Communications strategies Bright eyes, strong build ADM Milk A sub brand of VinaMilk

EXECUTIVE SUMMARY The milk market is currently attracting many players to enter in all segments such as whole milk powder, liquid milk, fresh- pasteurized milk and micronutrient fortifie

TRƯỜNG ĐẠI HỌC MỞ TP HCM UNIVERSITE LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL ECONOMICS & MANAGEMENT

MMA7

Ha Truong Phuong My Nguyen Thi Truc Vy

COMMUNICATIONS STRATEGIES

“BRIGHT EYES, STRONG BUILD” ADM+ MILK –

A SUB-BRAND OF VINAMILK

MASTER PROJECT MASTER IN MARKETING & ADVERTISING

Tutor’s Name: Ho Cong Hoai Phuong

Ho Chi Minh City

(2014)

DECLARATION

We, Nguyen Thi Truc Vy and Ha Truong Phuong My, hereby, declare that this project

is written by ourselves in its entirety based on the information collected from public sources and internal Vinamilk

This project is dedicated to our completion of the Master of Marketing and Advertising course This has also not been submitted for any degree in any university previously

These students understood well the theory and give some valid points of strategic

recommendations I highly appreciate their efforts

ACKNOWLEDGEMENT

Foremost, we would like to express our sincere gratitude to all of our Professors in Solvay Brussels School of Economics and Management in the Vietnam-Belgium Master Program for the invaluable knowledge, motivation and enthusiasm we have received from them

Our most profound thanks also go to Professor Jean P Baeyens for his special inspiration

at the very beginning of the course and Professor Marianne Claes for her sympathy for our unexpected difficulties we encountered during the time of our final project completion

We would like to thank Mr Ho Cong Hoai Phuong, our tutor for this project, for his valuable guidelines and supportive instruction

We thank our fellows and friends in MMA7 for their support in different ways We also take this occasion to extend our thanks to all of our friends and acquaintances, who have given tremendous assistance to help us finish the project

Last but not least, we would like to thank our families especially our parents and our partners who have provided us with continuous support, great encouragement, quiet patience and unwavering love while witnessing all ups and downs of our project

TABLE OF CONTENT

DECLARATION 1

ACKNOWLEDGEMENT 2

TABLE OF CONTENT 3

ABBREVIATIONS 8

LIST OF FIGURES 9

LIST OF TABLES 10

EXCUTIVE SUMMARY 11

PART 1: VIETNAM DAIRY MARKET OVERVIEW AND CURRENT MARKETING COMMUNICATION ACTIVITIES OF VINAMILK ADM+ 12

I.OVERVIEW OF MARKET FOR MILK PRODUCTS 12

1 Market overview of dairy products in Vietnam 12

1.1 Food and Beverage Market 12

1.2 Dairy products Market 13

2 Micronutrient fortified milk market 17

II.COMPANY OVERVIEW 18

1 Company Mission 18

2 Company Vision 18

3 Brief growing history 18

III.SUB-BRAND OVERVIEW –VINAMILKADM+ 19

1 What is VINAMILK ADM+? 19

2 Product Form 20

2.1 Portfolio 20

2.2 Package 20

3 Value proposition: 20

IV.ANALYSISOFVINAMILKADM+MARKETINGACTIVITIES 20

1 PESTEL Analysis 20

1.1 Political 20

1.2 Economic 21

1.3 Social 22

1.4 Technology 23

1.5 Environment 23

1.6 Legal 24

2 PORTER 5’s Forces Analysis 24

2.1 Threat of New Entrants 24

2.2 Power of Suppliers 25

2.3 Power of Buyers 26

2.4 Availability of Substitutes 26

2.5 Competitive Rivalry 27

3 SWOT Analyses 28

3.1 Strength 28

3.2 Weaknesses 29

3.3 Opportunities 30

3.4 Threats 30

4 Competitor analysis 31

4.2 Indirect competitors 32

4.3 Market players’ analysis 34

5 Marketing objectives 35

6 Segmentation 35

6.1 Product segments - Liquid milk 35

6.2 Demography segmentation 37

6.3 Micro-nutrient fortified milk for children from 2 to 12 38

7 Targeting 38

8 Positioning 40

9 Pricing strategies 41

9.1 Milk pricing stabilization policy 41

9.2 Micro nutrient fortified milk pricing 41

10 Distribution channels 42

11 Communications 45

11.1 Design a message 45

11.2 Summary of marketing activities from 2010-2013 45

PART 2: CRITICAL REVIEW OF VINAMILK ADM+ MARKETING COMMUNICATION PLAN IN 2010-2013 46

I.METHODOLOGIES 46

1 Integrated marketing communications 46

2 Sub-branding strategy 46

II.REVIEW OF VINAMILK ADM+ MARKETING COMMUNICATIONS PLAN IN 2010-2013 46

1 The brand story 46

1.1 The parent brand image 46

1.2 The initial sub-brand image 47

1.2.1 Launching 47

1.2.2 Three glasses of milk per day campaign 48

1.3 Unexpected Story 48

1.3.1 The happy animated cow officially becomes the sub-brand image 48

1.3.2 Happy animated cow – the sub-brand image of ADM+ milk 49

1.4 Evaluation on brand image building 50

1.4.1 Amiable endorsement 50

1.4.2 The sub-brand image of ADM+ milk versus the brand image of Vinamilk 50 1.4.3 Brand name education 51

2 Integrated Marketing Communications 52

2.1 Objectives 52

2.2 Target groups 52

2.3 Strategy analysis 52

2.3.1 Advertising 52

A Advertising activities 52

a Outdoor 52

b Magazines / newspapers 53

c TVC 53

B Review 53

a Lovely advertising soundtracks 53

b Promoting the new aspect of physical development: Eyesight improvement 54

2.3.2 Sales Promotion 55

A Sales Promotion Activities 55

a Free samples 55

b Gifts 55

c Discounts 55

d Loyalty Program 56

B Sales Promotion Review 56

a Non-separate promotion from mother brand promotion 56

b Frequency of free gifts 56

c Limited use of loyalty program 57

2.3.3 Public Relations 57

A PR campaigns 57

a Education meeting 57

b PR events/ sponsor 57

c Press releases 57

B Campaign review 58

a Ineffective PR 58

b Reliance on the mother brand 58

c No strong reaction on scandal regarding milk quality 58

2.3.4 Direct Marketing 58

A Direct consumer contact 58

B Digital marketing strategy 58

C Necessary improvements 59

a Reliance on Vinamilk website 59

b Uncontrolled information 59

c Ineffective online TVC 59

2.3.5 Social corporate responsibility 59

A Social campaigns 59

B Social evaluation 60

PART 3: RECOMENTDATION FOR FURTHER IMPROVEMENT 61

I.FURTHER IMPROVEMENT 61

1 Develop ADM+ milk into an independent brand name 61

1.1 Current state of affairs 61

1.2 Suggested remedies 61

2 Leverage the positive responses to the happy cow as the brand image 62

2.1 Current context 62

2.2 Practical suggestions 62

3 Influence mothers 63

3.1 Current situation 63

3.2 Suggested remedies 64

II.STRATEGY FOR 2014-2016 64

1 Objectives: 64

2 Marketing activities purposes 65

3 Target audience 65

4 Key message 65

5 Context 65

6.1 Advertising 66

6.2 Sales Promotion 67

6.3 Events & Experience 67

6.4 PR 68

6.5 Digital- Social media 69

7 Budget Allocation 70

7.1 Advertising 70

7.2 Sales Promotion 70

7.3 Events & Experience 70

7.4 PR 71

7.5 Digital- Social media 71

8 Timeline 71

8.1 Advertising 71

8.2 Sales Promotion 71

8.3 Events & Experience 72

8.4 PR 72

8.5 Digital- Social media 72

PART 4: CONCLUSION 74

APPENDICES 75

APPENDIX 1:ILLUSTRATION OF VINAMILK ADM+ADVERTISING ACTIVITIES 75

- 2010-2011: Out of home, Prints and Package design- “Nang tam voi, sang tam nhin” campaign 75

