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ESSAY
FINANCIAL ANALYSIS
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GROUP 5
Contents
1. Vietnam diary industry analyse.............................................................................3
1.1. Rivalry.............................................................................................................. 3
1.2. Potential of New Entrants Into an Industry ·..................................................5
1.3. Power of Suppliers ·........................................................................................5
1.4. Power of Customers ·......................................................................................6
1.5. Threat of Substitutes.......................................................................................7
2. Vienamilk’s stategy analyse: Cost leadership.......................................................7
2.1. Economics of scale, scope, and learnings.......................................................7
2.2. Simpler product designs..................................................................................8
2.3. Lower L&D.......................................................................................................8
2.4. Lower costs of input and distribution.............................................................8
2.5. Efficient organizational processes..................................................................9
2.6. Efficient production.........................................................................................9
3. Bussiness analyse.................................................................................................11
3.1. Bussiness overview........................................................................................11
3.2. SWOT analyse...............................................................................................14
3.2.1. Strengths.................................................................................................14
3.2.2. Weak.......................................................................................................14
3.2.3. Opportunity............................................................................................14
3.2.4. Threat.....................................................................................................15
4. Conclusion............................................................................................................15
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1. Vietnam diary industry analyse
1.1. Rivalry
The water milk segment will achieve a double growth of 7.7% in sales in the period of
2021-2025 thanks to: The increasing demand for water milk due to schools reopened
and the Government promoted the "School Milk Program " - Milk is distributed to
preschools and elementary schools, with efforts to improve nutritional and physical
stature for children.
Vinamilk is still the leader of diary industry in Vietnam thanks to the system of
factories and farms of this unit consisting of 13 large factories and 160,000 dairy
cows, giving this business a difficult production capacity to catch up with.
3
Vietnamese milk market share 2021 Vietnamese milk market share 2020
Although Vinamilk is leading in market share, other competitors are gradually gaining
higher market share over the years. TH True Milk increased from 7.2% to 11% during
2020 to 2021, and promises to be a heavy competitor to Vinamilk in the future. The
success of TH True milk in recent years is thanks to the brand positioning of FRESH
MILK company. The success of TH True milk in recent years is thanks to the brand
positioning of FRESH MILK. TH True milk besides focusing on improving product
quality by enhancing production process with advanced technology instead of cutting
costs, they also succeed in advertising their dairy products with associated with the
image of pure and healthy milk. As income and awareness of health care of
consumers increase, it will lead to an increase in the demand for high-quality milk
products.
4
According to EMI, the two main segments driving the growth of the domestic dairy
industry are liquid milk and powdered milk with a total market value of about 75%,
of which the value of powdered milk accounts for 45%. In the segment of high-value
products, which is powdered milk, Vietnamese dairy enterprises lag behind foreign
companies. According to the 2013 statistics of market research firm Euromonitor
International, foreign firms accounted for about 75% of the powdered milk market
share, led by Abbott, followed by Mead Johnson, Dutch Lady, Dumex, and Nestlé.
Only Vietnam's pride, Vinamilk Company, is able to compete with a market share of
approximately 25%.
The low swtiching costs is also another reason explaining the decline in dairy market
share of Vinamilk. Therefore, the competition between existing dairy firms is high.
Although Vinamilk is at the top of the milk segment, it has encountered many
difficulties:
+ Competitors such as Nutifood, Dutch Lady, TH true Milk and VitaDairy
launch new products.
+ In the powdered milk segment: NutiFood and VitaDairy are gradually
gaining a good growth market share because of their low average
prices compared to their competitors.
+ The structure of products sold by Vinamilk is shifting towards low-
priced products in the first 9 months of 2020. Middle and high income
groups tend to increase consumption of high-end products such as
Abbott, Friesland Campina, Mead Johnson, Nestle
=> These are the reasons that have a very high competitive potential compared to
Vinamilk
The Vietnam dairy industry is promising with many opportunities. With the
growth in dairy industry capacity, the urbanization, the increasing in income level
so that the awareness about the useful of dairy products of people goes up.
