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Viet Nam Naonal University Ho Chi Minh City ECONOMICS AND LAW UNIVESITY ESSAY Semester 1/2022 – 2023 FINANCIAL ANALYSIS Supervisor: Hoàng Thị Mai Khánh Tilte: BUSINESS STRATEGY ANALYSIS FOR VINAMILK GROUP Contents Vietnam diary industry analyse 1.1 Rivalry 1.2 Potenal of New Entrants Into an Industry · 1.3 Power of Suppliers · 1.4 Power of Customers · 1.5 Threat of Substutes .7 Vienamilk’s stategy analyse: Cost leadership .7 2.1 Economics of scale, scope, and learnings .7 2.2 Simpler product designs 2.3 Lower L&D .8 2.4 Lower costs of input and distribuon 2.5 Ecient organizaonal processes 2.6 Ecient producon .9 Bussiness analyse .11 3.1 Bussiness overview 11 3.2 SWOT analyse .14 3.2.1 Strengths .14 3.2.2 Weak .14 3.2.3 Opportunity 14 3.2.4 Threat 15 Conclusion 15 Vietnam diary industry analyse 1.1.Rivalry According to Euromonitor, Vietnam's dairy market reached VND 135,000 billion by 2020, an increase of 8% compared to 2019, thanks to the rapid growth of the yogurt and milk segment The commodity industries recorded high growth including water milk (+10%), yogurt (+12%), cheese (+11%), buer (+10%) and other dairy products 8% While powdered milk only increased by 4% in value The water milk segment will achieve a double growth of 7.7% in sales in the period of 2021-2025 thanks to: The increasing demand for water milk due to schools reopened and the Government promoted the "School Milk Program " - Milk is distributed to preschools and elementary schools, with eorts to improve nutrional and physical stature for children Vinamilk is sll the leader of diary industry in Vietnam thanks to the system of factories and farms of this unit consisting of 13 large factories and 160,000 dairy cows, giving this business a dicult producon capacity to catch up with Vietnamese milk market share 2021 Vietnamese milk market share 2020 Although Vinamilk is leading in market share, other competors are gradually gaining higher market share over the years TH True Milk increased from 7.2% to 11% during 2020 to 2021, and promises to be a heavy competor to Vinamilk in the future The success of TH True milk in recent years is thanks to the brand posioning of FRESH MILK company The success of TH True milk in recent years is thanks to the brand posioning of FRESH MILK TH True milk besides focusing on improving product quality by enhancing producon process with advanced technology instead of cung costs, they also succeed in adversing their dairy products with associated with the image of pure and healthy milk As income and awareness of health care of consumers increase, it will lead to an increase in the demand for high-quality milk products According to EMI, the two main segments driving the growth of the domesc dairy industry are liquid milk and powdered milk with a total market value of about 75%, of which the value of powdered milk accounts for 45% In the segment of high-value products, which is powdered milk, Vietnamese dairy enterprises lag behind foreign companies According to the 2013 stascs of market research rm Euromonitor Internaonal, foreign rms accounted for about 75% of the powdered milk market share, led by Abbo, followed by Mead Johnson, Dutch Lady, Dumex, and Nestlé Only Vietnam's pride, Vinamilk Company, is able to compete with a market share of approximately 25% The low swching costs is also another reason explaining the decline in dairy market share of Vinamilk Therefore, the compeon between exisng dairy rms is high 1.2 Potenal of New Entrants Into an Industry · Although Vinamilk is at the top of the milk segment, it has encountered many dicules: + Competors such as Nufood, Dutch Lady, TH true Milk and VitaDairy launch new products + In the powdered milk segment: NuFood and VitaDairy are gradually gaining a good growth market share because of their low average prices compared to their competors + The structure of products sold by Vinamilk is shiing towards lowpriced products in the rst months of 2020 Middle and high income groups tend to increase consumpon of high-end products such as Abbo, Friesland Campina, Mead Johnson, Nestle => These are the reasons that have a very high compeve potenal compared to Vinamilk The Vietnam dairy