Professional Documents
Culture Documents
In this report, the Vinamilk corporation is the main subject of our group research. Vinamilk has
been a great dairy related product corporation in Vietnam for more than 40 years and with its
extraordinary reputation as well as high value, Vinamilk is considered as the top model business
in the food and beverage industry of Vietnam.
Development history
Vietnam Dairy Products Joint Stock Company or Vinamilk is originally a company in Vietnam
which engages in manufacturing and distribution ò liquid milk and dairy products.
Headquarter
Founded in 1976, Vinamilk is the largest dairy company in Vietnam and sets up its headquarter
in Ho Chi Minh City, Vietnam.
Vision
Vinamilk aims to be a world’s leading brand in food and beverage industry while ensuring
nutrient and health as well as promoting trust in their products.
Mission
Vinamilk desires to enrich people’s lives with valuable nutrition in a way of respect, love and
responsibility.
Core Values
Vinamilk has always been following its core values in some very first days which are:
Influence
Vinamilk continues to influence the industry from holding the largest market share of liquid milk
(up to 50% in 2017), yoghurt (80%), condensed milk (80%) and 40% for powdered milk. In the
fresh milk segment, Vinamilk Corporation currently occupies 50% market share nationwide
(Vietnamnet, 2018)
Products
Vinamilk developed a wide range of products, which varies from liquid milk, yogurt, powdered
milk, infant cereals, special nutrition products for adults, condensed milk, beverages, ice cream,
cheese to soy milk.
Every businesses exists and operates not only on its own but also in an environment. Therefore,
in the process of analyzing Vinamilk corporation, the marketing environment has to be taken into
account. Marketing environment is a set of elements that influence the company marketing’s
performance, especially its relationship with customers as well as potential target market. Based
on the framework 3.1, marketing environment will be assessed in the prospect of 2 categories:
micro environment and macro environment.
Framework 3.1 (Kerin & Hartley, 2019)
MICRO ENVIRONMENT
Micro environment is the internal and external forces that are closed to the organization and
affect its performance and decision making process. The following analysis will assess 3 micro
environment elements: the organization itself, the competitors and suppliers.
Organisation
Under the General Meeting of Shareholders is the Board of Directors, which is the highest
management organization of Vinamilk Company. The Board of Directors includes one Chairman
of the Board ( Mrs Lê Thị Băng Tâm ) and four members with a term of five years elected by the
General Meeting of Shareholders. The Board of Directors on behalf of the Company decides all
issues related to the purpose and interests of the Company, except for matters under the authority
of the General Meeting of Shareholders. The Board of Directors is responsible for supervising
the operations of the Director and other managers in the Company. Rights and obligations of the
Board of Directors are stipulated by the Law, the Company's Charter and the Resolution of the
General Meeting of Shareholders.
The third important position in the company is the Chief Executive Officer ( CEO ), undertaken
by Ms. Mai Kieu Lien who is the daily manager of Vietnam Dairy Products Joint Stock
Company (Vinamilk), under the supervision of the Board of Directors and responsible to the
Board and the legal council for implementing the rights and duties assigned. Moreover, behind
Mrs. Lien are other departments and positions that always work very effectively such as
marketing director, finance director and Research and Development ( R&D ) departments, but
marketing department has brought very high efficiency for the company. There are evidences for
this idea that the growth rate is getting higher, the percentage of market share is growing, the
revenue is growing strongly, this is the achievement that Vinamilk has achieved during the
period of operation. In order to do good marketing, marketing management must also work
closely with other units of the company. As the finance department is always interested in capital
to use the capital needed to implement the marketing plan. R&D department studies the quality
product lines and effective production methods. The operation of all these departments, whether
this or that, affects the marketing plan and activities. In addition, Vinamilk employees enjoy a lot
of benefits from the policies set by the company for employees to ensure their health and
well-being while working. Not only that, the company annually organizes outdoor training
courses to increase solidarity as well as refresh to work more effectively.
Competitors
In 2016, Vinamilk accounted for nearly half of Vietnam's milk market share with 49%. Imported
milk from firms such as Nestle, Frieslandcampina accounted for 20% market share with major
product was powdered milk. Left 30% market share belonged to smaller scale dairy companies
such as Nutifood, Moc Chau Milk, IDP,..etc. Currently domestic dairy producers are under
pressure of increasing competition due to the reduction of tariffs on imported milk under the
reduction policy of Vietnam when implementing CEPT / AFTA commitments of the region
ASEAN and its commitment to the World Trade Organization (WTO). AFTA of Vietnam in the
past time will also be analysed in detail according to three areas for the sectors in charge: Field
of tariff reduction, areas that eliminate quantitative restrictions (Qrs) and other non-tariff barriers
(NTBs), field of customs cooperation. With the functions of CEPT / AFTA, Vinamilk is more
and more easy to penetrate the ASEAN market when countries in the region remove quantitative
restrictions (Qrs) and other non-tariff barriers (NTBs). Not only that, CEPT / AFTA also helps
Vinamilk save a cost in importing raw materials, this is also the competition of other companies
because CEPT is only applied to a number of items and depending on which sectors the index be
reduced high or low.