Therefore, dairy is potential market in Vietnam that can attract more enterprise to
enter. However, the cost for production is quite high, especially the technology to
produce UTH/ Pasteurized milk and the dryer for making powder milk.
Additional, the cost for building the farm is considerable and the quality and
quantity of milk material depend much on the land and the weather. Those reason
will deter new entrant get into the business
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1.3. Power of Suppliers ·
The input of Vinamilk Dairy Company includes: imported raw materials and raw
materials purchased from farmers raising cows and domestic farms. Vinamilk's
current imported materials are from USA, New Zealand, and Europe
About imported materials: In recent years, the increasing price of raw materials has
also been the cause of increasing production costs of Vinamilk.
At the General Meeting of Shareholders in 2022, the Board of Directors shared the
difficulties when the price of all input materials increased from 37-40% over the
same period.
To overcome this, Vinamilk increased by about 5% of the average selling price. This
can lead to a decrease in consumption of Vinamilk’s product in the future.
The domestic material resources will adapt 20 -25 % the domestic demand so that
the
Vietnam is still potential market for dairy with the consumption increase
considerably.
Additionally, Vinamilk is an enterprise that has the good distribution including 250
executive distributors and 200000 retailers and provides their products through all
supermarkets in domestic, so the approach to customer is easier than others peer.
However, there are many dairy companies in the market, and the price is more
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competitive. The customer will move to use the others products if the price of the
company set high.
Especially after the outbreak of the Covid-19 epidemic, plant-based dairy products
became more and more popular and led to competition between many large and
small brands. The growth rate is forecast at 5.3% year-on-year and is estimated to
reach about $593 billion in revenue by 2023.
However, this impact is still weak because the substitute products have a short
shelf life, are not easy to drink and use like Vinamilk milk. Beside that a majority of
consumers will continue to choose plant-based milk, because these products have
high protein content.
Domestic dairy net sales in 2021 recorded VND 51,202 billion, accounting for nearly
43% of the total revenue of Vietnam's dairy market in general (estimated VND
119,300 billion). Moreover, approximately half of domestic raw fresh milk provide for
Vianmilk, so Vinamilk may control on the price of domestic fresh milk. Particularly in
the liquid milk market, Vinamilk holds a market share of about 40%, according to a
report by VnDirect.
7
After more than 40 years of launching to consumers, so far Vinamilk has built 14
production factories, 2 logistics factories, 3 branches of sales offices, a dairy factory
in Cambodia (Angkormilk) and an office. representative in Thailand. In 2018, Vinamilk
was one of the Top 200 companies with the best revenue over 1 billion USD in Asia
Pacific (Best over a billion).
The widest distribution system in the country with a network of 240 distributors and
over 140,000 sales points covering 64/64 provinces. Sales through all Supermarkets
nationwide. Vinamilk products are also exported to many countries in Australia,
Cambodia, Iraq, the Philippines and the US.
CEO of Vinamilk said that by 2025, the total domestic revenue of Vietnam's dairy
industry is estimated at 136,000 billion VND, of which Vinamilk strives to reach
86,000 billion VND, equivalent to more than 63%.
2.2. Simpler product designs
Vinamilk has focused on designing new and appropriate packaging designs.
Packaging design is simple with white and blue tones making
up the majority.
In particular, Vinamilk is a pioneer in packing milk into Fino (bag milk) bags.
Considering the specific conditions in Vietnam, businesses have 2 advantages: Firstly,
the cost of bag packaging is cheaper than box packaging, helping to reduce
production costs. Secondly, the important thing is that the selling price of milk has
been reduced to consumers compared to box packaging
Research and development is the extremely importance activities for food production,
especially dairy products that require the absolutely accurate criteria. Vinamilk has a
good research and development department with highly qualified staffs and the
research methodological and technical is upgrade to meet the international standard.
