Dairy giant Vinamilk looks to milk new growth cycle

Vietnamese dairy giant Vinamilk is poised to transform itself and reverse the slowdown it has experienced in recent years despite continued domination of the domestic market.

The most recognized brand in Vietnam has adopted a new logo and is planning product diversification suited to new customer needs, said CEO Mai Kieu Lien.

After nearly half a century on the market, Vinamilk, listed on the Ho Chi Minh Stock Exchange (HoSE) as VNM, is a familiar name across the length and breadth of the nation.

Several of its products have enjoyed market shares as high as 70-80%. With a wide range of products including condensed milk, fresh milk, powdered milk, yogurt, ice cream, cheese and weaning foods, Vinamilk caters to many population segments including infants, the elderly and pregnant women.

Its products reach every corner of the country through 230,000 points of sale. People can easily find its products in any grocery store, supermarket or convenience store.

The company has also become a global brand to reckon with. According to world leading brand valuation firm Brand Finance, the Vinamilk brand was valued at $3 billion in 2023, ranking second among the top five most sustainable milk brands globally and sixth in the world’s top 10 most valuable brands.

Birth of a giant

Formed in 1976 with a takeover of Thong Nhat milk, Truong Tho milk and Dielac powdered milk factories, the company has grown strongly to operate 16 factories in Vietnam, Cambodia, Laos and the U.S., as also 15 farms.

Since its listing in 2006, Vinamilk has been a blue chip with great influence on the market. It has regularly paid huge dividends, at around 40% over the last five years, or trillions of Vietnam dong (VND1 trillion = $41.2 million) each year.

However, the Vietnamese dairy giant has run into a problem that large enterprises face after reaching a certain growth level – peak revenue and reduced business efficiency.

After a long period of continuous growth (2003 to 2018), the national milk brand saw profit stagnate in 2019 and begin to decline after with revenue hovering around VND60 trillion ($2.47 billion) in the 2020-2022 period.

Its profit per share (EPS) dropped to VND4,000-5,000 ($0.21) and the VNM ticker began sliding since the end of 2017.

However, Vinamilk has built a solid financial foundation despite deducting most of its profit every year as dividend. Its total assets value at the end of Q3/2023 was VND55 trillion ($2.27 billion), of which VND26 trillion was in cash and deposits. Debt was just VND7 billion ($288.3 million), mainly short-term loans.

Caution and determination

Vinamilk has been looking for opportunities to regain its growth momentum for several years now and has targeted this year as a turning point.

“2023 is the year marking significant changes in Vinamilk,” said CEO Mai Kieu Lien, adding that the brand entered the year with caution and determination to transform itself. The transformation was needed for the firm to build on past successes and bring into full play its potential in the “new era,” she added.

In July, the company changed its long-standing logo to “inject a new, more youthful energy” while preserving the cultural heritage of a 47-year-old brand.

"This is the first step for the firm to modernize and create momentum for acceleration in the future," Lien said.

She said Vinamilk will focus on optimizing operating costs so that it can reinvest in expanding its distribution channels and strengthening its brand. The company will also introduce new, high quality products that meet consumer needs.

Growth factors

Vinamilk's leadership has said that they are very confident about the dairy industry's potential, because per-capita milk consumption is still very low in Vietnam compared to the regional and world averages.

According to Research and Markets, Vietnam’s average milk consumption was just 27 liters per person per year, compared to 35 liters in Thailand and 45 liters in Singapore.

Each year, about 1.5 million children are born in Vietnam and this, coupled with the trend of people paying more attention to health, will form a driving force for the dairy industry in the coming years, senior industry executives have said.

For its part, Vinamilk has said it will analyze needs afresh and explore different customer segments. In the first nine months of 2023, it launched and/or resumed 11 products and opened 11 new Vietnamese Milk Dream stores, increasing the total number to 657.

At present, Vinamilk's products are present in 59 countries and territories. It is actively approaching new markets in South America, the Caribbean, West and South Africa. Besides the U.S. as a large market, China is an attractive market that the dairy giant is targeting.

The firm has signed memoranda of understanding with two major importers and distributors of milk and agricultural products in China. As scheduled, the first batch of durian-flavored yogurt hit shelves in China at the end of November and early December.

Earlier, its "Ong Tho" condensed milk began selling at Guangbai - a large supermarket chain in Guangzhou with more than 17 supermarkets.

Besides the main dairy business, the company has actively tapped business opportunities in new markets through mergers & acquisitions, joint ventures or venture investments.

Currently, Vinamilk is developing a VND3 trillion ($123.6 million) cattle complex with Japanese partner Sojitz Corporation in Tam Dao district, Vinh Phuc province to produce and supply beef.

Lien said work on the project, a 51%-49% joint venture between Vinamilk subsidiary Vilico and Sojitz, kicked off in March and is expected to be completed in the fourth quarter of 2024. Once operational, it can generate revenues of VND3 trillion and profits of VND500 billion ($20.6 million) per year.

Vinamilk has targeted VND63.38 trillion ($2.7 billion) in consolidated revenues this year, a year-on-year increase of 5.5%; and VND8.62 trillion ($367 million) in after-tax profit, unchanged from the previous year, said CEO Lien.

On the HoSE, VNM closed Wednesday at VND68,200 ($2.81) per share.