(Tiểu luận) a comprehensive approach to supply, demand andmarket equilibrium for dairy products invietnam

Supply...8CHAPTER 2: APPLICATION IN DOMESTIC DAIRY PRODUCTION...10 Trang 4 INTRODUCTIONThe industry of producing and processing of milk and milk products of Viet Nam in recent years has

FOREIGN TRADE UNIVERSITY Major: International Business -o0o -

: Nguyễn Thị Tường Anh : KTEE201.5

TABLE OF CONTENTS

INTRODUCTION 3

Introduction to Viet Nam dairy industry 4

CHAPTER 1: BASES 6

SUPPLY AND DEMAND: DEFINITION 6

1 Demand 6

2 Supply 8

CHAPTER 2: APPLICATION IN DOMESTIC DAIRY PRODUCTION 10

1 Demand of dairy products in Viet Nam market 10

- Consumer’s income 10

- Consumer’s taste 10

- Consumer’s expectation 11

- Number of consumers 11

2 Supply of dairy products in Viet Nam market 11

- Price of inputs 11

- Technology and equipment 12

- Suppliers 13

- Expectation 13

CHAPTER 3: CONCLUSION 14

REFERENCES 15

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The industry of producing and processing of milk and milk products of Viet Nam in recent years has developed dynamically This movement has provided diverse products for the national economic life and satisfied the domestic demand National brands are now gradually replacing imported milk products and participating in exportation with different modes and types In addition, this sector has contributed significantly to the state budget, creating jobs for the labor force, contributing to ensure livelihood and stabilizing social status This field has also become an important link of Viet Nam agriculture

With being the essential product category, even in the COVID-19 pandemic period – the depressed years of the whole economy, dairy enterprises have still kept growing at an incredible speed For that reason, we decided to choose the topic: “Supply, Demand and Market Equilibrium for Dairy products in Viet Nam”

to analyze the domestic market of dairy products and also propose some drawbacks

of this production sector

Hopefully our study can enrich your microeconomic knowledge, and provoke your interest in domestic dairy production Thanks for your time and we would be appreciated if you could leave any comments or ideas

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INTRODUCTION TO VIET NAM DAIRY INDUSTRY

Domestic milk production in Vietnam is not keeping up with rising domesticdemand According to the most recent data, Vietnam's dairy industry revenuenearly doubled from USD4.4 billion in 2017 to USD8.4 billion in 2021, withdomestic production meeting less than half of demand

Two main segments leading the growth of the whole domestic dairy industryand being the most important are liquid milk and powdered milk The total value ofthose two products accounts for ¾ the market value, in which the value ofpowdered milk was 45% and liquid milk 30%

Powdered milk market share is mainly held by foreign companies such asAbbott, Friesland Campina Viet Nam and Mead Johnson because Vietnameseconsumers are still willing to pay high price for foreign brands Meanwhile, fordomestic milk products, beside Vinamilk, which accounts for over 40% of themarket share, there are also other companies such as TH True Milk, Nutifood, IDP,Dutch Lady, etc

Milk production capacity 2010-2015

Source: General Department of Statistics

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A majority of milk products in Viet Nam are produced for children under 3and the elderly while the big market for daily consumption or milk for adults is notinvested significantly The research of Nguyen Viet Khoi (2013) showed that 10%

of the population in the two big cities of Viet Nam, Ha Noi and Ho Chi Minh City,consumed up to 78% milk products This is unbalanced in terms of the demand formilk products

The amount of dairy cows in Viet Nam has sharply increased in recent years.According to the General Statistics Office, until the 1st October 2019, it accountedfor 330.000 dairy cows, the average growth of dairy cows was 11% per year And it

is forecasted that the number of cows will increase to 700.000 by the end of 2030.This expansion has been a positive factor in promoting the production of milk inViet Nam, which has had the propensity for increasing considerably every year Roughly 24.000 households take part of the dairy production chain This is amajor force enabling the development of the dairy industry in Viet Nam, asmedium-scale household farming sustains less pressure in terms of environmentcompared to large-scale farms According to the Dairy association of Viet Nam,solely focusing on the development of large-scale farms regardless of developingthe household farming would face various difficulties, such as: lack of land,farmers losing land will face difficulties in their livelihood, productivity, diseaseand especially environmental issue