- 2011- 2012: Out of home, Prints and Package design – “3 cay chum lai nen tam voc cao” campaign 75

- 2012- 2013: Out of home, Prints and Package design – “3 Ly chum lai nen tam voc cao" 76

APPENDIX 2:ILLUSTRATION OF VINAMILK ADM+TVC 77

- 2010-2011: a kid and a laughing cow 77

- 2011-2012: 77

TVC 1: Jumping cows 77

TVC 2: Playing with a kite 77

TVC 3: Collection of funny cow stickers 77

- 2012-2013: 78

TVC 1: High heel shoes and glasses shop 78

TVC 2: Journey around the world 78

- 2013-2014: ADM shop 78

APPENDIX 3:ILLUSTRATION OF VINAMILK ADM+ADVERTISING PLACES 79

APPENDIX 4:ILLUSTRATION OF VINAMILK ADM+SALE PROMOTIONS 80

- Free gift: 80

2010-2012: 80

2013: 80

- Loyalty program 81

APPENDIX 5:FORMAT THE PROMOTION OF COLLECTING ADM+ CARDS TO EXCHANGE TICKET FOR ADM+ FESTIVAL TO MEET THE HAPPY COW 81

APPENDIX 6:MONTHLY MAGAZINE “BRIGHT EYES,STRONG BUILD” 81

APPENDIX 7:ILLUSTRATION OF TOUCH POINTS FOR VINAMILK ADM+ ADVERTISINGS 82

1 Movable objects: 82

1.1 On buses 82

1.2 On Food carts 82

2 Fixtures 83

2.1 On the public electric box 83

2.2 On the street surface 83

2.3 At the bus stop 83

2.4 At the elevator and stair 84

2.5 In the childcare centers 84

APPENDIX 8:SURVEY ON BRAND RECOGNITION AND IDENTITY 85

REFERENCES 88

ABBREVIATIONS

ASEAN: The Association of Southeast Asian Nations DHA: Docosahexaenoic acid

EMI: Euromonitor International

FAPRI: The Food and Agricultural Policy Research Institute FY: Fiscal Year

GDP: Gross Domestic Product

GSO: General Statistics Office

IMC: Integrated Marketing Communications

JSC: Joint Stock Company

OOH: Out-of-home

POSM: Point of Sales Materials

PR: Public Relations

R&D: Research and Development

SEA: South East Asia

LIST OF FIGURES

Figure 1: Food Consumption in Vietnam (Source: General Statistics Office, BMI) 12

Figure 2: Vietnam dairy market size - VND tn (Source: EMI and VCSC estimated) 13

Figure 3: Vietnam imported dairy product value- US$ mn (Source: GSO) 14

Figure 4: Market Share of Dairy product Segments (Source: EMI 2009) 14

Figure 5: Vietnam dairy market share FY2010 (Source: EMI and VCSC collected) 15

Figure 6: Yoghurt and Sour Milk product company shares 2008-2012 (Source: EMI) 16

Figure 7: Powder milk market share Q4-2013 (% of total) (Source: EMI) 16

Figure 8: Vietnam Dairy Development and National Dairy Development Plan to year 2015 (Source: GSO and Jaccar) 22

Figure 9: ADM+ milk’s PORTER five forces analysis 28

Figure 10:Comparison between the differentiation on product and brand awareness of the micro-nutrient fortified milk players 34

Figure 11:Spotting position of Vinamilk ADM+’s competitors in the micro-nutrient fortified milk market 34

Figure 12: Vietnam liquid milk market size - VND tn (Source: EMI) 35

Figure 13: Liquid milk market share (% of total) (Source: IBM, Bloomberg 2011) 36

Figure 14:Vinamilk revenue by product (Source: Vinamilk) 39

Figure 15:ADM+ milk in 6 cities (HCM, Hanoi, Can Tho, Da Nang, Nha Trang, Hai Phong) (Source: Neilsen) 40

Figure 16:Revenue of Vinamilk ADM+ by channel as at 31/12/2012 43

Figure 17:Model of Vinamilk distribution channels 43

Figure 18: Number of supermarket-delivered Vinamilk products in Vietnam from 2008-2012 (Source: Vinamilk, Ministry of Industry and Trade) 44

Figure 19:The increase of number of Vinamilk national sole distributors from 2008 to 2012 (Source: Vinamilk) 44

Figure 20:Pupils of Nguyen Duc Canh Primary School - Ha Noi enjoyed the Bright Eyes, Strong Build show 57

Figure 21:Children in Bac Ninh province enjoyed the free Vinamilk ADM+ at the program “Milk at school” 60

LIST OF TABLES

Table 1:Dairy companies and their product lines (Source: EMI & VCSC collected) 17

Table 2:Summary of suppliers of Vinamilk (Source: Vinamilk website) 26

Table 3: Summary comparison between Vinamilk ADM+ and its direct competitors 31

Table 4:Summary comparison between Vinamilk ADM+ and its indirect competitors 33

Table 5:Vietnam Liquid Milk Consumption, 2012-2017 (Sources: General Statistics Office of Vietnam, BMI; FAPRI, BMI) 36

Table 6:Vietnam Dairy consumers (Source: GSO, MOIT, CIA World Factbook) 37

Table 7:The price of some main components of milk (Source: Trương Minh Huy (2009), Dairy sector value chain analysis, Research Department - Tai Viet Jointstock company, Hanoi, p.12) 42

EXECUTIVE SUMMARY

The milk market is currently attracting many players to enter in all segments such as whole milk powder, liquid milk, fresh- pasteurized milk and micronutrient fortified milk etc Micronutrient fortified milk is one of the potentially fast-growing segment among them It creates the new style of drinking milk while bringing the insightful benefits to consumers

VINAMILK – established 38 years and the most famous Vietnamese brand - has entered to micronutrient fortified milk market since 2010 and currently is well recognize with the sub-brand Vinamilk ADM+ It contributes around 35% of micronutrient fortified milk market share in Vietnam Vinamilk ADM+ focuses on building Bright Eyes, Strong Build for 2-12 year old Vietnamese children that makes it different from other milk brands in the micronutrient fortified milk market

While launching Vinamilk ADM+ in the market, the sub-brand has inherited the goodwill, brand awareness and existing operation system of the parent brand – Vinamilk Moreover, based on the parent brand – Vinamilk - marketing strategy, Vinamilk ADM+ has asserted certain success in its marketing communication strategies Some successful aspects can be counted are the cheerful animated cow image in children mind, the kids’ favourite TVCs, the high brand coverage rate in the public etc However, PR and digital marketing are relying a bit heavily on the parent brand so they are not effective as expected