Figure 1.2 - Vietnam’s milk market share in 2016. (Stoxplus, 2016)
Almost the liquid milk market segment is held by domestic companies, particularly, Vinamilk
alone accounts for 53% of the liquid milk market. The liquid milk market is considered a
potential market for future growth and this is also an attractive market. Especially, Vinamilk's
biggest competitors in liquid milk industry are TH True Milk, Frieslandcampina and IDP.
In general, the dairy industry in Vietnam has a high profitability level, so the competition
between domestic and international companies is very high. But with abundant capital, modern
machinery, good relationships with suppliers and it is important to have customers' trust did not
make Vinamilk difficult and turned Vinamilk into a leading dairy brand in Vietnam. Including
abundant capital, which is considered a big barrier for competitors when there are 10 farms and
12 processing factories scattered in the provinces, including the charter capital reached 1.8
billion. To achieve product quality standards, Vinamilk has invested heavily in modern
machinery, built a complete production process, and Vinamilk also cooperated with farmers to
create more milk and partly improve their lives. Although most raw materials are imported from
abroad, thanks to policies, relations between Vinamilk and suppliers are very tight. Thanks to the
long-standing appearance, Vinamilk is no longer a strange name for Vietnamese people,
Vinamilk has a place in the minds of customers - a quality product with stable prices. But it
cannot be acknowledged that more and more milk substitutes are available today such as high
quality foods, vegetable and cereal drinks, including indirect competitive products such as soft
drinks, coffee and tea are also rivals with dairy products. However, in the future, the revenue of
the dairy industry will continue to increase, but does not mean the competitive pressure will
decrease, so the dairy industry must continue to improve to suit consumers.
Supplier
A good supplier is a combination of time, quality and price. This means the suppliers must
provide the material on time, in the best condition with reasonable price. The lack of any
characteristic would not be considered as a good supplier.
Figure 1.3 - Liquid milk productitvity of Vietnam in 2017.
Recently, Vinamilk is having some problems with its supply chain whose two main sources of
importing cows are New Zealand and Australia. According to Viet Nam Dairy Association
(VDA), Vinamilk only met nearly one third of the market demand in 2017; while Vinamilk
produced 773,4 million liters, the need in domestic market wass 2.484,04 million liters.
Specifically, the average liter of milk demand of Vietnamese was only 26 liter per person per
year and it was predicted that the milk demand of domestic market would probably increase in
the next few years because in other Asian countries, the milk consumed figures were
considerably higher . In order to address this problem, Vinamilk should apply several measures
such as importing more cows that has higher productivity and establishing relationship with
domestic farmers that would diversify the sources of supplier.
Also, these two main suppliers have high bargaining power on Vinamilk because New Zealand
and Australia have good reputation on their milk cow farms. Consequently, they have a wide
range of both domestic and foreign customers while Vinamilk relies too much on its two main
suppliers. It is urgent for Vinamilk to differentiate the suppliers in order to have better sources of
cows in both price and quality terms if their target is to become an independent organization in
the future.
Customer
Clients are subject who not only are the key to enterprises’ sales but also create the market.
Therefore, enterprises have to carry out analysis carefully on these clients. There are many kinds
of clients but can be classified as 5 main types below:
*Business: Organizations which consume the products to serve its manufactured process or to
run its operation.
*Intermediate marketing: Organizations or individuals who buy the products then re-sale it to
gain profit.
*Government and not-for-profit organization: Organizations which consume the products for
public purposes or provide it to people who are in need with social aims.
*International customer: Anyone who buy the products which are exported oversea for
different purposes.
Enterprises are put under an intense pressure from customers and intermediate
marketing:
Bargaining power: As not only Vinamilk but also many other company such as TH True milk or
Dutch Lady...are running in the same field of dairy industry, customers have a particular power
to bargain, to choose their favorite supplier. If the list of optional supplier is short, this power is
small.
Substitution effect: As the product is not exclusive, there are many alternative product which can
shift the customers’ choice away from the company’s product. This somehow requires the
company to differentiate their product continuously.
MACRO ENVIRONMENT
Macro environment is a larger scale societal forces that can affect, pose threats or shape
opportunities to the business. Generally, company has no control over the macro environment
but it must learn to adapt with that constant changing macro environment in order to develop a
well-aligned marketing strategy. Macro environment includes political conditions, economic
forces, social forces and technology.
Political conditions
The current import tariff of up to 10% and an additional value added tax (VAT) rate of 10% are
the main reasons to drive up the prices of general milk products (Tu,H. 2012).To mitigate the
negative impact of high prices on both producers and consumers, Vietnam authorities have set an
ambitious target to increase domestic milk production to 1 million tons by 2020 (Minh Chau,
2011). Dairy companies, including Vinamilk, could benefit enormously from this government
movement as it would help reduce their operating costs.
