topic analyzing the supply of vinamilk in vietnam market from 2018 2023

In 2018, the domestic revenue of Vinamilk was44.7 billion VND, accounting for 55% of Vietnam milk market share, proving thedominance of the brand to the milk industry in Vietnam.. In par

Ha Noi, 2023

TABLE OF CONTENTS

A INTRODUCTION 1

I REASONS FOR CHOOSING THE TOPIC 1

II RESEARCH SUBJECTS - THE SCOPE OF RESEARCH: 1

III RESEARCH METHODS: 1

B CONTENT 2

CHAPTER 1: THEORETICAL BASIS 2

CHAPTER 2: MARKET ANALYSIS 3

1 The summary of Vinamilk dairy market in Vietnam: 3

CHAPTER 3: EVALUATION PROPOSED SOLUTIONS AND PREDICTIONS, .15

1 The evaluation of Vinamilk’s market in Vietnam 15

A INTRODUCTION:

I Reasons for choosing the topic:

Currently, the dairy products business is booming and competing more fiercelythan ever due to the rapid rise of countless different brands Proud to be a brand fromVietnam Vinamilk has successfully affirmed its position in this arena and has beenambitious to expand its reputation to other markets around the world, not just in Vietnam.In recent years, along with the outstanding development of our country’seconomy, people’s needs for quality of life have also been increasingly improved.Consumers tend to focus on the level of perfection and value the product brings tothemselves when using it Then Vinamilk has become the top priority choice whentalking about the dairy industry It is the responsiveness in terms of products, prices aswell as product quality that has helped Vinamilk have a solid foothold in the hearts ofmany generations.

II Research subjects - The scope of research:

from 2018 to 2023.

The scope of research: Vietnam's economy, facing the remarkable development ofsociety, has raised people's consumption needs to a new level, requiring businesses toquickly adapt to that environment

Study space: Vinamilk (Vietnam Dairy Products Joint Stock Company)Study time: 2018 - 2023

III Research methods:

Theoretical analysis - synthesis method.Analysis - synthesis research method.Statistical data collection.

B CONTENT

Chapter 1: Theoretical basis

Market: A market is a group of buyers and sellers of a particular product.

Price: the money price of a good or service is the amount of money needed to buy it.Quantity supplied: In economics, quantity supplied describes the number of goods orservices that suppliers will produce and sell at a given market price The quantitysupplied differs from the actual amount of supply (the total supply) as price changesinfluence how much supply producers actually put on the market

Law of supply: The law of supply is a microeconomic law It states that, all other factorsbeing equal, as the price of a good or service increases, the quantity of that good orservice that suppliers offer will increase, and vice versa.

Determinants of supply: are factors that directly affect the supply of a good or service.Price can determine the quantity supplied but price doesn't determine the supply of agood or service There are many non-price determinants of supply, including input prices,technology, future expectations, and the number of sellers

Input prices significantly influence the supply of a particular good or service.That's because input prices directly impact the company's cost, which then dictateshow much profit a firm makes

Technology is another important factor that determines the supply of a good orservice That's because technology has a direct impact on the cost that the firmfaces while turning inputs into outputs When a company employs technology thatmakes the production process more efficient, manufacturers can boost theirproductivity while decreasing the amount of money they spend on labor This thencontributes to an increase in supply and vice-versa.

The number of sellers in a market impacts the supply of a good or service That'sbecause when you have more sellers in the market, the supply of that good will belarger.

The expectations that companies have about the price of a good in the future havean impact on their present supply of goods or services For example, if companiesbelieve they will be able to sell their goods at higher prices the next month, theywill cut down on their supply levels for the time being and then boost those levelsthe following month to maximize their profits.

Unlike price, non-price determinants of supply do not cause a movement along thesupply curve Instead, they cause the supply curve to shift to the right or left.

Chapter 2: Market analysis1 The summary of Vinamilk dairy market in Vietnam:

Being included in “5-year plan 2017-2021” by Vinamilk, a significant improvementwas reported during the year 2018-2021 In 2018, the domestic revenue of Vinamilk was44.7 billion VND, accounting for 55% of Vietnam milk market share, proving thedominance of the brand to the milk industry in Vietnam

The revenue continued to rise substantially in 2019 with 47.3 billion VND, however,the market share remained unchanged in this year A slowdown trend can be seen in thelast two years of the plan as the Covid-19 pandemic hit the world economy and Vinamilkwas unable to avoid the losses it brought.

By 2020, It experienced a marginal decrease of 0.55 billion compared to the previousyear, with the reduction being relatively minor.