Besides, Vinamilk coordinate closely with the national institution of nutrition and
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other nutrient and medical centers like DMS, ARLA, and so on to perfectly complete
the standard quality for milk’s products. The research and development is also the
place to examine the characteristic of raw material to build up suitable standard for
reserve and using them. For the existing products, this department always checks
again the quality to enhance the value of those products. Moreover, with the trait
point of raw material, Vinamilk investigate the new ingredient along with the
tendency of customer to create the new products that satisfy the demand of users and
exploit maximize the value of dairy products.
To reduce the product cost Vinamilk has focused on expanding dairy cow farm and
limited production with imported powdered milk to help reduce costs. in Vietnam
Vinamil has 13 large factories and 160,000 dairy cows, giving this business a difficult
production capacity to catch up with.
Vinamilk have strong distribution channel to assess both urban and rural residence. With
the development on distribution channel, Vinamilk will keep the quality of products to
bring the healthy one to the user and can expand their products to the rural area. In 2012,
Vinamilk conduct to building the sale online system by associating with Viettel
Company. By doing that, the product’s information is more instant to approach
customers. It is anticipated that this system will help Vinamilk improve the operational
management on retailer and distributor and can control strictly sales volume
9
According to Vinamilk's organizational structure chart, the company's levels are
stratified in the following order: supreme management level, intermediate
management level, grassroots management level and employee level.
Vinamilk also investst in the training and improvement of managerial capacity for
managers and energy managers in key energy-using units on economical and
efficient use of energy.
10
In order to achieve this roadmap, the existing farms such as Tay Ninh and Organic in
Da Lat and Thong Nhat - Thanh Hoa farms are completed in construction and
expanded. Moreover, the orientation of developing more farms in Laos, Quang Ngai
and some localities with appropriate soil.
11
Vinamilk continuously encourages all employees to contribute initiatives in
economical and efficient use of materials to optimize production costs. At the same
time, Vinamilk mobilizes Factories to implement the movement to save materials and
effectively use labor, maximize the productivity.
In 2018, the whole farm system were invested with a system of bran Silo with fully
automatic operation system to shorten the operation time, reduce labor costs,
operating costs for food mixing, save packaging costs, and ensure quality is not
affected by the weather.
3. Bussiness analyse
3.1. Bussiness overview
Vinamilk is the short name of Vietnam Dairy Products Joint Stock Company (Vietnam
Dairy Products).Products Joint Stock Company) a company that manufactures and
trades milk and dairy products dairy as well as related machinery and equipment in
Vietnam, is the 15th largest company in Vietnam in 2007. The company is the leading
enterprise of the processing industry dairy industry, currently accounts for 75% of
the dairy market share in Vietnam. Vinamilk products are also exported to many
countries in the US, France,Canada, Poland, Germany, Middle East, Southeast Asia...
Most products are manufactured in nine factories with a total capacity of about
570,406 tons of milk per year. The company owns an extensive distribution network
of over 200 products pasteurized, pasteurized milk and products made from milk.
Calculated by sales and products .
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In its portfolio, Vinamilk currently has nearly 250 products of all kinds, the liquid milk
industry alone has owned nearly 50 types of products, meeting almost all the
nutritional needs of consumers who are becoming increasingly diversified. more
form.
Liquid milk is a key industry that Vinamilk focuses on investing in. In addition to
ensuring the quality and high nutritional value of products, Vinamilk will focus on
diversifying liquid milk product lines to suit customers of all ages, segments and
development selectively high-end product lines.
Vinamilk currently owns 12 farms with a total herd of dairy cows of approximately
150,000 cows, helping to supply the market with over 1,000 tons of raw fresh milk
per day. raw fresh milk to meet the needs of producing products for consumers. used
at home and abroad.
Currently, Vinamilk owns a system of 13 factories across the country. The factories all
meet the strictest international standards, with modern technology to produce most
of the main product lines of the dairy industry. This helps Vinamilk maintain its
leading position in key dairy products for many years.
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Vinamilk currently has 13 domestic factories that are invested in scale and apply the
world's leading technology.