With the objectives of maintaining the first position in the micro-nutrient fortified milk market; increasing average sales by 10%-15% and 3% market share and continuing the integrated marketing communications for consumers’ needs generating, brand awareness gaining and consumers’ interest arousing for the period 2014-2016, Vinamilk ADM+ master strategy needs to focus to the three main points:

1 Develop ADM+ milk into an independent brand name

2 Leverage the positive responses to the happy cow as the brand image

3 Influence mothers

All of marketing activities should be done with the following purposes:

- Differentiating the sub-brand image from the parent brand image

- Continuing to increase brand awareness among the unreachable of the target audiences

- Maximizing the advertising and PR activities to deliver brand image and product values

to consumers

- Building independent sales promotion programs and social community activities

- Planning to develop the product function to get consumer insights

- Adding extra services to increase the product values

Micronutrient fortified milk market is new and potential to milk producers By controlling good quality, cost and price as well as developing proper marketing communications strategies, Vinamilk can keep its position and have the strong, independent, attractive and competitive sub-brand AMD+ in micronutrient fortified milk market

PART 1: VIETNAM DAIRY MARKET OVERVIEW AND CURRENT MARKETING COMMUNICATION ACTIVITIES OF VINAMILK ADM+

I Overview of market for milk products

1 Market overview of dairy products in Vietnam

1.1 Food and Beverage Market

Being one of the ASEAN countries, Vietnam is a developing nation with a population of over 88 million and a GDP of more than US$120 billion for 2012 According to Trading Economics, Vietnam’s GDP annual growth rate from 2010-2013 is 5.65 percent and this is expected to reach 6.07 percent in 2013 GDP per capita was US$1,140 in 2010, but there is

a large gap between the wealthy urban population and the low income rural population With a continually increased population, consumption of food and beverages is dramatically growing in Vietnam The foodservice industry is worth approximately US$13 billion in 2011 and is expected to grow at a compound annual growth rate of 4.2 percent per annum for the two years 2012 and 2013 The food and beverage retail sector is worth nearly US$33 billion for 2011 and is expected to grow at a compound annual growth rate

of 18.9 percent until 2014

Figure 1: Food Consumption in Vietnam (Source: General Statistics Office, BMI)

Vietnam’s food and beverage industry is becoming more developed, matured and westernized The growth of modern retail formats such as supermarkets, hypermarkets and many other types presents opportunities for Vietnamese consumers to be more exposed to

a wide range of products from domestic and imported The average Vietnamese diet is also changing to include more meat and dairy products

The overall food market is expected to grow between 3.7 – 4.3 percent per annum for the period 2011 – 2013 There are several sectors and products that are expected to grow faster than the overall market Main food categories that are consumed considerably much today include meat, convenient and processed foods, healthy food and dairy This proves a significant change in the food consumption trend of modern Vietnamese That there appear two criteria for choosing food – nutrition and convenience can exert leverage over food

production and distribution in Vietnam Vietnam food market is evaluated to be expanding

in terms of size and developing in terms of diversity and quality

For beverages, the market overall is growing rapidly with sales of beverage products expected to increase between 6.3 – 7.2 percent per annum for the period 2011 – 2013 Non-alcoholic and alcoholic are the two main categories should be counted Alcohol consumption is forecast to increase by around 6.5 – 7.5 percent each year for the period

2011 – 2013 As for non-alcoholic, due to a combination of westernisation and rising health consciousness, both soft drinks and healthy alternatives, such as fruit and vegetable juices, are expected to grow As the population becomes wealthier, demand for hot beverages such as coffee and tea is also expected to rise

Besides, it is impossible not to mention the great influence of the importing trend on the domestic market place Being on the same ground as a great number of foreign competitors, Vietnamese enterprises have to struggle the ways to win back customer loyalty

1.2 Dairy products Market

Dairy product has not had a long history of development in Vietnam, which is similar to many countries in the Southeast Asian area While cattle and buffaloes have historically been important in farming systems, for labour, meat and leather, dairy products themselves have been ignored However, globalization has changed the inclination and created new chances for the emergent markets both domestically and for export In addition, milk has been used in impoverished communities as a means of improving the physical and intellectual development of children This becomes an additional reason for fostering the dairy industry in the country, which now includes health, export markets, globalization and the use of areas of potential comparative advantage

The increasing demand for dairy products in Vietnam is posing many great opportunities for enterprises in dairy industry to develop according to an official from the Ministry of Agriculture and Rural Development The yearly average growth rate of milk consumption

in Vietnam will grow between 12% and 15% by 2015, according to the Research and Development Division under the Information Center for Agriculture and Rural Development (Agroinfo)

VND tn

Figure 2: Vietnam dairy market size - VND tn (Source: EMI and VCSC estimated)

When society reaches considerable development, living conditions also tremendously improves Higher income encourages Vietnamese people to consume more dairy products

women Therefore, dairy production and consumption have witnessed an extremely high growth rate through the past decade However, the average level of fresh milk consumption

of Vietnamese people is still much lower than that in regional countries A Vietnamese person consumes 14 liters of milk per annum, while the figures are 23 liters in Thailand and 25 liters in China That reveals Viet Nam's dairy sector has enormous growth potential Viet Nam's economy was expected to grow at 7% in 2011 and its growth prospects for the next decade look promising That imported dairy product value has decreased year by year since 2011 has expanded the market for domestic and local players

US$ mn

Figure 3: Vietnam imported dairy product value- US$ mn (Source: GSO)

Vietnamese dairy consumption has witnessed a significant expansion in the last 15 years, driven by comparatively large increases in domestic consumption, rising incomes and living conditions The Vietnam dairy product market has developed into more product segments compared to that of a couple of years ago Besides traditionally popular product segments, a few more ones and even many various product types within each specific segment have quickly emerged Currently, Vietnam dairy product market can be divided into five main segments including powder milk, liquid milk, condensed milk, yoghurt and other product segments (comprising of butter, cheese, ice cream, cream…) The following chart displays in detail the market share of all dairy product segments:

2008 2009 2010 2011 2012

Powder Milk 41%

Liquid Milk 32%

Condensed Milk 15%

Yoghurt 11%

Others 1%

Figure 4: Market Share of Dairy product Segments (Source: EMI 2009)

Powder milk is primarily consumed among all age groups (up to 41%) Following is liquid milk with 32% Condensed milk, yoghurt and other segments account for 15%, 11% and 1% of the market respectively Apparently, powder milk and liquid milk are the two segments in which consumers’ needs have increased dramatically these days Conversely, the rate of consumption in condensed milk segment has plunged steeply due to the appearance of other new product types The market shares of yoghurt and other dairy products are quite small whereas there emerge more and more new product lines and categories in these segments

Vietnam dairy product market is evaluated to be highly concentrated when the ground is for only a few key players Vinamilk and Friesland, having dominant roles in the market, account for 60% of total market share The remainder is shared by a number of small players Both Vinamilk and Friesland have a wide range of products in all of product lines from UHT milk to powder milk Others try to penetrate liquid milk segment, but still their market share is less than 5% each Vinamilk dominates most markets such as yogurt, condensed milk and liquid milk In the powder milk market segment, the leading positions belong to imported/foreigner brands