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CHAPTER 1: BASES ANALYZE SUPPLY, DEMAND AND MARKET EQUILIBRIUM Supply and demand: Definition

1 Demand

Definition:

- Demand is the quantity of products or services that buyers are willing andable to buy at different prices in certain period of time given everything elseconstant There are many things that determine the quantity demanded ofany good, but when analyzing how market work, one determinant plays thecentral role – the price of goods

Market demand versus individual demand

- Consumer’s demand for a particular product or service is called individualdemand

- The sum of all individual demands for a particular product or service iscalled market demand

- The relationship between price and quantity demanded of a good is negative.Demand curve

- The demand curve illustrates how the quantity demanded of a good changes

as its price varies Because lower price increases the quantity demanded, thedemand curve slope downwards

Shift in demand curve

- There are many variables that can shift the demand curve Here are the most

2 Supply

Definition

- Supply shows the amount of commodity that buyers are willing and able tosell at different prices in certain period of time given everything elseconstant There are many determinants of quantity supplied, but once again,price plays the primary role

Market supply versus individual supply

- Seller’s supply for a particular product or service is called individual supply

- Just as market demand is the sum of the demands of all buyers, marketsupply is the sum of supplies of all suppliers

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Shift in supply curve

- There are many variables that can shift the supply curve Here are the most

CHAPTER 2: APPLICATION IN DOMESTIC DAIRY PRODUCTION

1 Demand of dairy products in Vietnam market

Consumer’s income

- According to the figures from the International Labor Organization (ILO) in

Vietnam during the COVID-19 Pandemic period, monthly income per capita

of laborers was 5.2 million VND, north of a 5% decrease compared with the same period last year The income of informal workers underwent a more significant fall compared to that of their full-time counterparts, at 8.4% (decreased by 4.7% in comparison with the same period last year) Workers with higher levels of education or having certificates could have less reduction in their earnings

Consumer’s taste

- Taste of consumers is a major segment concerned by numerous companies inmanufacture and business Understanding the importance of consumers’ taste, many milk companies were and are developing new production lines

in order to meet different customers’ needs For instance, in 2019, Vinamilk has developed almost 20 new products, such as Organic Gold, Zori Rice Milk, Happy Milk Tea, etc Those products were considered to grasp the current modern tendencies of nutrition

- The diversity in liquid milk

products in Vietnam:

Consumer’s expectation

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- Healthy eating habits have become more important in the eyes of consumers

during and after the Covid-19 Pandemic With the expectation of organic and healthy products, many dairy companies in Vietnam have introduced to consumers a variety of new modes and types of milk products that are meeting customers' needs This makes consumers believe in their products’ quality, thus the increase in demand

Number of consumers

- The increase in number of citizens consuming dairy products leads to the

growth in goods’ quantity demanded, which brings in large profits to the dairy companies

2 Supply of dairy product in Viet Nam market

Price of input

- WMP (whole milk powder) prices climb by 50% in late 2020 before somewhat declining by 20% in April 2021 However, after the COVID-19 outbreak in Vietnam, this amount fell significantly, from about $4000 to

$3500 In the subsequent term, from July 2021 to July 2022, the price of WMP continues to range between $3400 and $4700 In the third quarter of

2022, this occurrence puts pressure on the profit margin of all dairy businesses

- According to the SSI stock data, the shift in the cost of raw materials for

dairy products during the second quarter of 2022 had a direct impact on all milk companies' revenue Vinamilk is a classic example of this, with second-quarter profits falling by 26% year over year to VND2.1 trillion (US$89.97 million)

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Technology and equipment

- Following the "Doi Moi" period (1986), the majority of dairy factories were

invested with integral and modern investment scales Comprehensive production line as well as advanced technology were imported from countries that possess developed technology and dairy equipments such as Sweden, Denmark, Germany, Italy, Switzerland alongside with automatic and semi-automatic self-contained production lines This move from enterprises aims to closely control the technological parameters so the products will have a stable quality and attain the expected goal