The market measurement is reflected more clearly in the Kantar Worldpanel report In2021, in urban areas, the consumption rate of Vinamilk products reaches 99% ofhouseholds, while in rural areas, this number is approximately 90% It can be understoodthat out of every 10 households, 9 families in Vietnam will use at least one Vinamilkproduct In particular, this rate in urban areas is almost absolute at up to 99%, this is alsoan area with very strong growth in dairy product consumption in recent years.

According to the 2022 "Brand Footprint"report published by Kantar's Worldpaneldivision, Vinamilk received 03 outstandingresults: (1) Milk brand most chosen byconsumers; (2) Top 3 manufacturers of fast-moving consumer goods (FMCG) chosen byconsumers the most; (3) Mr Tho andPhuong Nam Star - The condensed milkbrand most chosen by consumers.

In particular, for more than a decade, Vinamilk has always maintained the highest position in the ranking of Top 10 Milk Brands and Dairy Products most chosen by

Vietnamese consumers with CRP (Customer Reach Point - Consumer touch points) far surpass other brands.

The Top 10 most chosen milk and dairy product brands also have the appearance of two other brands, Susu and Probi, belonging to the yogurt industry - one of Vinamilk's key products Thus, among the 10 most typical brands in the dairy industry in 2022, names belonging to Vinamilk have occupied 5 positions.

=> To achieve such achievements, Vinamilk has constantly made efforts to improve inputs, production processes, transportation and branding, those determinants will be clarified in the next section.

2 Determinants of supply:

2.1 Input prices:

Being the largest enterprise in the dairy industry in our country, Vinamilk still hasto use up to 60% of its raw materials are imported powdered milk to produce powderedmilk products, liquid milk, yogurt, while raw materials account for about 50% ofVinamilk's production costs in the past 5 years

According to figures from the analysis report of FPT Securities Company in 2020.Escalating raw material prices caused Vinamilk's P/E to decrease by nearly 16%compared to the beginning of the year This will affect the company's gross profit.According to VNDirect, every 5% increase in raw milk powder price can cause thecompany's gross profit to decrease by 0.4 to 0.5 percentage points Besides, the dairyindustry still cannot meet the milk demand for domestic milk factories.

Therefore, Vinamilk has early built a strategy to develop domestic raw materialareas and considered it a key task throughout the past 42 years of development.

Cooperate and accompany farmers:

In 2018, Vinamilk has more than 80 raw milk transfer stations to receive freshmilk from farmers and at the same time support the distribution to farmers ofanimal feed, and advise on technology transfer from there can develop andmake the most of domestic raw material resources.

Vinamilk is operating and managing 02 subsidiaries 100% owned byVinamilk, namely Vietnam Dairy Cow Company Limited and Thong NhatThanh Hoa Dairy Cow Company Limited These two companies have operatedand provided the factory with milk and animal feed, and also producedconstruction materials for the factories.

2019: Vinamilk officially owns 75% of the charter capital of GTNFoods JointStock Company, setting the strategic goal of building Moc Chau into the high-

tech dairy capital of Vietnam, contributing to the development of the liquidmilk industry home.

2020: Putting into operation the Dairy Cow Technical Center and EmbryoTransplantation to serve the needs of selecting and providing outstandinggenetic resources.

In 2020 and 2021, the Covid pandemic occurred, causing the global supplychain, including Vietnam, to be seriously affected During that year, Vinamilkalso encountered many difficulties in producing and distributing goods:

+ Animal feed prices increase by 30-40% in 2021

+ Shipping fees increased by 20% (domestic) and 500% internationally+ Vinamilk's purchasing activities of raw fresh milk from livestock farmers insome localities face difficulties due to long-term social distancing, high foodprices, and some types of food are not in supply => affecting the animalhusbandry => many farming households are forced to change occupations.

=> These factors had lead to the increase in the price of milk in 2020,2021,2022

In order to ensure supply, the company had to reduce staff, and at the same timeconduct an overall review of machinery and equipment, optimize operating time,and distribute operating time for each equipment cluster equipment during the dayto optimize efficiency while saving energy costs and aiming to apply circulareconomy and sustainable development.

Vinamilk also gradually improves the quality of domestic raw materials throughthe application of international standards in dairy management and farming.Specifically, of the company's 12 farms, 10 farms meet Global G.A.P standards,with all breeding cows imported from Australia, America, New Zealand and 2farms following European organic standards Vinamilk currently owns the largestGlobal G.A.P dairy farm system in Asia in terms of number of farms.