Economic forces
The economic environment plays an important role in the development of one company and
affects its strategies, including marketing. Major economic factors that can be analyzed to refer
the purchasing power and consumption structure are the general economic growth rate, economic
inflation rate.
For the last five years, Vietnam GDP rate fluctuates around 6 to nearly 8% (Figure 1.4). The
Gross Domestic Product per capita in Vietnam was at 1834.65 US dollars in 2017 (The World
Bank). In general, Vietnam economy is growing quite well and it is among the 10
fastest-growing economies. This can be interpreted as Vietnamese people income is increasing,
which also means they are more willing to buy more or pay more for a better product.
Vietnam annual inflation rate, recorded in February 2019, was 0.08% higher than the previous
month, which was 2.56%. Meanwhile, food-related goods saw a more significant rose in prices
(7.08 percent vs 6.6 percent). This rate, however, is forecasted to decrease from 2019 onward
(Figure 1.5). Although the annual inflation rate is quite good, the increase in the price of
materials as well as ingredients to produce food - drink related goods will be a concern for the
milk industry.
In conclusion, with the overall good economy where people are willing to buy more and pay
more for products and goods, especially products related to nutrition and health like those of
Vinamilk, Vietnam is still a good and prosper market for Vinamilk. However, it is also expected
that the inflation rate for ingredients in for food and beverage related will continue to rise. This
can have the negative effect on the producing process of Vinamilk, its supply partners as well as
future pricing of the end-products.
Figure 1.4 - Vietnam GDP growth rate from 2010 to 2018. (Tradingeconomics)
Social Forces
Demographic
As estimated in 2019, the current population of Vietnam is over 97 million (The World Bank).
Considering the area of just over 300.000 km2, Vietnam is considered as a quite populous
country and a large potential consumer markets for various industries as well as a large labor
market.
There are two main trends currently going on with Vietnam population. First, refer from figure
1.6 and 1.7, Vietnam population is growing over the years. However, this growth is gradual and
quite stable in the last few years. In 2017, Vietnam is in top of low fertility countries. This
pattern is seemed to continue for many more years and is a significant concern for the milk
industry in general.
Another trend, as observed in figure 1.8, the population of Vietnam is growing old. In 2010, the
population below 10 years old is at 15,7 % while the population above 60 is at 8.9%. In 2018, the
population below 10 years old increase only 1% meanwhile the population above 60 has reached
9.5%. The growing of old population foresees a shift in milk industry in the future: focusing
more on the potential customers of the elderly.
These two trends eventually point out one significant pattern: Vietnam total population by child
is decreasing and the elder population is increasing. Vinamilk, for the past few years as well as
currently, mainly focus on the market of consumers as children. However, as seen by future
trend, the children consumers will be very small and crowded, especially when there are and will
be more dairy companies enter this market. Therefore, this future change in Vietnam
demographic will definitely have great impact on Vinamilk if it continues to just centralize its
products around its current target market of children consumers. On the other hand, elder
consumers can be a great potential market for Vinamilk and with its strengths, experiences in
dairy products, Vinamilk can definitely gain a large share to compensate its future lost if there is.
Figure 1.6 – Vietnam population from 1950 to 2019. (United Nations Department of Economic
and Social Affairs)
Figure 1.7 – Vietnam yearly population growth rate (%). (United Nations Department of
Economic and Social Affairs)
Figure 1.8 - Vietnam population pyramid in the year 2010 and 2018.
Culture
One of the most significant change in the world over the years is the change in roles of woman
and man in market place. Vietnam is no different. Around 72 percent of Vietnamese women
have joined the workforce, bringing the country to the group of nations with highest percentages
of women in the labor pool. And with women become busier, it is expected that liquid milk box
or fresh milk become more popular due to their convenience. In recent years, Vinamilk have
acknowledged that and invested more in that sector of milk.
Technology
Vinamilk is facilitated with advanced machines, factories and techniques. Specifically, Vinamilk
has an automation Tetra Plant Master system that connects and synchronizes the procedure from
the first to the last step, so that the manager would be able to control the producing activities and
frequently check the quality of products. Additionally, Vinamilk has upgraded the inventory
management Waman system recently that links the producing plans with the quantity of the
ingredient needed and finally control the quantity of products. Also, this company applied the
latest innovation in raising cows. Each cow would be implanted with a microchip and daily
checked the health conditions. Environmental problems are also in the concerns of Vinamilk
when it organized the biological water waste treatment system. After this process, all the water
waste would be reused to water the crop. It can be said that Vinamilk has been putting a great
effort in applying the latest technology in every process of production. In other words, improved
technology has affected Vinamilk in the business growth positively.
References: