Tên: Nguyễn Như Hậu

Position: Market Analysis

THE INDUSTRY

The nature of the milk industry.

Overview of the historical development of the milk industry.

Milk production in Vietnam started during the 1920s. At that time, milk was not very popular
but it allowed farmers to improve their income. The farms were small with 10 to 20 cows
maximum.

In the 1990s, there were around 11,000 cows in Vietnam. Annual milk production was
around 36,000 tonnes.

Since the 2000s, milk production has increased significantly thanks to the promotion policy
of the Vietnamese Government. The increase of Vietnamese income and the desire of
consumers to eat more dairy products have created favorable conditions for the development
of the dairy sector in Vietnam.
The number of cows reached 302,000 heads in 2017 thanks to the spectacular development of
the dairy sector over the last 20 years. It was mainly big companies like Vinamilk and TH
True Milk who funded the expansion of the farms. From 2000 to 2017, milk production
increased by around 15% each year, reaching 881,000 tonnes per year.

Key events that have altered the milk industry in Vietnam in the last ten years:

2014: The Vietnamese government launched the National Dairy Development Program,
which aimed to increase domestic milk production and reduce reliance on imports.

2017: The Vietnamese government imposed tariffs on imported milk powder in order to
protect domestic dairy farmers.

2018: Vinamilk, the largest dairy company in Vietnam, acquired a majority stake in Moc
Chau Milk, another leading Vietnamese dairy company. This acquisition made Vinamilk
even more dominant in the Vietnamese dairy market.

2020: The COVID-19 pandemic had a significant impact on the milk industry in Vietnam.
Demand for milk products declined due to lockdowns and restaurant closures. However, the
industry has since recovered and is expected to continue to grow in the coming years.

Market Size:

According to information from the Dairy Association, in 2020 and 2021, despite difficulties
due to the epidemic, Vietnam's milk market revenue in 2020 is estimated to reach 113,700
billion VND and in 2021 is estimated to reach 119,300 billion VND. The dairy industry's
scale of more than 5 billion USD is still attracting new investors, especially in the high-end
segment.

Growth Trends:

According to VIRAC, the dairy market size in Vietnam will grow from 613.96 billion USD
in 2023 to 840 billion USD in 2028, with a CAGR of 6.47% during the forecast period (2023-
2028).

Market Share:
Vinamilk leads with 40% market share, FrieslandCampina 18% and TH Food accounts for
11%.

Competitive strength of major firms in the industry:

Vinamilk: First we talk about the largest dairy company in Vietnam currently, Vinamilk.
One of the few strengths of this brand is its high brand recognition. In terms of brand, this is
the top brand of mind in the dairy market in Vietnam. In addition, always focusing on product
quality, selling products at reasonable prices and being customer-centric is the secret to
making a difference for Vinamilk. Only good quality products can help a brand retain
customers. Thanks to that, Vinamilk clearly leads in the level of trust and love of Vietnamese
people for nutritional products. International quality is always committed and affirmed by
Vinamilk to achieve sustainable development goals. Next, Vinamilk owns a widespread
distribution system. Currently, Vinamilk has over 220 distributors in its product distribution
system, plus over 140,000 sales points covering 63 provinces and cities. Products under the
Vinamilk brand are also present in the US, Canada, France, Russia, Czechia, Poland,
Germany, China, the Middle East, Asia, Laos, Cambodia...

FrieslandCampina: FrieslandCampina is a Dutch dairy company that has been operating in

Vietnam for over 20 years. FrieslandCampina is the second-largest dairy company in
Vietnam. FrieslandCampina has a strong brand awareness and trust among consumers, an
extensive distribution network, and a wide range of milk products. FrieslandCampina is also
investing heavily in sustainable dairy farming practices.
Nestlé: Nestlé is a Swiss food and beverage company that has been operating in Vietnam for
over 40 years. Nestlé has a strong brand awareness and trust among consumers, an extensive
distribution network, and a wide range of milk products. Nestlé is also investing heavily in
innovation and new product development.

Seasonal fluctuations in demand:

There are seasonal fluctuations in demand for milk in Vietnam. Demand for milk products is
typically higher in the summer months, when people are more likely to consume cold
beverages and ice cream. Demand for milk products is also higher during the holiday season,
such as Tet (Vietnamese New Year).