- In recent years, concerning the packaging field, enterprises in the industry

have invested in renovating comprehensive production lines, modern equipments in diversification of packaging, which use sterilized paper packaging to pack the product This type of packaging possesses a special composition of 6 layers that allow to protect against harmful effects from light, air, humidity in the air in the storage process of the product Nowadays, Viet Nam only has 2 exclusive paper box cover suppliers which are Tetra Pak Group ad Combi-block (Germany) In 2005, Dutch Lady Ldt (FrieslandCampina Viet Nam) invested in a bottling line with the most

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advanced technology in the world In 2008, Nutifood invested the latest production line of powdered milk, with equipments provided by WOLF (Germany),

Suppliers

- With effective logistic strategies and a connective supply chain, dairy

companies could ensure to distribute their products to consumers in a fast, convenient way even in the context of the outbreak of the COVID-19 pandemic

- Vinamilk, with 500 “Vietnamese Milk Dream” chains and more than

251.000 retail stores, shares the leader’s position among dairy enterprises Their products were also distributed on more than 7.800 internet platforms Expectation

- With a CAGR (Compound Annual Growth Rate of 10%, Vietnam’s dairy )market is expected to grow from 159.6 kilotons in 2021 to 375.1 kilotons by

2030 This is representative of an additional 370,000 cows that are expected

to be added to Vietnam’s dairy industry by 2030, bringing Vietnam’s total herd to 700,000 To achieve these goals, milk companies have to

reinforce distribution channels, expand farming systems and develop new products

This led to a right shift in supply curve

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CHAPTER 3: CONCLUSION

Finally, we would like to use SWOT analysis to identify strengths, weaknesses, opportunities and threats that Vietnam dairy industry has to face:

Strengths:

- High product quality

- Wide milk distributing nets

- Actively investing in modern technology and equipment

- International Standard Farms

- Professional Marketing

- Effective logistic strategies and connective supply chain

- The diversity of dairy products

Weaknesses:

- Few milk products for adult

- Not able to control the input

Opportunities:

- Number of potential consumers

- Input supplied by the Government

Threats:

- Competition with foreign counterparts

- The instability of input

- Environmental issues

The SWOT analysis revealed various problems and difficulties that the local dairy business must overcome to maintain its current position.This is our essay written about “Supply, Demand and Market equilibrium for Dairy products in Viet Nam” There might be some errors, so

if you have any feedback, we would appreciate it

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1 Overview of Viet Nam’s Dairy Industry [online] Available at:

https://investvietnam.gov.vn/en/nghanh.nghd/27/dairy-industry.html(Accessed: 22 December 2022)

2 Vietnam Dairy Industry Report 2022: Value of Dairy Products Imported into Vietnam in 2021 was $11.8 Billion, an Increase of 12.4% y-o-y - Forecasts

to 2031 [online] Available at:

https://www.globenewswire.com/en/news-2022-Value-of-Dairy-Products-Imported-into-Vietnam-in-2021-was-11-8-Billion-an-Increase-of-12-4-y-o-y-Forecasts-to-2031.html (Accessed: 22 December 2022)

release/2022/09/07/2511574/28124/en/Vietnam-Dairy-Industry-Report-3 Báo cáo tổng quan thị trường ngành sữa Việt Nam 2022 [online] Available at:

https://gmp.com.vn/thi-truong-sua-viet-nam-2022-n.html (Accessed: 22 December 2022)

4 Whole Milk Powder Average Prices [online] Available at:

https://www.globaldairytrade.info/en/product-results/whole-milk-powder/(Accessed: 22 December 2022)

5 Dairy Production in Vietnam: Opportunities and Challenges [online] Available at:

https://www.researchgate.net/publication/31901424_Dairy_Production_in_Vietnam_Opportunities_and_Challenges (Accessed: 22 December 2022)

6 Vietnam Milks EAEU for all its Worth with New Dairy in Russia [online] Available at:

worth-with-new-dairy-in-russia.html/ (Accessed: 22 December 2022)

https://www.vietnam-briefing.com/news/vietnam-milks-eaeu-for-all-its-7 Phân tích tình hình cung, cầu, cân bằng thị trường sữa Vinamilk tại Việt Nam và đề xuất giải pháp [online] Available at:

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mo/tieu-luan-kinh-te-vi-mo-grade-a/18543178 (Accessed: 22 December 2022)

https://www.studocu.com/vn/document/dai-hoc-ton-duc-thang/kinh-te-vi-17

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