Figure 5: Vietnam dairy market share FY2010 (Source: EMI and VCSC collected)

Particularly, Vinamilk dominates the yogurt and condensed milk market, with a market share in FY11 of 71% and 88% respectively This is predicted not to change much in the next couple of years

Condensed milk has a low margin (est gross margin of 13%), low growth rate (volume growth rate from 2-3%) and requires significant capital to manufacture Friesland seems to officially withdraw from this segment and other small players find it not attractive and profitable enough to enter Capturing 88% market share, Vinamilk has been the leader for this market for years

Yogurt involves heavy investment in manufacturing machine and transportation vehicles, which will create a large barrier for new entry With yogurt factories in the north, south and central of Vietnam, Vinamilk has a considerable advantage for this product, and guarantees its dominant market share

Vinamilk 32%

Friesland 28%

Others 40%

Figure 6: Yoghurt and Sour Milk product company shares 2008-2012 (Source: EMI)

The most profitable product line, powder milk, is led by Abott Vietnam with the market share of 25% in FY13, followed by Vinamilk with 16% Foreign companies still dominate this segment with at least 61% market share Vietnamese perception on imported/foreign brands explains the popularity of foreign brands Vinamilk targets to increase market share

by low pricing strategy (lower by 10-30% compared to international brands) and gradually educating customers by advertisement, conventions and events Vinamilk is expecting to gain its target of 35% market share, but it appears that will takes much longer or will require a different strategy to change customers’ view

Figure 7: Powder milk market share Q4-2013 (% of total) (Source: EMI)

Vietnam's dairy market is rich with opportunities A growing population with a rapidly increasing per capita income is setting the stage for a decade of transformational growth in the Vietnamese dairy product import sector Moreover, urbanization and westernization influence on lifestyle and eating habits will play an extremely important role in the potentiality of Vietnam dairy sector Greater awareness of perceived nutritionl and health benefit of eating more dairy products also affect the choice of products consumed in terms

of origin, quality and other criteria

Abott 25%

Vinamilk 16%

Mead Johnson 14%

Friesland 15%

Nestle Vietnam 9%

Others 21%

UHT Pasteurized Yoghurt Condensed Powder

Friesland     

Abbott  Nestle  Mead Johnson  Dumex  Honoi Milk   

IDP    

Moc Chau   

Long Thanh   

TH Milk   

Table 1:Dairy companies and their product lines (Source: EMI & VCSC collected)

Although government continues to place a high priority on developing the country's dairy industry, in an effort to keep up with the growing domestic demand for fresh milk, many local processors face up to huge challenges which are heavy dependence on imported ingredients; quality of local dairy product; fierce competition in marketing activities; little Research and Development That requires more intelligent strategies so that the local processors can grasp these opportunities more successfully

2 Micronutrient fortified milk market

Micronutrient malnutrition is prevalent in Vietnam due to the staple diet of rice with few nutrition sources Approximately 50 per cent of the country's women of reproductive age (from 15 to 44) , children and infants experience iron deficiency anaemia Vitamin A deficiency is still widespread among mothers and children under five years old (Source: Nutriview, 2005) Although eating a wide variety of foods and extra supplementation has helped to reduce this problem, improvement has been slow As the country economy develops, the Government has also given attention to improving people’s health and nutritional status With strong support from the government, it is likely to drive the growth

of the mineral and vitamin food fortification market in Vietnam in the future

Children in their time of physical and intellectual development have become the one of the main target groups Among different types of mineral and vitamin food fortification products that can be offered to Vietnam market, micro-nutrient fortified milk can be counted as the type of product to approach children easily and rapidly Micronutrient fortified milk is liquid milk supplemented more micro-nutrient like DHA, Vitamins and other necessary minerals… These days, the awareness of the nutritious food and drinks has increased tremendously due to wide exposure to many reliable sources of information Moreover, increasing numbers of Vietnamese women joining the workforce has led to an increase in early bottle-feeding The fact that fewer women are breastfeeding has created

an opportunity for not only powder milk products but also micro-nutrient fortified milk All urges a great number of consumers to compare product features and nutrition index among types of liquid milk currently available on the market Besides quality and origin, liquid milk is chosen to consume based on the value-added nutrition That opens the new

playground for micro-nutrient fortified milk Attempts of manufacturers to differentiate provided products make this market grow more and more sharply

First players in this market are the manufacturers who develop the idea of make nutritious powder milk products become more convenient and easy to consume with its own fluidal type Nuvita of Nutifood is considered to enter this market at the very beginning Afterwards, other milk manufacturers who have strong power in the segment of liquid milk embark on conducting research to penetrate this market Vinamilk with ADM+ milk for height development and eyesight improvement and Dutch Lady 20+ for full energy can be counted as the next key players The market has continued to witness the emergence of more products which are the variants of its relative powder milk product Some cannot be ignored are Pediasure and Ensure of Abott or Anlene of Fonterra Recently, there have been new players joining the market regarded as fertile and potential such as TH collagen added milk or Izzi S+ of Hanoi Milk Each product has its own target consumers to follow: While Nuvita, ADM+, Izzi S+ and 20+ are for children development, Pediasure is for children appetite, Ensure is for the sick; TH collagen added milk and Anlene are aim at women Unique attributes and product functions are also various among the brands, which has created a multifarious picture of the sub-segment micronutrient fortified milk

II Company Overview

Vinamilk is the biggest dairy company in Vietnam, and also the 15th largest company in

Vietnam In 2010, it is the first company in Vietnam to be included in the Forbes Asia's

200 Best Under A Billion list that highlights 200 top-performing small- and mid-sized companies with annual revenue under US$1 billion

Vinamilk has the leading distribution network in Vietnam, giving a broad access to consumers with a wide range of products such as condensed milk, powder milk, fresh milk, soya milk, yogurts, ice-cream, cheese, fruit juice and other products derived from milk They generate a substantial majority of the revenues from sales of our products in Vietnam comprising both dairy and non-dairy products and export to countries such as Australia, Cambodia, Iraq, the Philippines and the United States

After more than 30 years of operation, Vinamilk has built 8 plants, and 2 factories and is

on the progress of setting up 3 new plants Now, Vinamlik has started to invest capital abroad in a diversity of products comprising 200 dairy products and many other ones

1 Company Mission

Vinamilk will be the most sustainable growing healthy dairy food company with long-term competitive advantaged product portfolios to bring the best nutritious products with the best quality to the community

2 Company Vision

Vinamilk attempts to become a symbol of Vietnam nutritional product provider for community life by expanding the existing geographical coverage and improving the current product portfolios

3 Brief growing history

Period 1976-1986 (Subsidy Period)

- 1976: The Company was founded under the name of Southern Coffee-Dairy Company, a subsidiary of the General Food Directorate and had six factories in operation, namely

Thong Nhat Dairy Factory (belonging to a Chinese company), Truong Tho Dairy Factory (formerly owned by Friesland Foods), Dielac Factory (Nestle), Bien Hoa Coffee Factory, Bich Chi Powder Factory and Lubico