industry is promising with many opportunies With the growth in dairy industry capacity, the urbanizaon, the increasing in income level so that the awareness about the useful of dairy products of people goes up Therefore, dairy is potenal market in Vietnam that can aract more enterprise to enter However, the cost for producon is quite high, especially the technology to produce UTH/ Pasteurized milk and the dryer for making powder milk Addional, the cost for building the farm is considerable and the quality and quanty of milk material depend much on the land and the weather Those reason will deter new entrant get into the business 1.3 Power of Suppliers · The input of Vinamilk Dairy Company includes: imported raw materials and raw materials purchased from farmers raising cows and domesc farms Vinamilk's current imported materials are from USA, New Zealand, and Europe About imported materials: In recent years, the increasing price of raw materials has also been the cause of increasing producon costs of Vinamilk At the General Meeng of Shareholders in 2022, the Board of Directors shared the dicules when the price of all input materials increased from 37-40% over the same period To overcome this, Vinamilk increased by about 5% of the average selling price This can lead to a decrease in consumpon of Vinamilk’s product in the future Therefore the risk for power of supplier is considerable 1.4 Power of Customers · The domesc material resources will adapt 20 -25 % the domesc demand so that the Vietnam is sll potenal market for dairy with the consumpon increase considerably Addionally, Vinamilk is an enterprise that has the good distribuon including 250 execuve distributors and 200000 retailers and provides their products through all supermarkets in domesc, so the approach to customer is easier than others peer However, there are many dairy companies in the market, and the price is more compeve The customer will move to use the others products if the price of the company set high According to a survey of dairy consumers by IPSARD, the criterion inuencing the choice of dairy products, up to 80% of consumers decide to use dairy products based on the criteria of nutrional supply Therefore if the quality of dairy products don’t sasfy the need of the the customers, they may choose another dairy brand that good for their health The risk of buyer is high 1.5 Threat of Substutes The reasons of choosing substute products: - Cow's milk allergy - Lactose intolerance The product easily replaces milk but sll fully adds nutrients such as nut milk, soy milk, yogurt, cereal, beverage mixed with milk, etc.These products are formed from the needs of consumers with the desire to use fat-free drinks but sll ensure high nutrional value The threat comes from substute products that can reduce Vinamilk's market share Especially aer the outbreak of the Covid-19 epidemic, plant-based dairy products became more and more popular and led to compeon between many large and small brands The growth rate is forecast at 5.3% year-on-year and is esmated to reach about $593 billion in revenue by 2023 However, this impact is sll weak because the substute products have a short shelf life, are not easy to drink and use like Vinamilk milk Beside that a majority of consumers will connue to choose plant-based milk, because these products have high protein content Vienamilk’s stategy analyse: Cost leadership 2.1 Economics of scale, scope, and learnings Domesc dairy net sales in 2021 recorded VND 51,202 billion, accounng for nearly 43% of the total revenue of Vietnam's dairy market in general (esmated VND 119,300 billion) Moreover, approximately half of domestic raw fresh milk provide for Vianmilk, so Vinamilk may control on the price of domestic fresh milk Parcularly in the liquid milk market, Vinamilk holds a market share of about 40%, according to a report by VnDirect Aer more than 40 years of launching to consumers, so far Vinamilk has built 14 producon factories, logiscs factories, branches of sales oces, a dairy factory in Cambodia (Angkormilk) and an oce representave in Thailand In 2018, Vinamilk was one of the Top 200 companies with the best revenue over billion USD in Asia Pacic (Best over a billion) The