1.

Economic

Figure 4: Philippines’s food & fuel as percentage of CPI. Source: Carnegie 2022.
Philippines faces highest inflation rate compared to other Southeast Asia nations, primarily
attributed to its reliance on imported food & fuel, constituting 45% of total household
expenditure (IBON 2023, Figure 4). This dependency potentially elevates TH’s operating
costs and erodes purchasing power (Figure 5). Despite these challenges, TH still has the
opportunity to enter as government’s efforts in strong labor market and impressive GDP
growth that bolster disposable income, outpacing soaring inflation. Thus, inflation has
moderated to 4.1% y/y in late 2023 (Rajiv 2023).
Regarding the labor market, the government strategically focuses on fostering high-quality,
well-compensated employment opportunities to streamline business processes for Public-
Private Partnerships (PPPs) in 2023-2032 (Neda 2023). Furthermore, Philippines is
forecasted to achieve above-ASEAN’s average real GDP and household disposable income
growth of 6.2% and 8.4% annually from 2022-2026 (OECD 2023; Joann 2022). This implies
substantial market potential for TH, especially given the lowest expected steady growth in
dairy revenue per capita and 2nd largest market revenue over the next five years (Statista
2023). TH can leverage this advantage to target expanding segments such as children aged 6-
16 following government’s incentive milk programs above and increasing middle-income
Filipinos that are health-conscious (Venus 2023).

Figure 5: Cross-country farm gate and consumer price comparison. Source: Hoang 2021.
 Figure 6: Philippines’s household disposable income compared to other ASEAN nations.
Source: Statista 2023.

2. Internationalization

International strategy is suggested for TH’s internationalization, demonstrating the need of

utilizing its core competency developed domestically as main competitive asset in Philippines
(Kennedy et. al 2020).

As its mission revolves around rationalizing benefits rather than maximizing profits, TH has
been committed to shaping Vietnam’s image with quality and pioneering capacity since its
establishment (TH 2018, Vietnamplus 2023). Over 15 years, TH has strived towards boosting
global presence, from offering a diverse portfolio of more than 140 product types expanded into
China and ASEAN region to actively securing booths in global diplomatic events and numerous
international quality awards (VCCI 2023). Moreover, TH attaches great importance to
philosophy of “Cherish Mother Nature” and ‘True’ in its name, reflecting commitment to
efficiency in natural resources’ usage and production via uniform cutting-edge technologies,
namely imported herd and vet management (Vietnamplus 2023; Vo 2022). These provide TH
competitive advantage through saving costs, quality and highlight endeavor to maintaining and
enhancing its key competencies (brand image and technology breakthroughs). Amidst non-
competitiveness with heavily subsidized foreign producers faced by local farmers lacking
funding, technological investment, self-sufficiency in dairy products, TH experiences low
pressure for global integration (Palacpac & Valiente 2023).

TH’s success in Philippines is primarily attributed to its emphasis on local responsiveness, driven
by market-seeking motives. Specifically, TH’s increasing market share and impact in Philippines
market is associated with higher customer satisfaction (Xiang 2023). Firstly, its diversified
product portfolio effectively addresses the fast-changing preferences of global customers, thus
catering to Philippines’s multiculturalism (Kantar 2019). Moreover, Filipinos’ inclination
towards products featuring sustainable packaging and airtight seal to ensure product freshness
aligns with TH’s SIG standard filling (Euromonitor 2023; Vo 2022). This underscores that TH
faces low pressure for local responsiveness upon entering Philippines.

3. Company introduction

Ever since its establishment in 2009, TH Group has grown to become pioneering company in the
field of dairy and food manufacturing, farming, retailing (TH 2023). Besides its major milk
initiative, TH Group also produces and distributes wholesome, high-quality food including
vegetables, fruits, fishery and poultry products using a farming-to-consumer model (Enterprise
Asia 2018).

With significant, long-term investment, TH True Milk, which is one of 3 companies under TH
Group, is committed to becoming a world-class food brand that is of everyone’s favorite and
national pride, derived from nature-safe, clean, and nutrient ingredients (LinkedIn 2023). By the
end of 2023, the company operated 302 ‘True’ stores in 63/63 provinces in Vietnam, had more
than 180 distributors nationwide and possessed a profound network market in China, Hong
Kong, Russia, Cambodia, Philippines, Singapore, Malaysia, Indonesia, Japan and Korea (TH
2023; Vietnamplus 2022).

Thanks to continuous innovation and product developments, TH True Milk recorded 20% growth
in 2022 in the context of no increase in the domestic market, further reaching ~45% fresh dairy
industry (VCCI 2023). Its success has continued to transcend international markets, specifically
1st Vietnamese enterprise granted official export code to China and recent successful orders in
strict export control countries like Japan (Vietnam Agriculture 2023).

4. Country introduction

Located in Southeast Asia, Philippines is among the world’s fastest-growing emerging markets in
2022. Aiming for upper-middle-income status by 2023, the country witnessed increasing income
brackets from US$4,046-US$12,535 to US$4,096-US$12,695 (Chris 2022). Boasting a young
and well-educated workforce, with a median age of 26 and over 110 million population,
Philippines is a compelling economic force (HSBC 2023).

Vietnam-Philippines partnership, operating under the same Joint Commission on Trade (JCT),
establishes favorable condition in trade of agricultural and non-agricultural products (MOFA
2023). Since historically known as an outsourcing hub, the country is trying to increase their
self-sufficiency level, thereby presenting TH Group with newfound opportunities (Ayman 2023).

References