- 1978: The management of the Company was transferred to the Ministry of Food Industry and our Company was renamed United Enterprises of Milk Coffee Cookies and Candies I

Period 1986-2003 (Economic Reform Period):

- 1988: Introduced powder milk and cereal with milk powder at the first time in Vietnam

- 1991: Launched UHT milk and spoon yoghurt to Vietnam market

- 2003: Was formally converted into a joint stock company in December 2003 and changed its name to Vietnam Dairy Products Joint Stock Company to reflect its change in status

Period 2003 – present (Equalization Period)

- 2004: Acquired Saigon Milk Joint Stock Company Increased share capital to VND 1,590 billion

- 2005: Bought over the joint venture partner’s remaining shareholdings in Binh Dinh Dairy Products Company Ltd (as Binh Dinh Dairy Factory was then known) and inaugurated Nghe An Dairy Factory, located in Cua Lo Industrial Zone, Nghe An province, on 30 June 2005

* Entered the joint venture agreement with SABMiller Asia B.V and established SABMiller Vietnam Joint Venture Company Ltd in August 2005 The first joint venture product, Zorok, was also launched in the first half of 2007

- 2006: Vinamilk was listed on the HOSE on 19 January 2006 with the SCIC holding approximately 50.01% of our Company’s shareholdings

* Commenced the dairy cow farms program with the acquisition of Tuyen Quang dairy farm, a small scale farm with 1,400 heads of cows in November 2006

- 2010-2012: Developed water and powder milk factory in Binh Duong with total $220 million investment

- 2011: Started running the dairy in Da Nang with an investment of 30 million USD

- In 8/2011, the milk powder factory Miraka - New Zealand came into operation as planned This was the first project Vinamilk contributed capital overseas Earlier, on 11/9/2010, Vinamilk had received permission to invest in Miraka Company Limited in New Zealand

III Sub-brand Overview –VINAMILK ADM+

1 What is VINAMILK ADM+?

In February 2011, Vinamilk launched a new sterilized milk product line with additional micro-nutrients called Vinamilk ADM+ In addition to providing basic nutrients, the sterilized milk ADM+ provides important micro-nutrients for the full development of young children such as Calcium, Vitamin A, Vitamin D3, Magnesium, Manganese and Zinc The Vinamilk product targets mothers who wish to give their children extra nutrition

to help them to realize their full height potential Since the product line was launched, it has obtained positive feedback from end-users, proven by strong revenue growth during the years

2 Product Form

2.1 Portfolio

The Vinamilk ADM+ product line includes three product types, which are:

Sugar added Strawberry-flavoured Chocolate-flavoured

IV ANALYSIS OF VINAMILK ADM+ MARKETING ACTIVITIES

1 PESTEL Analysis

1.1 Political

- According to World Bank report (2011), Vietnam has currently had a stable political climate lasting for more than a decade, which helps Vietnam have sufficient time to reinforce its position in the world economic and polittical ranking Additionally, it also gives Vietnam a good opportunity to improve the general living standards

- The public policy system is currently in the process of being improved in terms of detailed meaning and execution in order to address the existing gaps in the current policy system As a result, there is the potential of bringing about significant and positive changes

in the view of policy makers and the beneficiaries

- Moreover, the health sector is one of the government’s top priorities, particularly when it comes to public health, nutrition level, and the health of future generations All policies concerning the health sector are reviewed and updated following relevant changes and advancement in accordance with the world trends with the purpose of improving both the quality of government policies and their applicability in practice

- Serious attention has also been paid to food related concerns when considering health issues In particular, there has been a dramatic increase in the number of food poisoning incidents in daily life as well as a rise in the prevalence of diet-related disorders and diseases Therefore, the Vietnamese government has taken into account the alert of potential problems associated with food safety and hygiene, especially at the level of managing the potential consequenses As such, the government has been keen on putting efforts into the process of improving relevant regulations in order to protect the rights of consumers and define the responsibilities for both food manufacturers and consumers

- Additionally, the government has now tighten the regulations on activities associated with milk product including manufacturing, retailing, importing and exporting by creating

and applying certain sets of policy Other aspects have also been strictly controlled such as quality, price and materials, which can have direct impacts on milk producers as well as milk consumers Although the government might be relatively late in taking these steps, it can still be a good move in managing milk production in terms of bringing good values for consumers and good returns for producers

- Export-import are increasing

Vietnam has gradually overcome the impacts of the world economic crisis while continuing to improve its economic situation:

- The World Bank 2013 reports that Vietnam has applied an effective course of actions in macro and micro environment in the last two years to resolve the world economy crisis effects It is quite good that the country’s inflation rate has dropped quickly in the last two years and maintained its downward trend Specifically, inflation rate would possibly reach 8.8 percent in end of 2013 then decline to 7.4 percent and 7.7 percent in 2014 and 2015, respectively

- Remarkable efforts have also been seen with regards to the management of Vietnam’s foreign currency market, in particular, there has been no major sudden change in the market in recent time Indeed, a stable exchange rate is a good sign that indicates favourable condition for investors and export-import in all sectors

- Having become a member of WTO in January-2007 seems to bring more opportunities for Vietnam to attract foreign investors while Vietnamese companies also have more chances to enter international businesses However, it brings considerable challenges for Vietnamese companies, especially in terms of skills and experiences, working capital, and regulations for both sides In addition, it also attracts more rivals in all sectors to compete with Vietnamese companies

- In order to reduce the milk price and the reliance on imported materials, Vietnam government has encouraged milk manufacturers and existing milk farmers to increase the size of cows and grass farms With the aim that Vietnamese milk producers can self-supply the qualified milk for their production, government has set the national development plan for dairy product up to 2015

Figure 8: Vietnam Dairy Development and National Dairy Development Plan to year

2015 (Source: GSO and Jaccar)

- The Government aims to attract foreign investors to take advantage of their advanced technology and practical knowledge so that Vietnam would be able to increase the number

of good-quality products that are made domestically As a result, a wide range of policies has been imposed to support the domestic manufacturers and consumers such as those that support the import of cows to produce milk in Vietnam meadow

1.3 Social

- While many countries are facing the problems associated with their ageing population

such as the superannuation fund, healthcare, limited range of good and service, Vietnam has a young population, of which 69.7% are in the labor force and only 5.5% are over 65 (Vietnam index profile 2013) That means Vietnam has a tremendous labor force as well as

a promising market to consume goods and services in the society

- Although Vietnam is still a developing country, it is one of the most developed countries

on the gender equality The women position is getting more important in the society as they become the main labor in the family, a decision maker and an influencer As a result,

it leads to changing view of many producers when offering goods and service to customers Women have become the main factor influencing the consuming goods of the others

- In addition, the young and increasingly more educated population creates and influences new trends in Vietnam society through their behaviors and ways of thinking People care not only about price but also more about their health, real value and benefits of the products they consider using They consume more healthy products such as milk, dairy products, and vitamin supplements more frequently Also, people do not use the goods just for immediate needs as in drinking water when they feel thirsty, they care more about flavor, ingredients, and add-on values, especially products and services in food and

beverage industry like Vinamilk ADM+ This consumption trend leads up to the new inclination of goods producing on the producer side