widest distribuon system in the country with a network of 240 distributors and over 140,000 sales points covering 64/64 provinces Sales through all Supermarkets naonwide Vinamilk products are also exported to many countries in Australia, Cambodia, Iraq, the Philippines and the US CEO of Vinamilk said that by 2025, the total domesc revenue of Vietnam's dairy industry is esmated at 136,000 billion VND, of which Vinamilk strives to reach 86,000 billion VND, equivalent to more than 63% 2.2 Simpler product designs Vinamilk has focused on designing new and appropriate packaging designs Packaging design is simple with white and blue tones making up the majority In parcular, Vinamilk is a pioneer in packing milk into Fino (bag milk) bags Considering the specic condions in Vietnam, businesses have advantages: Firstly, the cost of bag packaging is cheaper than box packaging, helping to reduce producon costs Secondly, the important thing is that the selling price of milk has been reduced to consumers compared to box packaging 2.3 Lower L&D Research and development is the extremely importance activities for food production, especially dairy products that require the absolutely accurate criteria Vinamilk has a good research and development department with highly qualified staffs and the research methodological and technical is upgrade to meet the international standard Besides, Vinamilk coordinate closely with the national institution of nutrition and other nutrient and medical centers like DMS, ARLA, and so on to perfectly complete the standard quality for milk’s products The research and development is also the place to examine the characteristic of raw material to build up suitable standard for reserve and using them For the existing products, this department always checks again the quality to enhance the value of those products Moreover, with the trait point of raw material, Vinamilk investigate the new ingredient along with the tendency of customer to create the new products that satisfy the demand of users and exploit maximize the value of dairy products 2.4 Lower costs of input and distribuon To reduce the product cost Vinamilk has focused on expanding dairy cow farm and limited producon with imported powdered milk to help reduce costs in Vietnam Vinamil has 13 large factories and 160,000 dairy cows, giving this business a dicult producon capacity to catch up with Currently the company has distribuon channels: Distribuon through tradional channels: (220 independent ferry operators in 64 provinces and cies and more than 200,000 retail points naonwide) distribute more than 80% of the company's output Vinamilk has opened 14 product showrooms in major cies Distribuon through modern channels: (supermarket system, Metro, Coopmart ) Vinamilk has the advantage through a system of invested dairy factories in many localies throughout the country With a network distributed evenly throughout the country as well as other direct channels such as: hospitals, supermarkets, schools Vinamilk has the ability to transfer disadvantages from external suppliers to customers Vinamilk have strong distribution channel to assess both urban and rural residence With the development on distribution channel, Vinamilk will keep the quality of products to bring the healthy one to the user and can expand their products to the rural area In 2012, Vinamilk conduct to building the sale online system by associating with Viettel Company By doing that, the product’s information is more instant to approach customers It is anticipated that this system will help Vinamilk improve the operational management on retailer and distributor and can control strictly sales volume 2.5 Ecient organizaonal processes According to Vinamilk's organizaonal structure chart, the company's levels are straed in the following order: supreme management level, intermediate management level, grassroots management level and employee level - Divisions in the organizaonal structure of Vinamilk will receive direct instrucons from a superior leader This means that the work is centralized in a single point, employees can easily exchange and report - The company's sta will fully promote the advantages of specializaon in each funcon and posion - The