Industry trends regarding the use of technology:

As one of the few industries with a technology level quite comparable to the world's
technology level, in recent years, Vietnam's Dairy industry has been invested and equipped
with a complete and modern equipment and technology system. Great way to "take a
shortcut".

For a long time, Vinamilk has used modern production and packaging technology at all
factories, importing technology from European countries such as Germany, Italy and
Switzerland to apply to the production line. As the only company in Vietnam that owns a
machinery system using spray drying technology produced by Denmark's Niro - the world
leader in industrial drying technology - production, Vinamilk also uses production lines that
meet international standards provided by Tetra Pak to produce dairy products and other
value-added products.

Not only Vinamilk, factories in the dairy industry in recent years have continuously invested
and upgraded with a synchronous, closed, automated equipment line system from raw
materials to finished products, applying new technology. Advanced technology from
reputable companies in the world's milk processing industry such as: Tetra Pak, Delaval
(Sweden); APV (Denmark); DEA, Bencopak (Italy); Combibloc (Germany), the products
produced have stable quality and meet food safety standards.

Enterprises in the industry have built quality management systems according to ISO 9001-
2008 standards. Currently, the majority of enterprises have been implementing food safety
quality management systems according to ISO 22000.
The future look for the entire industry:

Although the growth rate of the milk market in recent years has slowed down due to a
number of external factors, it will develop sustainably again. Vietnam's dairy market still has
a lot of room for growth as per capita consumption is still quite far apart from neighboring
countries (23.2kg per person annually compared to 31.7kg in Thailand and 43.7kg in Korea).

Each year there are still approximately one million children born. In addition, awareness
about health care and protection is increasing, especially in middle-aged and older people -
who are more economically stable and are also a major growth driver for the dairy industry.

A popular trend today is convenience. In addition to the development of convenient shopping

channels such as supermarkets and online sales sites, product formats must also be more
convenient for users.

Another perspective on the young generation (Gen Z), the audience that is determining future
consumption trends with the characteristics of being well-educated, promoting green lifestyle,
and actively interacting socially on public platforms. high technology... Serving this audience
requires dairy businesses to be more dynamic, sophisticated and sincere when bringing to
market nutritional solutions that are truly good for health, derived from nature, and friendly to
the environment. environment and have highly interactive communication activities.

Here are some international issues that are impacting the milk industry in Vietnam:

Rising global milk prices: The global price of milk has been rising in recent years, due to
factors such as increasing demand in China and India. This has increased the cost of imported
milk for Vietnamese dairy companies.

Food safety concerns: There have been a number of food safety concerns in the Vietnamese
dairy industry in recent years. This has led to some international consumers being hesitant to
purchase Vietnamese dairy products.

Sustainability: International consumers are increasingly demanding sustainable products.

This is putting pressure on Vietnamese dairy companies to adopt more sustainable practices,
such as reducing their environmental impact and improving animal welfare.

Companies moving offshore:

Some Vietnamese dairy companies are considering moving their operations offshore in order
to reduce costs and expand into new markets. For example, Vinamilk, the largest dairy
company in Vietnam, has announced plans to invest in dairy farms and processing facilities
in the United States and Russia.

International competitors coming into the industry:

A number of international dairy companies, such as Nestlé, FrieslandCampina, Abbott

Nutrition, and Meiji, have entered the Vietnamese market in recent years. These companies
are bringing new products and technologies to the market and are increasing competition for
domestic dairy companies.

Competitors that offering either a competitive product or by offering a substitute for

our product:

The segment that our products target is the powdered milk segment for babies (2-6 years old).
Currently on the market there are many brands targeting this segment and becoming our
competitors. The competitor holding the largest market share in the powdered milk segment
is Abbott, a few other names such as Vitadairy or Nutifood are also currently competitors of
Vinamilk in the same segment.

Current state of the art in the milk industry:

The current state of the art in the milk industry is focused on developing new products and
technologies that can improve the quality, safety, and sustainability of milk products. Some
of the key trends in the milk industry include: The development of new milk products, the
use of technology to improve food safety, and the focus on sustainable dairy farming.