- Moreover, the government has imposed many policies that have had considerable influence on the views of society For example, it now encourages breastfeeding infants and people are also encouraged to consume more milk The aims are to have better generations in the future, particularly in terms of physical strength, height and overall intelligence It also motivates producers to continue improving existing products as well as developing innovative ideas to bring about dairy products that may not have appeared on the market

- When the living standard is improving, the people’s demands are also increased Consumers, who have high standard of living, are often keen on the quality and real value more than the price of a product As a result, this often leads to the habit or the trend of looking only at major brand names, which usually happens to be foreign ones Vietnamese people used to hold high regards for foreign brand names because of their quality and reputation However, there is now a different way of how consumers hold their view In particular, regardless of foreign or Vietnamese brands, consumers’ first choice would be focusing on major, prestigious and certified brands, especially in the milk sector Ultimately, this results in changes in Vietnamese consumers’ buying behavior, which can

be recognized through observation and research

1.4 Technology

- After a long period of time using old and out-of-date infrastructure, Vietnam government

is putting considerable effort in improving its infrastructure to stimulate economic investments and manufacturing activities It also encourages the manufacturers to scale up their own facilities to improve the productivity

- Government also supports and encourages manufacturers to implement advanced technology in manufacturing The widespead and rapid application of high technology in all sectors is pushing producers to upgrade their manufacturing process in order to adapt to the new trends and survive in the difficult time of the economy, a typical example would

be the adaptation of a new and high-tech production line of Vinamilk

- Businessed incorporating high technology in production would gain strong support from government via subsidies in production and tax deduction for importing machines for production Addtionally, those businesses could receive additional financial supports for their end products in the market

- However, the use of high technology in production would require highly skilled labor force to operate and maintain manufaturing activities In deed, it is the real challenge for most businesses Therefore, government also helps with training the labor force that work

in high technology sector This not only helps address the shortage of skillful workers but also reduces the pressure of having to meet the required standard on the producers, who have to use high technology in their production

1.5 Environment

- Protecting the environment is among the major concerns for most countries, including Vietnam Taking this into account seriously, the government has established various policies focusing on environmental issues, raising awarness and guiding numerous efforts

on protecting the environment

- The authorities strictly require all the businesses to adhere to the policies of protecting the environment in all aspects of their operation such as electricity consumption and waste water treatment Heavy fine would be issued for those who directly or indirectly damage the environment, regardless of their background

- Manufacturers such as Vinamilk, TH true milk are encouraged to use clean and environmentally friendly material in their production Additionally, the product package would also be recycled as per recommendations from responsible authorities Most of the producers can receive subsidies from the government for using recycling material

- Consumers are becoming more and more interested not only in the final quality of the product but also in other aspects which have been involved in the making process, particularly the original manufaturing material Consumers would prefer using more environmentally friendly products which could be recyclable They believe that is how they can contribute to protect the environment

1.6 Legal

- Generally, Vietnam’s existing legistration and regulation system still has some potential limitations Ongoing efforts from the government are being put into improving the regulations step by step to provide a fair environment for all people as well as to protect them

- In order to protect the domestic producers, government imposes a high tax rate for import

in all fields In the food and beverage industry, the importers are limited by quota and high tax rate while domestic producers pay a lower tax rate Also, the government sets the price for some imported goods, especially milk and dairy products as these kinds of product usually have fluctuating price on the market

- Additionally, intellectual property is one of the newest regulations that have been put in place to protect producer and consumers The producers can protect their trade marks and brands while the consumers would be less worried about problems associated with counterfeiting goods or products

2 PORTER 5’s Forces Analysis

2.1 Threat of New Entrants

In general, the milk industry is a profitable one Even though the room in the milk industry has not yet been fulfilled, it is not easy for new companies to enter the milk market due to various barriers

- On Vinamilk side:

 Government support: Since it is strongly supported by government in terms of

working capital and pricing policies, it currently has some advantages over others

 Industrial specification: This industry has strict requirements on production that is not

easy to comply Particularly, the Vinamilk ADM+ represents a new trend of milk product which requires:

 High working capital for investment

 Modern manufacturing process

 High R&D cost

 High quality and stable resources

 Existing consumer loyalty: Vinamilk has gained the trust from a large number of

consumers based on its long established history and certified quality, it is confident on the loyalty of its customers

Therefore, it is currently hard (in short term) for a new company to enter the milk industry, specifically in the micro-nutrient fortified milk segment

- On the existing milk companies’ side, the micro-nutrition fortified milk is a new trend

that has generated a new product line and made profit for many companies It is also a way for them to take more share in the milk market As a result, there would be the threat from existing milk companies for new companies that enter to this market

 Milk farm network: Vinamilk has a wide and strong network of milk farms

throughout Vietnam that can guarantee the regular and stable supplies of milk at a specific amount It also set its own farms in certain suitable areas such as in the northern and central region of Vietnam

 Technology transferring: It has been running the cow-breeding program since 2006

that supports the farmers with finance and technology in relation to raising milk cow

By doing it, Vinamilk can directly check the quality of fresh milk

 Logistic: The domestic suppliers, especially in the remote areas have additional

assistance in the form of transportation allowances They might or might not have to pay the transportation fee or just have to pay a little cost

- Foreign suppliers:

 World well-known brands: Vinamilk is currently trading with Fonterra- a world

leading multinational corporation in milk and in dairy product export Especially for milk powder, its trading partner is Hoogwegt International –with 40 years of experience in supplying milk powder to manufacturers and consumers in Europe, and there are also some other smaller famous suppliers Hence, the supply of raw materials

is ensured for the stability of product quality

 Pricing adjustment: Vinamilk procurement policy is that the amount of milk powder

is bought varies every year based on the best negotiated prices of each supplier It manages the purchase price at the acceptable level

- General: the validity of the supplier contracts is normally one year Vinamilk does not

sign long-term contracts with any suppliers of milk material, milk powder, sugar or any other materials It only makes the purchase through the tenders after calculating the amount needed for the next financial year Moreover the purchase price from the milk suppliers is adjusted according to the world price of milk at that time

Name of Supplier Product(s) Supplied

Fonterra (SEA) Pte Ltd Milk powder

Hoogwegt International BV Milk powder

Perstima Binh Duong Tins

Tetra Pak Indo Carton packaging and packaging machines

Table 2: Summary of suppliers of Vinamilk (Source: Vinamilk website)

Based on these facts, Vinamilk does not rely heavily on any of its suppliers due to the flexible relationships, purchase and price negotiation policies The influence of suppliers is not particularly strong

2.3 Power of Buyers

- Product value: With a wide distribution network throughout Vietnam and more stores

opening in every month, Vinamilk is quite confident in its capability in delivering its products to customers, effectively meeting any demands Additionally, Vinamilk has gained a high awareness and trust in the public for the quality of its products like Vinamilk ADM+ However, despite the fact that milk is good for people at all age, especially for children, and there is a trend of using the micro-nutrition supplementing products like Vinamilk ADM+, people can possibly choose not to consume milk Buyers can decide whether or not to have milk for their daily life just like the option of drink It does not like air to breath, water for thirsty As a result, the product like Vinamilk ADM+ is not extremely important to consumers and thus,they can possibly choose not to buy the product for a period of time

- Price sensitive: Vinamilk does consider the price issues On one hand, this product has

subsidies with the direct control from the government; it needs to set the price within the certain range On another hand, customers are still keen on price

