DISTRIBUTION SYSTEM

Today, we would like to introduce the distribution system of Vinamilk company. But first, I will
introduce briefly about Vinamilk.
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I. Overview of Vinamilk:
- Vinamilk was established in 1976, is currently the leading dairy and dairy products
company in Vietnam, accounting for nearly 39% of the market share across the country.
- Vinamilk's main products are powdered milk, condensed milk, fresh milk, yogurt, coffee, ice
cream and fruit juice....
- Vinamilk's strength is its nationwide distribution system, the ability to find distribution
channels for new products and establish partnerships with other units to access the market.

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II. Overview of Vinamilk's distribution channels:
1. Vinamilk's channel structure:

As the diagram on the screen, this is the channel structure of Vinamilk including 3 main
types of channels working together:
1.1. Supermarket channel:

- Vinamilk divides the supermarket channel into two smaller categories: type 1 is large
supermarkets such as Big C, Metro, and type 2 is small supermarkets such as Vinmart, Circle
K, Bach Hoa Xanh... These supermarkets place orders directly with Vinamilk's branch
representative.

- And now Vinamilk's products are present in 1,609 large and small supermarkets and more
than 575 convenience stores nationwide.

1.2. Key accounts channel:

- This channel includes restaurants, hotels, schools, agencies. These units also directly order
from Vinamilk's branches in large quantities.

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1.3. Distributor channel:

- The nature of this type of channel is actually a VMS channel in which the manufacturer,
Vinamilk, manages its distributors through signing binding contracts on the responsibilities,
rights and obligations of both parties.

- As of December 2015, the Company has 243 exclusive distributors, present in all provinces
and cities nationwide. The number of retail points is more than 212,000 points. Distributors
are located throughout the provinces and cities across the country according to the market
map outlined by Vinamilk.

- According to this map, the Vietnamese market is divided into 3 main regions: the North, the
Coast, and the South. In each region, the number of distributors is located differently
depending on the size of customers, geographical location.

- Each distributor operates in its own area and distributes Vinamilk's products to agents and
retailers in the region. All these distributors are greatly supported by Vinamilk.

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2. Flows in the channel:

2.1. Information flow:

 - All information about promotional products as well as customer policies is
transferred by Vinamilk to Paml machines, sales staff using PDAs can access
information related to the day's goals as well as other information about products
and promotions to convey to customers. At the end of the day, all working results are
transferred to Vinamilk's server.
→ This management approach helps Vinamilk control the activities of distributors quickly
and effectively and makes it easy for Vinamilk to know which distributors sell effectively and
even which products they sell well.

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2.2. Flow of physical distribution and transfer of ownership:

- In order for goods to reach customers quickly and conveniently in the management
of goods, Vinamilk has established its own logistics enterprise in charge of
transporting goods.
- Goods from Vinamilk are transported directly to supermarkets, key accounts and
finally to customers.
- For the traditional channel, goods are delivered to distributors through logistics
enterprises, to small outlet stores and then to final customers.
- When goods are transferred to channel members, ownership is also transferred to
them.

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2.3. Order flow:

- Vinamilk's channel members have no difficulty in placing orders. For supermarkets

and key accounts, they order directly with the order department at the branches.
- For retailers, wholesalers and supermarkets in the distributor's area, they order with
the distributor through the sales staff.
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2.4. Promotion Flow:
- The promotion line is designed by Vinamilk according to the strategic goals of each period.
There are two main strategies, pull and push, respectively, which are two promotion flows as
follows:

- When using push strategy, Vinamilk actively encourages and supports distributors in
selling products. Those measures are to support display cabinets, signs, and hangers.
- In addition, it is possible to mention the goals that Vinamilk assigns to sales staff to
retailers such as sales staff, how to make Vinamilk's goods fill Vinamilk's product cabinets
and at the same time prevent other firms have the opportunity to bring in more goods.

Using the pull strategy, Vinamilk influences consumers to know about and buy their
products. Measures are to use television advertising to broadcast advertisements
continuously at prime hours, advertise in newspapers, leaflets, etc.

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2.5. Negotiation flow:
- By contract strength, Vinamilk negotiates with distributors so that they can sell its
products at the right price as well as fully apply the promotion programs and goals
set by the company.
- Each distributor has a SUP managed by Vinamilk to do this negotiation.

2.6. Financial Flow:

- In Vinamilk's channel, members are allowed to make deferred payments according to
the company's debt limit and with a bank guarantee.
- The company also sponsors distributors, key accounts, and even retailers with
display cases.
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2.7. Flow of risk-sharing:
- The provisions in the contract clearly indicate the responsibility of each party with the
goods. When the goods are delivered to the distributor's warehouse, they are
responsible for keeping the goods in accordance with the specified standards.
- With products that are about to expire or have ¼ date left, the distributor is
responsible for notifying the company to recall and use for purposes such as
promotion or ultimately destroy.

2.8. Payment Flow:

- Payment activities between Vinamilk and distributors, supermarkets, key accounts
are done through intermediaries which are banks.
- For retailers and wholesalers, they pay directly with the distributor in cash.

Thanks for watching