clear decentralizaon helps the HR department to simplify the training of human resources - The transparent organizaonal structure facilitates the closer and more connuous inspecon of daily work 2.6 Ecient producon Producon line technology: The applicaon of scienc and technical advances to milk producon in order to improve the designs and packaging, increase the variety and quality of products, and improve compeveness with other dairy products Vinamilk has used many types of modern technology in the world, with high investment costs and high cost, such as: - UHT high-temperature sterilizaon technology to produce milk Vinamilk focuses heavily on informaon technology and is currently successfully applying ERP Oracle EBS 11i, SAP CRM (customer relaonship management system) and BI (informaon system soware) Vinamilk also investst in the training and improvement of managerial capacity for managers and energy managers in key energy-using units on economical and ecient use of energy In input material Vinamilk aims at expanding and enhancing producvity in livestock acvies to meet the growing demand for raw milk The roadmap for supplying raw milk for the period of 2019-2021 is as follows: 10 In order to achieve this roadmap, the exisng farms such as Tay Ninh and Organic in Da Lat and Thong Nhat - Thanh Hoa farms are completed in construcon and expanded Moreover, the orientaon of developing more farms in Laos, Quang Ngai and some localies with appropriate soil 11 Vinamilk connuously encourages all employees to contribute iniaves in economical and ecient use of materials to opmize producon costs At the same me, Vinamilk mobilizes Factories to implement the movement to save materials and eecvely use labor, maximize the producvity In 2018, the whole farm system were invested with a system of bran Silo with fully automac operaon system to shorten the operaon me, reduce labor costs, operang costs for food mixing, save packaging costs, and ensure quality is not aected by the weather Bussiness analyse 3.1 Bussiness overview Vinamilk is the short name of Vietnam Dairy Products Joint Stock Company (Vietnam Dairy Products).Products Joint Stock Company) a company that manufactures and trades milk and dairy products dairy as well as related machinery and equipment in Vietnam, is the 15th largest company in Vietnam in 2007 The company is the leading enterprise of the processing industry dairy industry, currently accounts for 75% of the dairy market share in Vietnam Vinamilk products are also exported to many countries in the US, France,Canada, Poland, Germany, Middle East, Southeast Asia Most products are manufactured in nine factories with a total capacity of about 570,406 tons of milk per year The company owns an extensive distribuon network of over 200 products pasteurized, pasteurized milk and products made from milk Calculated by sales and products 12 In its porolio, Vinamilk currently has nearly 250 products of all kinds, the liquid milk industry alone has owned nearly 50 types of products, meeng almost all the nutrional needs of consumers who are becoming increasingly diversied more form Liquid milk is a key industry that Vinamilk focuses on invesng in In addion to ensuring the quality and high nutrional value of products, Vinamilk will focus on diversifying liquid milk product lines to suit customers of all ages, segments and development selecvely high-end product lines New products are connuously introduced by Vinamilk with many unique innovaons and cover all segments from mid to high end There are "popular" products such as: 100% fresh milk, Organic fresh milk, Pasteurized milk containing Nest or recently Vinamilk Green Farm fresh milk Vinamilk currently owns 12 farms with a total herd of dairy cows of approximately 150,000 cows, helping to supply the market with over 1,000 tons of raw fresh milk per day raw fresh milk to meet the needs of producing products for consumers used at home and abroad Currently, Vinamilk owns a system of 13 factories across the country The factories all meet the strictest internaonal standards, with modern technology to produce most of the main product lines of the dairy industry This helps Vinamilk maintain its leading posion in key dairy products for