Colossal Growth in the Vietnamese Dairy Industry

Milk Production

In calendar year 2009, Viet Nam had about 70,000 were milk cows; 15% of the dairy herds are in the Northern region of the country, and 85% are in the Southern region, where Ho Chi Minh City and the surrounding area account for 69% of the country's total dairy population.
  
Data from Vietnam's Ministry of Agriculture and Rural Development (MARD) shows that domestic milk production grew six percent from 262,000 metric tons in 2008 to 278,000 metric tons in 2009. Given the projected dairy cattle numbers in 2010, and the current average milk yield, dairy production in 2010 was expected to reach over 315,000 metric tons.

Local milk production is projected to continue to increase due to the growing demand for fresh milk.

Dairy Consumption Potential

Yearly per-capita rate of milk consumption is only about 15kg in Viet Nam, compared to 35kg in the rest of Asia. Therefore, Viet Nam's dairy sector has enormous growth potential. Viet Nam's economy was expected to grow at 7% in 2011 and its growth prospects for the next decade look promising.  According to Global Insight, growth in the economy will translate to a per capita GDP of $2,000 by 2020, and as incomes rise, expenditures on dairy products will increase commensurately.

For instance, increasing numbers of Vietnamese women joining the workforce has led to an increase in bottle-feeding. This is especially true in big cities such as Ho Chi Minh City and Hanoi, although the Government still generally encourages breastfeeding. Nevertheless, the fact that fewer women are breastfeeding has created an opportunity for powdered milk products and has helped this market grow sharply in Viet Nam in recent years.

Powdered milk formula products are the most popular types of baby food products, mainly because of their affordable price.  Though liquid milk formula is more convenient, parents still prefer the powdered formula because it is perceived to be of higher quality.  Baby food is heavily dominated by international brands with the only exception being Vietnam Dairy Products (Vinamilk).  Many parents think the leading international brands have better quality and are more nutritious than local brands, or at least the product safety is assured by the companies' good reputations. Consumers are therefore willing to pay the difference in price. Demand for baby food is expected to continue to increase, and this growth will be supplied mainly by imports.

Industry Relies on Milk Imports

Milk manufacturers in Viet Nam have to rely on imports since local milk production is low and cannot keep up with demand. There are two main factors affecting the unit price of drinking milk products, international milk prices and the fluctuating exchange rate. Even though the GVN tried to control price increases for baby formula, unit prices continued to increase in 2010.  High prices are a major concern for both manufacturers and consumers. 

Liquid milk Condensed/evaporated milk makes up the majority of dairy product sales. It has been a common product in Vietnam for a long time and was a nutritional supplement before drinking milk products became more popular and affordable. Its usage varies widely, from making coffee to homemade yoghurt. Looking forward, there is little to no potential for further development of this market segment due to product saturation.

Ice cream Consumer demand for ice cream continued to increase in 2010. In general, dairy ice cream was perceived as having more varieties, better taste and higher quality than other iced treats.  Since the consumption of ice cream in Viet Nam is still low compared to other countrieAdidas Questar Boost