INDUSTRY PREVIEW

Vietnam Dairy Market 2018

Table of Contents

No Contents Page

1 Vietnam Dairy Market 2018 2 - 14

1.1 Market Structure & Description 3

1.2 Size & Segmentation 4

1.3 Domestic Production 5

1.4 Import 6

1.5 Competitive Dynamics 7

1.6 Financial Indicators 8

1.7 Appendix: Key Players’ Profile 9 – 12

2 StoxPlus Introduction 12 – 22

Page 2
 Market Structure & Description
Vietnam dairy market has 04 main sectors including Drinking milk, Powdered milk, Yogurt,
and Condensed milk
Figure 1: Market structure of vietnam dairy market, 2017
• UHT milk dominates drinking milk segment thanks to consumer behavior and food safety,
especially in rural area. In particular, the undeveloped cold chain transportation limits the
UHT Milk
coverage of pasteurized milk to rural area.
Drinking
• Approx. 70% of drinking milk raw materials is imported. However, local giants companies are
milk developing their own farms to sharpen their competitive advantages, such as TH Milk and
Pasteurized Milk
Vinamilk.

• The market is fragmented with over 300 local and global brands. Top players include Abbott,
Formula Vinamilk, FrieslandCampina, Mead Johnson and Nestle.
Powdered • Customers prefer global brand. For instance, in the infant milk powder segment, Japanese
milk Specialty products such as Meiji, Morigana or Wakodo are gaining popularity.
DAIRY MARKET

• The persistent rising trend of health-consciousness in Vietnam is the key driver boosting the
Drinking growth of yogurt segment - the star-performer in dairy market.
• Despites its dominant position, Vinamilk’s market share declined from 90% (2012) to 84% (2017)
Yogurt due to fierce competition. As yogurt is seen as a potential market (CAGR 2012-2017 of 13.1%),
Traditional companies focused more on this segment with the introduction of new brand and product in
2017.

Condensed • This sector is in mature stage, largely affecting by the rising health-awareness trend.
milk • Vinamilk brand name “Ong Tho” remains a firm position with approximately 80% market share

Butter • The market size is relatively small due to customer behavior. However, cheese and butter are
gaining popularity in Vietnam, driven by increasing influence of Western food culture, especially
amongst the youngsters in big cities. Thus, this sector is expected to experience high growth
Others Cream rate from low base.
• This segment is currently dominated by foreign players such as Bel Group with “The laughing
Cheese cow” brand and Lactalis with its “Président”.
Source: StoxPlus
Page 3
 Size & Segmentation

Market size of dairy market reached approx. US$4.6bn in 2017, posting CAGR 2014-2017 of
7.8%
Figure 02: Market size (US$ mn) of Vietnam dairy market, 2014-2017

2014-2017 CAGR
VIETNAM DAIRY MARKET SIZE BY SEGMENTATION
5,000
7.8%
Others
19% Condensed Milk
4,000
16.8%

Yogurt Drinking
3,000
Milk
US$ mn

10.5% Products
2,000

1,000 2.0% Powdered

Milk
0
2014 2015 2016 2017

Market
Dairy size
Consumption Growth Rate (%)
Source: StoxPlus

• Market size of dairy market reached approx. US$4.6bn in 2017, posting CAGR 2014-2017 of 7.8%. The market recorded growth rate recovery of
10.5% in 2017, driven by the expansion of powdered milk and other dairy products such as cheese, butter or ice-cream with growth rate of 11.7%
and 19.5% respectively.
• In 2017, the drinking milk consumption per capita reached 12 liter per person per annum in Vietnam, as much as half of Thailand’s figure or one-
third of Singapore’s one. Given low penetration rate, dairy market in Vietnam is expected to enjoy a healthy growth rate in coming years thanks
to: 2% average population growth with rising health improvement initiatives; rising health-awareness (driving yogurt, drinking milk and powdered
milk segments); zero import tariff with FTAs such as CPTPP

Page 4
Domestic Production

Production volume of drinking milk and powdered milk grew at CAGR 2013-2017 of 11.8% and
6.4%, respectively
Figure 3: Production volume of drinking milk and powdered milk, 2013-2017
Drinking Milk CAGR 2013-2017 11.8% Powdered Milk CAGR 2013-2017 6.4%