The rise in input prices has presented a considerable challenge for Vinamilk, resultingin diminished profitability Faced with the dual impact of the global pandemic andescalating prices, the company has taken proactive measures to optimize the sourcing ofdomestic raw materials and implement cost-saving strategies to maintain supply stabilityand operational resilience.

2.2 Technology:

Vinamilk's revenue and profit growth comes not only from what they sell at the marketbut also thanks to modern technologies that help increase productivity and sales volume,leading to a revenue increase gradually over the years.

Dairy farming system:

All dairy cow breeding systems are invested and built by the Company based onmodern, world-class design and technology consultancy from countries such as the US,Sweden and Israel:

In 2018:

The whole farm system has been equipped with a fully automaticsilofeeding system that helps to shorten operation time, reduce labor costs, savepackaging costs and ensure weatherproof quality at the same time.

Automatic cooling system from Israel and super soft rubber mattress fromUS was installed to keeps cows healthy and stress-free and to reduce lameness rateand increase milk yields, contributing to the economic performance of theCompany.

Sustainable water management:Application of GEA solutions for fertilizercollection and treatment, which makes use of water discharge to retain fertilizer,not only helps to treat fertilizer effectively but also reuses water discharge,bringing positive impacts to the environment and optimizing water use bycirculation and recycling of wastewater

Up to 2020:

Vinamilk had invested and put biogas-powered water heating system inoperations in 8 farms to pasteurize milk, wash buckets and provide water for cowsand therefore help reducing environmental pollution and energy costs

Prioritizing energy-saving technologies LED lighting systems are installed: in all newly built barns and factories and gradually replaced the high-pressuredcompact lamps in existing farms; Eco-friendly orientation is also applied.Moreover, by the end of 2020, solar panels have been installed in 05 farms: BinhDinh (2.96 MWp), VNM Da Lat (2.06MWp), Organic (1.18MWp), Di Linh (0.99MWp).

- In the production process:

In 2018, many of the most modern production lines to increase productioncapacity for factories nationwide was invested

+ Completing phase 2 of the Mega liquid milk factory in Binh Duong, increasingthe total capacity of this factory from 400 million liters/year to 800 millionliters/year

Invest in more high-speed liquid milk transmission lines (A3 Speed) of100ml and 180ml cans at Tien Son and Lam Son factories to serve theschool milk program in Hanoi and the Northern provinces

Invest in installing 2 yogurt lines with a capacity of 80,000jars/hour/machine at the factory in Ho Chi Minh and the factory in TienSon, which are the most modern production lines and the largest capacity inthe world time of year 2018

In 2019, Cu Chi Raw Fresh Milk Center has been established, which gathers allfresh milk sources in Ho Chi Minh City and surrounding areas to make the milk

transportation process and quality control activities more convenient Thetechnology in that Center includes:

+ Cold storage to store concentrated samples

+ Fast analyzer system operates by barcode, returning results to eachhousehold

+ Automatic cleaning system (CIP) helps tank trucks of milk stations useadvanced cleaning regimes, ensuring food hygiene and safety

+ System of fast milk cooling tanks, large volume, high flexibility can bothreceive milk from purchasing stations when necessary, and can also receivemilk directly from farmers

- Moreover, a document system was also built to control and manage fueland periodic energy audit programs was implemented at the factory tooptimize production costs and ensure product quality

- Supply Activities:

Manage the trips of the Warehouse Enterprise and other transport units withroute sharing software => save 1.5 hours of daily transportation time foreach Enterprise and closely manage orders outsourcing

ERP: Encryption technology and application of traceability to ensuretransparency in quality and inventory management of suppliers

Overall, in the period of 2017- 2021, machinery and equipment investmentplan has basically been completed at all factories to increase production capacityof key product lines by 60-80%.

=> The integration of technology plays a crucial role in enhancing Vinamilk's supplycapability at the microeconomic level Automation in production and infrastructureexpansion enables the optimization of processes, cost reduction, and ensures a stable

dairy products for many consecutive years.

2.3 Number of sellers:

Modern channels:

Supermarkets, shopping centers and grocery store systems: Currently, Vinamilkproducts are present in more than 1,500 level 1 agents, 251,000 small agents, 200Vinamilk distributors, 3,899 large and small supermarkets and 1,356 conveniencestores spread evenly across the country.

Vinamilk store: With the "Vietnamese Milk Dream" chain, there are currentlymore than 600 stores and 251,000 retail points This is the main growth driver ofthe business and is also the basis for reputable subsidiaries and manufacturing