How fruit-flavored baby powdered milk reflects the current state or exceeds it:

Fruit-flavored baby powdered milk products can reflect the current state of the art in the milk
industry in a number of ways. For example, some manufacturers are using natural ingredients
to flavor their products, developing hypoallergenic products, and adding probiotics to their
products.

Fruit-flavored baby powdered milk products can also exceed the current state of the art in the
milk industry by offering new and innovative features. For example, some manufacturers are
developing products that are fortified with additional nutrients, such as DHA and ARA, or
that are designed to be easy to digest.

What you need to succeed in your chosen market

To succeed in the fruit-flavored baby powdered milk market, I will need to:

● Develop a high-quality product that meets the needs of consumers.

● Build brand awareness and trust with consumers.
● Develop a strong distribution network to get the product to market.
● Price the product competitively.
● Market the product effectively.
● Current applications of fruit-flavored baby powdered milk

Fruit-flavored baby powdered milk is currently used by parents to provide their babies with a
nutritious and convenient meal option. It is also used in hospitals and clinics to provide
babies with a safe and convenient way to get the nutrients they need.

Potential applications of fruit-flavored baby powdered milk:

Fruit-flavored baby powdered milk has a number of potential applications, including:

● Providing babies with a nutritious and affordable meal option in developing countries.
● Being used for medical purposes, such as providing nutrition to babies with feeding
difficulties.
● Being used as an ingredient in other food products, such as baby formula and yogurt.

MARKET

What market research have you conducted or found about your customer?

First, we conducted a market overview study of the dairy industry in Vietnam in general and
the powdered milk segment in particular to see if the future growth rate is feasible for us to
jump in or not. Next, we conduct market segmentation, specifically here, we exploit the baby
powder milk segment to check what direct or indirect competitors we have in this segment
sell powdered milk products and check what products they are offering, what are their
strengths, what are their communication strategies,... After segmenting the market, we will
check who are customers in that segment, because they are the same segment, we can
completely convert customers from our competitors to ours. This is also how we can
determine our source of growth. In addition, current users are also the source of growth for
our products. After determining the source of growth, we will conduct more research to
narrow down the source of growth, selecting potential customers who choose to use our
products.

Why do they buy?

What is their primary purchase criterion: price, quality, availability, convenience, or...?

For Vinamilk's fruit powder milk product for babies, the factor that motivates customers to
buy the product is the quality of the product. Because up until now, Vinamilk's goal has
always focused on developing product quality but at reasonable prices, easily accessible to
Vietnamese people. The second factor is the innovation in the flavor of milk while still
ensuring nutrition for children from 2-6 years old. We believe that a product with an easy-to-
drink flavor that stimulates children's taste will receive trust from mothers.

Are there price tiers in the target market?

Actually there are no price tiers in baby powdered milk because price is not a considerable
element in this market. Normally dairy companies often segment the market according to
consumers (demographics, behavior, psychology, geography,...).

What features do they seek? What benefits do they want?

Customers choose our products because they seek a product that has a delicious taste and is
easy to drink for their children but is still as nutritious as other milks on the market.

What are the potential annual purchases?

How often do they buy?

Once opened, powdered milk should be used up within 1 month so that the nutrients in the
milk are fully retained for the baby. If you do not use it all within 1 month, if you observe
that the milk still shows no signs of spoilage or mold, parents can still let your baby use it.
Therefore, the purchasing frequency will be 1 product per month.

What do they buy?

Price - how much will changes in price affect your customers’ purchases?
Quality - will they pay more for better quality?

With an expected price of 600,000 VND for an 800g box, according to the customers we
surveyed, they think this is a reasonable price. 50% of the customers we surveyed said they
are willing to spend 800,000 VND for our product because of its high quality ingredients and
fruity flavor. 100% of them said they would not spend more than 1,000,000 on the product.

Image - is brand name important?

For us, the product name is extremely important for a brand new product line because it is
what will be remembered in the customer's mind later on. However, nutritional ingredients
and main functions of the product will always be the top priority for the baby powder milk
segment.

Are customers brand loyal?

