014, Nutifood’s powdered milk accounted for only 10 per cent of market share while it amounted to 15 per cent in 2017, mainly targeting the low-end segment.

Vinamilk’s core product liquid milk, which accounted for 42 per cent of both revenue and gross profit of Vinamilk 2017, is less competitive with foreign firms than powdered milk as Vinamilk has an advantage of the local supply source.

Despite topping and dominating market share in the liquid milk segment, Vinamilk still faces fierce competition from many big names in the industry such as Friesland Campina, TH Milk, Nestle, IDP and Moc Chau.

While powdered milk and liquid milk are two traditional products, yogurt is considered a new product and attracts many businesses for investment to win market share.

The yogurt market has grown at an average annual rate of 13.1 per cent over the past five years and rose 16 per cent last year, much higher than the average growth of the dairy industry.

Being used to overwhelm 90 per cent market share in yogurt segment in 2012, Vinamilk now has to share the pie with many other competitors. New competitors such as IDP and TH Milk entered the industry with many breakthroughs in the product.

KDC also launched a new product, the frozen yogurt. According to a securities company’s assessment, Vinamilk’s market share in yogurt segment will continue to decline, to 80 – 83 per cent in the next few years.