many years 13 Vinamilk currently has 13 domesc factories that are invested in scale and apply the world's leading technology TruongTon Dairy factory o Thong Nhat Dairy factory o Dielac Dairy Factory BinhDinh Dairy Factory o Nghe An Dairy Factory Sai Gon Dairy Factory CanTho Dairy Factory TienSon Dairy Factory Vietnam Dairy Factory VietnamMilkPowderFactory In 2021, Vinamilk's business results, the company's revenue reached VND 60,919 billion, reaching 98% of the whole year business plan With an increase of 2.2% compared to 2020, the total consolidated revenue in 2021 has reached VND 61,012 billion, surpassing VND 60 trillion for the rst me and compleng 98.2% of the plan Notably, consolidated revenue in the fourth quarter of 2021 grew by approximately 10%, the fastest quarterly growth in nearly years Vietnam Dairy Products Joint Stock Company (“Vinamilk”) announced its nancial statements for quarter 4/2022 with total consolidated revenue of VND 15,081 billion Accumulated in 2022, the total consolidated revenue reached VND 60,075 billion In which, net revenue of Domesc/Export/Foreign branches reached 50,704 respecvely; 4,828; 4,424 billion VND 14 3.2. SWOT analyse 3.2.1 Strengths Vinamilk is still the leader in the Vietnamese dairy market with 40% market share in the dairy industry Besides, the acquisition of Moc Chau Milk Company has helped Vinamilk gain 5% more in Vietnam's milk market share including Moc Chau’s Market share In Vietnam, Vinamilk currently has 13 farms and 13 dairy factories across the country This factory system helps Vinamilk to develop more than 250 types of dairy products in 13 product groups from condensed milk, liquid milk, powdered milk, yogurt, ice cream, and soft drinks, of which there are super factories: Vietnam Dairy Factory and Vietnam Milk Powder Factory The number of factories is times larger than its competitor, TH True Milk, with only milk factories The highlight of Vinamilk's factories is not only in terms of capacity and output, but also in the way this enterprise applies 4.0 technology, meeting many standards such as ISO 9001, FSSC 22000, ISO 17025 Vinamilk's domestic distribution system currently has a chain of 430 stores and nearly 251,000 retail points and supermarkets and convenience stores across the country In 2016, Vinamilk was the pioneer dairy company to launch the first giacmosuaviet.com.vn e-commerce website Up to now, this sales channel is still growing along with online consumption is growing strongly in Vietnam 3.2.2 Weak 15 Vinamilk's biggest weakness is that most of the raw materials are imported from abroad The brand has not been able to be self-sufficient in domestic raw materials The increase in import prices in recent years has increased the cost of input materials of Vinamilk As a result, in the last three years, Vinamilk's gross profit margin decreased from 49% to 42.5% Currently, users tend to use imported powdered milk higher than domestically produced powdered milk The strict competition from other domestic and foreign brand name in some main segment such as the high competition with TH Milk, Dutch Lady in liquid Milk, the strongly compete with Mead Johnson, Abbott, Nestle and Dutch Lady in Powder milk 3.2.3 Opportunity To assist companies in lowering their manufacturing costs, the government is assisting the source of raw materials and lowering the import tax on raw materials The number of potential customers is high and there is a great demand: Young Vietnamese individuals who have higher levels of education have access to Western information and cultures and a greater understanding of how milk affects the body, which leads them to consume more milk The demand for milk of Vietnamese people is increasing: for skin and body care or for cooking Competitors are gradually weakening and Vietnamese people's thinking about using milk is gradually changing Customers have a need to consume quality and healthy products 3.2.4 Threat The dairy industry is quite competitive, therefore many businesses enter the market: TH True Milk, Dutch Lady, Meadow Fresh, Table Cove While Vinamilk still imports its raw materials, the source of input resources is not constant and because the profit from livestock is not high, farmers