Whether or not customers choose to be loyal to the product depends mainly on customer
experience and marketing strategies in the later stages of building customer loyalty. However,
with the new flavor experience we bring, we are confident that customers will choose the
product the next buy

Describe the overall market

Location and size, in number of customers and sales dollars. Is the market growing?

In the VietNam milk market, according to the General Statistics Office, in the two years
2020-2021, Vietnam's dairy market revenue in 2020 is estimated to reach 113,700 billion
VND and in 2021 is estimated to reach 119,300 billion VND. The market is still growing but
at a steady pace.
Growth rate and trends:

Project your market share, best case, worst case, most likely case. (This is important to
your financial forecasts later.)
MARKET TRENDS

How might the economy affect sales of your product/service?

What is the economic forecast for your geographic area for the next year, the next five
years?

The economic forecast for the milk industry in Ho Chi Minh City and Vietnam is positive.
The industry is expected to grow at a compound annual growth rate (CAGR) of 6.47% in the
next year and the next five years, driven by factors such as a growing population, rising
incomes, and increasing awareness of the health benefits of dairy products.

How might government programs, policies, or legislation affect your industry, business,
or product/service?

Government programs, policies, or legislation can affect the milk industry in Vietnam in a
number of ways, both positive and negative.

Positive effects:

Support for domestic producers: Governments can support domestic milk producers
through a variety of measures, such as subsidies, tax breaks, and low-interest loans. This can
help to make Vietnamese milk more competitive in the domestic market and reduce reliance
on imported milk.

Investment in infrastructure: Governments can also invest in infrastructure that supports

the dairy industry, such as roads, bridges, and cold storage facilities. This can help to reduce
the cost of transporting and storing milk, making it more affordable for both producers and
consumers.

Research and development: Governments can also support research and development in the
dairy industry. This can lead to new technologies and innovations that can help to improve
the efficiency and productivity of Vietnamese dairy farms.

Consumer protection: Governments can also play a role in protecting consumers by

regulating the quality and safety of milk products. This can help to build consumer
confidence in Vietnamese milk and increase demand.

Negative effects:
Unfair competition: Government policies can sometimes lead to unfair competition in the
milk industry. For example, if the government provides subsidies to domestic producers, this
can make it difficult for foreign producers to compete.

Price distortions: Government price controls can also distort the market for milk products.
For example, if the government sets a maximum price for milk, this can lead to shortages and
reduce the incentive for producers to produce more milk.

Bureaucracy: Government regulations can also add to the cost and complexity of doing
business in the milk industry. This can discourage investment and innovation.

How might technological factors affect your product/service sales?

Here are some specific examples of technological factors that are affecting the fruit-flavored
baby powdered milk industry in Vietnam:

The use of spray drying technology: Spray drying is a technology that is used to convert
milk into a powder. It is a very efficient process that can produce high-quality powdered milk
products. Spray drying is now widely used by fruit-flavored baby powdered milk producers
in Vietnam.

The use of microencapsulation technology: Microencapsulation is a technology that can be

used to protect fruit flavors and nutrients in powdered milk products. This technology is
becoming increasingly popular among fruit-flavored baby powdered milk producers in
Vietnam.

The use of online marketing and sales channels: Online marketing and sales channels can
help fruit-flavored baby powdered milk producers to reach more consumers and expand their
market reach. Many Vietnamese producers are now using online platforms to sell their
products to consumers both domestically and internationally.

What social/cultural factors might impact your sales?

Changing dietary habits: Vietnamese consumers are becoming increasingly health-

conscious and are looking for food and beverage products that are perceived as being healthy
and nutritious. This could lead to increased demand for fruit-flavored baby powdered milk
products, which are often seen as being healthier and more nutritious than plain powdered
milk products.
Growing disposable incomes: Vietnamese disposable incomes are on the rise, which is
leading to increased spending on consumer goods, including food and beverage products.
This could lead to increased demand for premium fruit-flavored baby powdered milk
products.

Increasing urbanization: Vietnam is becoming increasingly urbanized, and urban

consumers are more likely to purchase processed foods and beverages, such as fruit-flavored
baby powdered milk.

Rising birth rates: Vietnam's birth rates are rising, which is leading to an increase in the
demand for baby products, including fruit-flavored baby powdered milk.