1,500 120 10.1%

21.4% 8.5%
7.1%
1,000 80

'000 tons
mn litre

11.3% 3.7% 3.7%

500 7.5% 40
8.5% 7.4%

0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Drinking Milk Growth Rate (%) Powdered Milk Growth Rate (%)

Source: StoxPlus from GSO Source: StoxPlus from GSO

• Overall, the outperformed growth of the domestic production in the 2014-2015 period was due to the expansion and new construction of cow
farming. In particular, the 2 largest dairy plants in Vietnam with a capacity of 54,000 tons of milk powder and 1.2 million liters of drinking milk
were put into operation by Vinamilk in late 2013.
• Key players in dairy segment in Vietnam including Vinamilk, TH Group, Hanoi Milk are developing their own dairy farm and cooperating with local
farmers. TH Group owns the largest farm in Nghe An with 45,000 cows, and plans to invest in 4 new farms (Ha Giang, Phu Yen, Thanh Hoa, Soc
Trang). Meanwhile, Vinamilk has planned to develop 8 new cow farms during 2017-2021 period. Of which Vinamilk Hanoi farm has capacity of 10,000
cows, while other farm will have around 4,000 cows each. StoxPlus foresees the milk production volume will record a noticeable increase in the
next five years.

Page 5
 Import

Import value of dairy products & materials is on the downward trend with CAGR 2014-2017 of
-5%
Figure 4: Import value (US$ mn) of dairy product & material
1,500 15.0%
• Cow farming in Vietnam has not yet developed as the qualified dairy
1,000 10.0%
cows are still imported. Additionally, Vietnam still relies much on
500 5.0% import raw material due to limited local production capacity.
0 0.0%
However, in recent years, local giant dairy companies including TH
2014 2015 2016 2017 and Vinamilk are focusing in developing raw materials with the
-500 -5.0% establishment of big dairy cow farm, resulting in a decrease in
-1,000 -10.0% import. Please refer to slide 5 for detailed analysis.
-1,500 -15.0% • New Zealand remains the biggest milk exporter to Vietnam,
accounted for 30.3% of total import. Notably, among countries,
-2,000 -20.0%
import products from Japan registered high growth, increased market
Import vlue Growth rate (%) share (from 0.1% in 2013 to 2.6% in 2017), indicating the strong
preference of Vietnamese consumers toward Japan products,
Source: StoxPlus from Customs especially infant milk powder.
Figure 5: Breakdown Import Value of Dairy Product by Country
• Raw materials expose to zero-import tariff thanks to FTA such as
CPTPP.
2013 2017
New Zealand
Singapore
22%
21% 25% 30% US
Germany
4% 2% Thailand
5%
5% 7% Holand
19%
5% 6% Malaysia
4% 13%
6% 12%
Australia
7% 9%
Others

Source: StoxPlus from Customs

Page 6
 Competitive Dynamics

Vietnam dairy market is dominated by top 5 players, making up approx. 85% market share

Figure 6: Market share of dairy companies by net sales in Vietnam, 2017 Figure 7: Net sales of top 5 dairy companies, 2017

US$ mn

- 500 1,000 1,500 2,000 2,500

Others

Vinamilk
TH Milk

Nestle Vietnam
Frieslandcampina
Vinamilk
Nutifood
Nutifood

Frieslandcampina
Nestle
Vietnam
TH Milk

Source: StoxPlus
Source: StoxPlus
** Note: Sales revenue covers ALL BUSINESS LINES
• There are 238 companies producing and trading dairy products in Vietnam. The market is concentrated as top 5 players dominated the market
with 85% market share. Vinamilk remained the as the leading company with approx. 50% market share by net sales in 2017.
• The market witnessed fierce competition:
➢ Product offering: While TH Milk delivered premium organic products, Nutifood offered powder milk targeting low-income customer
class, and Vinamilk with diversified portfolio reaching high-come to economic product). The market also witnessed new product such as
Kido Group’s iced yogurt (‘brand’) or Vinamilk’s Greek yogurt.
➢ Distribution network: Besides the retailers’ network (supermarkets, grocery stores, etc.), Vinamilk and TH Milk pioneered in developing
their own retail chains. In 2018, Vinamilk and TH Milk owned 415 and 213 stores nationwide.
➢ Dairy cow farming: Key players also actively invest in dairy farm. While Vinamilk plans to develop 8 new cow farms during 2017-2021
period, TH Milk continues to invest in 2 large-scaled farms with advanced technology application similarly to the precedent farms.
Page 7
 Financial Indicators

