Foreign enterprises ‘milking’ Vietnam’s dairy demand

10:25 | 23/12/2019 Companies

(VEN) - With a population of more than 96 million, and fast economic growth, Vietnam has huge dairy business potential, with many foreign enterprises seeking to penetrate this promising market.

foreign enterprises milking vietnams dairy demand
Bubs goat milk from Australia

Potential market

For example, Bubs Australia goat milk formula has started exporting its products to Vietnam in a bid to crack the country’s US$2.2 billion infant nutritionals market. Director of the Vietnamese distributor, TVV Vietnam, Ngo Tran Khanh Van, said the company signed the deal with Bubs after its success in importing and distributing Kid Power milk products from the Republic of Korea this year.

Vietnam’s domestic dairy production is still lagging behind production in some of its Asian neighbors. A report by the United Nations Food and Agriculture Organization (FAO) indicates that domestic milk production and sales reached 27kg/capita/ year, 1.5 times that of 2013, which is 33 percent of Asian countries’ average, 68 percent of China’s, 75 percent of Thailand’s and 35 percent of Japan’s.

According to a report by Kantar Worldpanel Vietnam, in the second quarter of 2019, the dairy industry in urban areas grew three percent in production output and 6.8 percent in value compared to the same period last year, while the growth rates were 12.1 and 14.7 percent in rural areas. In particular, sales of dissolved milk powder products grew 49 percent in volume and 47 percent in value.

Declining imports

However, according to Kantar Worldpanel Vietnam, dairy products have only reached 16.7 percent of all households in the country. With demand exceeding supply, imports have flourished. However, according to Tran Cong Thang, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) under the Ministry of Agriculture and Rural Development, since 2014, milk imports have decreased due to the growth of domestic dairy production.

When the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) come into effect, domestic dairy businesses will face increasing competition, as most CPTPP and EU countries are giant milk exporters. Vietnam has not been licensed to export milk products to the EU, but Thang expects powdered milk and other milk products will generate strong competition among businesses. Domestic businesses need to organize the dairy industry according chains from farmer households to enterprises. Along with improving capacity and technology, they need to develop pasteurized fresh milk, apart from reconstituted milk products. The state needs to make transparent information about milk and milk products, and facilitate production of nutritious and fresh milk products.

Milk consumption in Vietnam reached 27kg/capita/year in 2018 and is expected to increase to 28kg/person/year by 2020. However, domestic producers have met only 38-40 percent of the domestic demand, with the remaining 60-62 percent imported.

Thanh Ha