tend to switch jobs Vietnamese citizens frequently favor foreign milk: They believe that the nutritional content and safety of portable products is higher than that of domestic products Conclusion 16 With the trend of using high-quality milk from customers, Vinamilk should focus on improving producon lines, upgrading farms, and creang a source of good products for customers' health At the same me, he changed his image from a business supplying aordable milk to a business supplying quality fresh milk With the populaon structure gradually shiing from rural to urban areas, Vinamilk should start targeng high-income customers and build adversing campain for them In order to reduce input costs imported from abroad, Vinamilk should focus on research and development in order to create its own input products 17 Sources: Bích Vân, [Bích ] (17 C.E., June) VIETNAM DAIRY 2022: Tái ngành Sữa Việt từ đồng cỏ đến ly sữa https://vietnam.vnanet.vn/ Retrieved March 22, 2023, from https://vietnam.vnanet.vn/vietnamese/long-form/vietnam-dairy2022-tai-hien-nganh-sua-viet-tu-dong-co-den-ly-sua-299191.html Nam C T C P G V (n.d.) Báo cáo tổng quan thị trường ngành sữa Việt Nam 2022 Công Ty Cổ Phần GMPc Việt Nam https://gmp.com.vn/thi-truongsua-viet-nam-2022-n.html Ai đứng đầu thị phần ngành sữa? (n.d.) MBS https://mbs.com.vn/en/research-center/market-overview/macro-insights/aidang-dung-dau-thi-phan-nganh-sua/ Trị, N Q (2022, July 26). Ngành sữa trước áp lực giá nguyên liệu đầu vào cao kỷ lục Cổng Thông Tin Điện Tử 1034 https://tmdt.mic.gov.vn/tin-tuchoat-dong/thong-tin-thi-truong-nong-nghiep/bien-dong-gia-ca-thi-truong/ nganh-sua-truoc-ap-luc-gia-nguyen-lieu-dau-vao-cao-ky-luc-3386.html Dương N (2020, September 28) Các “mũi nhọn” giúp Vinamilk dẫn đầu thị trường sữa Việt Nam https://cafef.vn/cac-mui-nhon-giup-vinamilk-dandau-thi-truong-sua-tai-viet-nam-20200928141108647.chn Tư B Đ T N Đ (n.d.) Con đường tạo dựng “Bản đồ sữa” trải khắp đất nước TH true MILK Báo Điện Tử Nhà Đầu Tư https://nhadautu.vn/con-duongtao-dung-ban-do-sua-trai-khap-dat-nuoc-cua-th-true-milk-d40452.html congan.com.vn (n.d.) Hệ thống “khủng” 13 nhà máy giúp Vinamilk trì dẫn đầu thị trường sữa Báo Cơng an Thành Phố Hồ Chí Minh 18 https://congan.com.vn/thi-truong/thuong-hieu-viet/he-thong-khung-13-nhamay-giup-vinamilk-duy-tri-vi-tri-dan-dau-thi-truong-sua_111549.html VnExpress (2019, December 22) Vinamilk thâu tóm Sữa Mộc Châu vnexpress.net https://vnexpress.net/vinamilk-mua-cong-ty-me-sua-moc-chau4031127.html VietNamNet News (n.d.) Vinamilk: Top đầu thời liên tục tụt dốc, chưa biết đỉnh cũ https://vietnamnet.vn/vinamilk-top-san-mot-thoi-lientuc-tut-doc-chua-biet-bao-gio-ve-dinh-cu-822562.html VietNamNet News (n.d.-a) Ngành sữa nhiều thách thức, Vinamilk thận trọng với mục tiêu tăng trưởng doanh thu lợi nhuận https://vietnamnet.vn/nganhsua-nhieu-thach-thuc-vinamilk-than-trong-voi-muc-tieu-tang-truong-doanhthu-va-loi-nhuan-824575.html Sustainable Development Report 2021 – Vinamilk Sustainable Development Report 2019 – Vinamilk Sustainable Development Report 2018 – Vinamilk VINAMILK – 10 năm liền góp mặt TOP 50 doanh nghiệp niêm yết tốt Forbes Việt Nam (n.d.) https://www.vinamilk.com.vn/vi/tin-tuc-sukien/2450/vinamilk-10-nam-lien-gop-mat-trong-top-50-doanh-nghiep-niemyet-tot-nhat-cua-forbes-viet-nam Nam T T T B T C V (2022, March 4) Doanh thu Vinamilk liên tục lập đỉnh 2021, nhà đầu tư tiếp tục kỳ vọng Thời Báo Tài Chính Việt Nam https://thoibaotaichinhvietnam.vn/doanh-thu-vinamilk-lien-tuc-lapdinh-moi-trong-2021-nha-dau-tu-co-the-tiep-tuc-ky-vong-101181.html 19 ... Development Report 2018 – Vinamilk? ? VINAMILK – 10 năm liền góp mặt TOP 50 doanh nghiệp niêm yết tốt Forbes Việt Nam (n.d.) https://www .vinamilk. com.vn/vi/tin-tuc-sukien/2450 /vinamilk- 10-nam-lien-gop-mat-trong-top-50-doanh-nghiep-niemyet-tot-nhat-cua-forbes-viet-nam... To overcome this, Vinamilk increased by about 5% of the average selling price This can lead to a decrease in consumpon of Vinamilk? ??s product in the future Therefore the risk for power of supplier... into the business 1.3 Power of Suppliers · The input of Vinamilk Dairy Company includes: imported raw materials and raw materials purchased from farmers raising cows and domesc farms Vinamilk'' s