Vietnam dairy market is dominated by top 06 players, making up approx. 90% market share

Figure 7: Selected financial indicators (US$ mn) of key players in dairy market, 2016

SALES TOTAL OWNER’S

COMPANY KEY BUSINESS LINE TYPE COGS NPAT
REVENUE ASSET EQUITY

Vinamilk Dairy product SOEs (formerly) > 1,000 1,073.2 410.9 1,289.1 983.1

Nestle Diversified Foreign-owned 500 - 1,000 307.6 48.6 349.3 103.9

Frieslandcampina
Dairy product Foreign-owned 300 - 400 202.0 50.3 143.5 53.0
Vietnam

Binh Duong Nutifood Dairy product Private 300 - 400 204.8 45.0 227.9 89.8

TH True Milk Dairy product Private 100 - 200 141.6 -8.9 39.7 -76.2

Moc Chau Milk Drinking milk Private 100 - 200 81.1 8.9 47.7 31.1

Drinking milk (UHT milk) &

IDP Private < 100 44.1 -9.2 37.1 5.9
yoghurt

Source: StoxPlus

Page 8
 Appendix| Key Players’ Profiles

COMPANY PROFILING KEY PRODUCTS & DISTRIBUTION CAPACITY

• Registered name: TH Food Chain Joint Stock Company DRINKING MILK YOGURT OTHERS
• Head office: No. 166 Nguyen Thai Hoc, Quang Trung Ward, Vinh City, • Pasteurized milk • Tradition yogurt • Ice cream
Nghe An Province
• UHT milk • Drinking yogurt • Butter and
• Establishment Year: 2009 cheese
• Formula milk
• Charter capital: US$167.1mm (as of 2017) • Healthy
beverage
• Principal businesses: TH Food Chain Jsc. (TH True Milk) focuses on
manufacturing and distributing drinking milk and yogurt. TH True Milk • Nut milk
farm is the biggest hi-tech cow rising facility in Asia. The company TH Group’s business strategy is to develop the "True Milk" brand - bring
enjoys great advantages due to having developed a large cow herd fresh milk from the farm into production instead of using powdered milk
and applied modern technologies provided by Israel, the US and to mix with water. In order to create strong brand positioning, TH Group
Europe in raising cows and managing the farm. Currently, TH Milk has developed its own TH True Mart retail channel with up to 200 outlets
owns 45,000 cows, of which more than 22,000 are lactating at 30-40 nationwide besides distributing its products through traditional
liters per cow every day. distribution channels and supermarkets,

FINANCIAL PERFORMANCE PRODUCTION SITES

Unit: US$mn No Plant Location (Province) Designed Capacity

2014 2015 2016 2017 (‘000 tons/year)
Net sales 123.6 1 TH Milk Farm Nghe An 500

CoGS 113.2
Gross Profit 10.4 • In Ha Giang, TH Milk will develop a cow farm of 10,000 cows with
Contents to be total estimated investment value of US$100 mn. The Company has
% Gross Profit(*) 8.4%
NPAT (11.8)
removed for kicked off the project in November, 2017

% NPAT (*) -9.5% demo purpose • TH Milk will develop a dairy cattle farm of 20,000 heads in Phu Yen,
which is divided into 2 phases. The total estimated investment value
Total Assets 64.1 is around US$201 mn. The project in Phu Yen has commenced to
Total Liabilities 95.2 construct the first phase with capacity of 5,000 cows in 2018
ROA (*) -18.4% • Additionally, TH Milk will continue to invest in large-scale farm in
ROE (*) 37.8% Thanh Hoa (10,000 cows) and Soc Trang (20,000 cows) with advanced
technology application similarly to the precedent farms.
 Appendix| Key Players’ Profiles