- Switching to competitive brands: The product is not the niche in the market and it is not

hard to get a similar product like Vinamilk ADM+ in terms of instant use The price sensitive factor mentioned above is also illustrating for the ease of switching to other brands other than Vinamilk ADM+ It might still be acceptable for customers to have another reasonable quality micro-nutrient fortified milk at lower price compared to Vinamilk ADM+

Even though Vinamilk might have unlimited of group of customers, the power of buyers is still strong Customers have a large enough influence to affect a company's margins and volumes as they could place the high pressure on the Vinamilk operation

2.4 Availability of Substitutes

People now concern more about health and quality of life than before Everyone wants to have a better life with good health There have been many alternative milk products being introduced in the market

- Nutrition supplementing products: The beverage industry has brought many kinds of

new drink into the market such as fruit juice with extra vitamin, yoghurt and fruit, tea plus

supported ions – TEA Plus, mineral added ions- PORECAT mineral water All of them provide the means for conumsers to meet ther basic needs in terms of daily usage, health values, convenience, reasonable price

- Dairy products: Dairy products nowadays are not only basic milk and powder The

product lines have been extended to different products such as cheeses - Vinamilk, Bega, The Laughing Cow; butter and margarine for cooking and quick serve - Tuong An, Anchor, Western Star; cream - Mel Jo, Monte, Mikus; yogurt – Ehrmann, Vinamilk; ice cream – Haagen Dazs, Wall As these products also contain nutrition that is good for health, some of these products such as cheese, cream have already been used as substitute for milk in family and childcare The Vietnamese dairy brands can be on mass production while the imported brands can focus on moderate price As a result, these dairy products can compete directly to the micro-nutrient fortified milk like Vinamilk ADM+ in terms of value, price and production scale

- Stable milk market: while the milk price generally resembles a wave pattern and keeps

increasing, other nutrition supplementing products’ price are quite stable or have longer adjustment time The cost of switching to a new kind of drink is much lower than the expected benefits People are also willing to try new products and would switch at ease Since drinking milk is still on the way of becoming a habit for people, it is likely that consumers might switch to competitive products in certain situations As a result, they would compete directly or indirectly against the Vinamilk ADM+

2.5 Competitive Rivalry

Athough being the biggest milk producer in the market, Vinamilk is facing a considerable number of competitors both directly and indirectly

- Existing firms in the micro-nutritent fortified milk segment: There are only few main

firms that directly compete with Vinamilk in this section by producing milk with added supplementary micro-nutrients like the Vinamilk ADM+ They are 20+ from Dutch Lady, Nuvita from Nutifood and Izzy S+ from Hanoi Milk

 Little differentiation: All of them are running the similar kinds of milk like Vinamilk

ADM+ in the very close launching time The message delivered to the customers is all about added nutritionvalues which support for the growth of children in certainnaspects The product commercial value is almost the same, only slight difference in price or package size

 The same size of players: The brand of Dutch Lady belonging to Friesland Campina

Viet Nam (30% of the local milk market) is a little stronger than Nutifood, it also has strong brand awareness like Vinamilk It competes harshly to Vinamilk in this section

in terms of marketing, product quality, gaining market share

- Existing firms in the milk industry: Among two brands mentioned above, there are still

other milk producers that have not entered into this section such as Nestle’, TH True milk (33 % of the fresh milk market) However, they are all strong in doing branding and willing to invest in R&D, marketing They are potential competitors to Vinamilk ADM+ in this sector in the near future

In fact, the competition between Vinamilk and its direct/indirect competitors are considerably intensive Although it is a new trend of drinking milk and the product is still

at the growth stage of the product life cycle, the battle of micro-nutrient fortified milk would be harder and more competitive later on

Figure 9: ADM+ milk’s PORTER five forces analysis

3 SWOT Analyses

All above mentioned facts and analysis give a strong support for the following SWOT analysis for the Vinamilk in general and the ADM + in specific

3.1 Strength

- Healthy working capital: Vinamilk has strong financial support from the government

that currently holds 45% shares in Vinamilk It has a healthy working capital around 3.53 bil USD and cash flow around 534 bil VND (annual report 9/2013) Vinamilk only invests using its own capital and it has no debt in banks

- Good reputation: Vinamilk has a strong reputation due to its long established history

with a strong brand image of high quality Besides, Vinamilk is also managing 8 brands with more than 20 product lines and has acquired considerable market share in most

sub-of its product lines

- Strong brand equity: Since starting the brand Vinamilk, the company introduced and

built up the image of the happy cow It is one of the Vinamilk’s successes in branding as people nowadays can refer quickly to Vinamilk products when looking at this This character is used for the whole milk brand of Vinamilk which also positively reflects on Vinamilk ADM+ It is the strength in branding that not many brands can do like Vinamilk

- Good labor force: Working in a fast changing industry, Vinamilk needs a good quality

workforce who have knowledge and experience Vinamilk has taken advantage of the young and good-quality Vietnamese labor force by bringing the skillful workers into its production Most of Vinamilk workers are young and educated

- Self-supply material: Vinamilk has invested heavily in milk farms as well as factories

In 2012, Vinamilk already had 5 cow farms with 8,200 cows During 2012-2016, it expects

to increase the number of cows to 25,000,000 heads in 2015 and 28,000,000 heads in 2016

It plans to increase 4 more cow farms in 2014 in 4 provinces and the total investment would be VND 1,500 billion It also invests in building the biggest factory in Vietnam with

the total investment of VND 2,400 billion By self- control the raw material and the production process, Vinamilk can increase its production and R&D activities to extend its product lines like Vinamilk ADM+

- Loyal and cooperative relationships: Not all the entrepreneurs have a durable

relationship with both local and oversea suppliers like Vinamilk It allows the company to have stable sources of materials at a reasonable price and at almost any time Vinamilk is confident with its relationships with multiple partners as it currently consumes around 60%

of all cow milk produced in Viet Nam

- Effective distribution channels: Vinamilk has around 250 exclusive distributors

nationwide and over 200,000 retail outlets throughout Vietnam (2012) Its large and effective national distribution channels bring benefits not only to the producer, which is Vinamilk itself, but also to its consumers, as in making it become more convenient for people to purchase a product of Vinamilk, saving them both time and money

- Acceptable price: Vinamilk offers its customers a wide range of products that can reach

different target groups at a reasonable price Moreover, despite the fact that milk is among the products receiving government subsidies and all other advantages discussed above, the price of Vinamilk product like ADM+ does not make it any easier to compete in the market

- Good investment: Investing smartly and strategically in manufacturing process (over

VND 2,000 billion for building factory) helps improve production quality which meet international standard of milk products, especially the micro-nutrient fortified milk ADM+

- Efficiency of organizational structure: The highly professional and experienced

management panel in dairy business and production of Vinamilk creates a transparent internal management system In particular, they publish strict and detailed management procedures to the whole organization They help in managing the operation and production of Vinamilk efficiently, allowing Vinamillk to develop and expand its activities without having to struggle with the expansion process

3.2 Weaknesses

- Uncompetitive price: Milk has become a popular product to most of Vietnamese

households having children The more the number of milk brands enter the market, the lower the price of the milk would be Price is no longer the main competitive factor in the milk industry