TruongTon Dairy factory o Thong Nhat Dairy factory o Dielac Dairy Factory
VietnamMilkPowderFactory
In 2021, Vinamilk's business results, the company's revenue reached VND 60,919
billion, reaching 98% of the whole year business plan. With an increase of 2.2%
compared to 2020, the total consolidated revenue in 2021 has reached VND 61,012
billion, surpassing VND 60 trillion for the first time and completing 98.2% of the plan.
Notably, consolidated revenue in the fourth quarter of 2021 grew by approximately
10%, the fastest quarterly growth in nearly 5 years.
Vietnam Dairy Products Joint Stock Company (“Vinamilk”) announced its financial
statements for quarter 4/2022 with total consolidated revenue of VND 15,081 billion.
Accumulated in 2022, the total consolidated revenue reached VND 60,075 billion. In
which, net revenue of Domestic/Export/Foreign branches reached 50,704
respectively; 4,828; 4,424 billion VND
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3.2. SWOT analyse
3.2.1. Strengths
Vinamilk is still the leader in the Vietnamese dairy market with 40% market
share in the dairy industry. Besides, the acquisition of Moc Chau Milk
Company has helped Vinamilk gain 5% more in Vietnam's milk market share
including Moc Chau’s Market share.
In Vietnam, Vinamilk currently has 13 farms and 13 dairy factories across the
country. This factory system helps Vinamilk to develop more than 250 types of
dairy products in 13 product groups from condensed milk, liquid milk,
powdered milk, yogurt, ice cream, and soft drinks, of which there are 2 super
factories: Vietnam Dairy Factory and Vietnam Milk Powder Factory. The
number of factories is 4 times larger than its competitor, TH True Milk, with
only 3 milk factories.
Vinamilk's domestic distribution system currently has a chain of 430 stores and
nearly 251,000 retail points and supermarkets and convenience stores across
the country. In 2016, Vinamilk was the pioneer dairy company to launch the
first giacmosuaviet.com.vn e-commerce website. Up to now, this sales channel
is still growing along with online consumption is growing strongly in Vietnam.
3.2.2. Weak
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Vinamilk's biggest weakness is that most of the raw materials are imported
from abroad. The brand has not been able to be self-sufficient in domestic raw
materials. The increase in import prices in recent years has increased the cost of
input materials of Vinamilk. As a result, in the last three years, Vinamilk's
gross profit margin decreased from 49% to 42.5%.
Currently, users tend to use imported powdered milk higher than domestically
produced powdered milk.
The strict competition from other domestic and foreign brand name in some
main segment such as the high competition with TH Milk, Dutch Lady in liquid
Milk, the strongly compete with Mead Johnson, Abbott, Nestle and Dutch Lady
in Powder milk
3.2.3. Opportunity
The number of potential customers is high and there is a great demand: Young
Vietnamese individuals who have higher levels of education have access to
Western information and cultures and a greater understanding of how milk
affects the body, which leads them to consume more milk.
The demand for milk of Vietnamese people is increasing: for skin and body
care or for cooking
3.2.4. Threat
The dairy industry is quite competitive, therefore many businesses enter the
market: TH True Milk, Dutch Lady, Meadow Fresh, Table Cove
While Vinamilk still imports its raw materials, the source of input resources is
not constant and because the profit from livestock is not high, farmers tend to
switch jobs
Vietnamese citizens frequently favor foreign milk: They believe that the
nutritional content and safety of portable products is higher than that of
domestic products.
4. Conclusion
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With the trend of using high-quality milk from customers, Vinamilk should focus on
improving production lines, upgrading farms, and creating a source of good products
for customers' health.
At the same time, he changed his image from a business supplying affordable milk to
a business supplying quality fresh milk.
With the population structure gradually shifting from rural to urban areas, Vinamilk
should start targeting high-income customers and build advertising campain for
them.
In order to reduce input costs imported from abroad, Vinamilk should focus on
research and development in order to create its own input products.
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