COMPANY PROFILING KEY PRODUCTS & DISTRIBUTION CAPACITY

• Registered name: International Dairy Products Joint Stock Company DRINKING MILK YOGURT OTHERS
• Head office: Km 29, National Road 6, Truong Yen Commune, Chuong • UHT milk • Tradition yogurt • Milk café
My District, Hanoi, Vietnam
• Corn milk • Fruit milk
• Establishment Year: 2004 • Choco milk
• Principal businesses: International Dairy Products Jsc. (IDP) is a milk
and yogurt manufacturer and distributor in Vietnam,. The company
owns 04 brand names including Love'in Farm (LIF), LIF Kun, Ba Vi, and
Men Song. Besides the traditional products, IDP also develops a
“hybrid“ product line between milk and soft drink to create IDP focus its business on 02 segments: fresh milk and yoghurt, in which
nutritious energy drinks. The corporation currently operates 03 milk "Love'in Farm" and BaVi are the major fresh milk brands. “Love’in Farm”
processing and manufacturing plants, of which 02 factories in Ba Vi is positioned as a premium 100% fresh milk product line, competing
(Hanoi) and only 01 factory in Ho Chi Minh City. directly with major players such as Vinamilk and TH True Milk.
Meanwhile BaVi targets at the low- and middle-income consumers,
strongly focuses on rural markets.

FINANCIAL PERFORMANCE PRODUCTION SITES

Unit: US$mn No Plant Location Designed Capacity

2014 2015 2016 2017 (mn litre/year)
Net sales 79.9 1 Truong Yen factory Hanoi City
CoGS 59.7 48
2 Ba Vi factory Hanoi City
Gross Profit 20.0 Contents to be N/A
% Gross Profit(*) 25.1%
removed for 3 Cu Chi factory Ho Chi Minh City
NPAT (3.2)
% NPAT (*) -3.9%
demo purpose
Total Assets 8.3
Total Liabilities 40.8
ROA (*) -37.9%
ROE (*) 9.7%
 Appendix| Key Players’ Profiles

COMPANY PROFILING KEY PRODUCTS & DISTRIBUTION CAPACITY

• Registered name: Binh Duong Nutifood Nutrition Food Joint Stock POWDERED MILK DRINKING MILK OTHERS
Company
• Formula • UHT milk • Yoghurt
• Head office: 281-283 Hoang Dieu Street, Ward 6, District 4 Ho Chi
• Specialty • Soymilk
Minh
• condensed milk
• Establishment Year: 2003
• Café
• Principal businesses: NutiFood is a manufacturer and distributor of
specialty dairy products focused on 03 groups: Infant milk powdered, • Nutritious cereal
specialty milk, and high-energy nutrition product. Today, Nutifood is
one of the leading brands in whole milk powder. Besides the milk At present, NutiFood has 03 exclusive distribution centers located in Ho
powdered lines, the company also distributes a wide range of Chi Minh City, Dong Nai province, Quang Nam province. From these 3
products including UHT milk, yoghurt, condensed milk, and most centers, NutiFood builds a professional distribution network covering 64
recently the company has invaded the field of instant coffee in 2018. provinces and cities nationwide

FINANCIAL PERFORMANCE PRODUCTION SITES

v Unit: US$mn No Plant Location Designed Capacity

2014 2015 2016 2017 (per year)
Net sales 270.7 NutiFood Binh
1 Binh Duong Province - PM: 50,000 tons
CoGS 167.7 Duong
Gross Profit 102.5 NutiFood Cao - DM: 500 mn liters
% Gross Profit(*) 37.9% Contents to be 2
Nguyên
Gia Lai Province
NPAT 23.0 removed for
• In 2015, the company started the construction of NutiFood Vietnam
% NPAT (*) 8.5% demo purpose Factory in Kien Khe Industrial Zone, Ha Nam with the processing
Total Assets capacity of 200 million liters of fresh milk and 31,000 tons of milk
99.8
powder, which is the largest factory in the North.
Total Liabilities 43.2
• In 2017, the company invested in NutiFood Vietnam Factory II at Pho
ROA (*) Noi Industrial Zone, Hung Yen Province with total investment capital
23.0%
ROE (*) of US$$72 million.
40.5%
Table of Contents

No Contents Page

1 Vietnam Dairy Market 2018 2 - 14

1.1 Market Structure & Description 3

1.2 Size & Segmentation 4

1.3 Domestic Production 5

1.4 Import 6

1.5 Competitive Dynamics 7

1.6 Financial Indicators 8

1.7 Appendix: Key Players’ Profile 9 – 12

2 StoxPlus Introduction 12 – 22

Page 12
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Page 14
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