- Vulnerable target customer: Although Vinamilk also target the rural population , this

group, however, is not stable users Having low income would greatly influence their decision in choosing which brand to buy Especially in the difficult economic situation, milk would not be the first choice for their daily needs In general the operation of Vinamilk would be affected by the slow and small sales volume in rural areas

- Fluctuations in exchange rates: As discussed above, although Vietnam has had a stable

exchange rates, it is uncertain that the situation would remain the same in the future Vinamilk currently has around 50% of raw material imported; it leads to the uncertain dealing via US dollar for company The operation of the Company in terms of financial health would be strongly affected

- Existing and prospective competitors: Having in hand a large portion of the total

equities owned by the government is one of the advantages of Vinamilk on the market in terms of infrastructure and operation However, it would be easily defeated by its existing

or potential competitor when passively performing on the market, heavily relying on the government subsides and being under the state control

3.3 Opportunities

- Stable political and policies support business: Gaining the most benefits of Vietnam

political stability makes Vinamilk become more confident in operating and expanding its business that would bring back promising profit for the company

- Dramatic economic performance offers the healthy economic environment for

companies like Vinamilk to develop

- Open market economy: It has attracted many foreign investments including the high

inflow of FDI Vinamilk – as a profitable company - has opportunities of working on international business

- Join WTO: One of the positive facts of joining WTO is that Vinamilk has more chance

to work on the international stage as well as compete and develop its technology, knowledge and experience on the international market It is a good move for Vinamilk to

go international and global

- Good labor force: Since Vinamilk has upgraded its production process by using high

technology in manufacturing, it can take advantage of Vietnam good labor force which nowadays is more educated and skillful

- Young and educated population: the biggest target group of Vinamilk’s products,

particularly ADM+, is the educated youngers They now have high demand in terms of milk consumption and the nutrition supplementing products like Vinamilk ADM+

- Increase in consumption of liquid milk: The demographics of Vinamilk’s target market

are now expanding into more age groups such as above 15 year old and geographical groups such as those living in rural areas As a result,the number of consumers using the milk product like liquid milk continues to increase They have more choices in relation to milk products with micro-nutrient added values

- Trend to consume the nutritional supplement milk: People are keener on the quality

of milk in terms of added nutrients, original material, and hygiene than just flavor and price The larger the number of people are interested in and and prefer to consume the micro-nutrient fortified milk like Vinamilk ADM+, the more opportunities for Vinamilk ADM+ to build up its brand and increase sales volume

3.4 Threats

- Incomplete and incoherent regulation and legislation system: Even though there are

many policies that support the milk industry, there still remain limitations regarding their relevance as well as the actual implementation of those policies to the ever-changing market Hence, Vinamilk might still be affected from potential problems associated with the regulation system in relation to importing material or setting prices

- Negative effects from world economic crisis: Vietnam is still recovering from the

impacts of the world economic crisis in many aspects Vinamilk may continue to face some difficulties in trading domestically and internationally

- High investment cost: Supporting local and foreign businesses to attract more

investment is one of legislators’ priorities However, there are existing barriers such as high investment cost that would slow down the business growth Vinamilk is also facing this barrier when calling for external investment and self – investment

- Corruption: Although corruption is still existing in Vietnam, it may not be the main

factor that directly affects Vinamilk However, it could bring about potential complications

as Vinamilk is in the process of expanding further and faster Hence, this factor should be taken into consideration

- Poor infrastructure: the company itself is improving its facilities in order to improve

the productivity However, the overall infrastructure is still in poor conditions in terms of poor logistic and farms protection that directly affect the progress of Vinamilk in its effort

to improve product quality

- Lack of highly skilled staff: Investing in the high technology and large-scale plant

requires the highly skilled staff Moreover, in order to comply with international standards

in production and milk quality, Vinamilk needs to employ large number of highly skilled staffs, in addition to proper education, which is challenging considering current conditions

of the labour market

- Competitors: Since Vietnam joined WTO, Vinamilk has been facing not only the

domestic competitors, but also foreign competitors entering into the milk market, thus dividing the domestic milk market even faster and smaller

4 Competitor analysis

4.1 Direct competitors

Vinamilk ADM+ is currently not the only player on the micronutrient fortified milk market There have been some others such as DHA 20+ from Dutch Lady, Izzi S+ from Hanoi Milk

Table 3: Summary comparison between Vinamilk ADM+ and its direct competitors

Vinamilk ADM+

Sample

Target group Children aged

2-12

Children and adults

Children from age 3

Children aged 2-15

Special

specifications

Vitamin A and

D, Calcium, Magnesium and other necessary micro-nutrients

1 Cholin, 4 kinds

of Vitamins, 6 kinds of Minerals,

9 kinds of Acid Amin

Protein, Calcium, Zinc, Lysin, Vitamin group B, FOS/Inulin added DHA, ARA, Taurin

- The specific formula for Vietnamese children

- Palatinose,

Synergy 1

Main focus Improving on

height and eyesight

Providing 20 essential nutrients that human body cannot produce itself

Developing on height, physical strength, brain development

Improving on height and strong brain development

recognized – product quality, the happy animated cow character

product quality, 20+ family community

recognized

- No endorsement

recognized in the southern area

- Character like 20+

Marketing

activities

- Active on offline activities, using all tools: OOH, TVC, Print Ads and Sale

Promotion

- Active on online activities:

online ads, social media etc

- Active on offline activities, using all tools: OOH, TVC, Print Ads and Sales Promotion

- Extremely active

on online activities: brand story, microsite, etc

- Strong community for 20+: mother 20+

club, bothers 20+

club

- Less activities both offline and online: TVC, Sale Promotion and Print ads

- Few activities for offline: only Print Ads, Sales

Promotion

- No online activities

block of 4 (180ml)

VND 26,700/

block of 4 (180ml)

VND 26,000/

block of 4 (180ml)

VND 27,600/ block of 4 (180ml)

- Package size:

110ml, 180ml, 225ml, 1l

- 4 flavors: plain, sugar added, chocolate, strawberry

- Package size:

110ml, 180ml

- 3 flavors:

vanilla, chocolate, strawberry

- Package size: 110ml, 180ml,

- 4 flavors: sugar added, chocolate, strawberry, melon

4.2 Indirect competitors

As the micro-nutrient fortified milk market is profitable and has support from the Ministry

of Health, other milk producers in different segments have recently moved into this market with different approaches and become the potential competitors for Vinamilk ADM+

Table 4:Summary comparison between Vinamilk ADM+ and its indirect competitors

Protomalt,

ACTIGEN-E, Whey

10 Vitamins and Minerals

Main focus Supporting human

memory system and height

Providing energy for physical activities -sport

Improving brain development and height

Brand image Recognized as

premium product

Recognized – product quality, sporty person

- Few activities: Print Ads; rarely sales promotion

- No online activities

- Active on offline activities, using all tools: OOH, TVC, Print Ads and Sales Promotion

- Active on online activities: online ads, social media etc

- Inactive on offline activities: no ads, few sales promotions

- Extremely active on online activities: games, social media, online community etc

Price VND 61,800/ block

of 4 (180ml)

VND 18,600/ block of 4 (110ml)

- Package size:

110ml, 115ml,180ml,

- 1 flavor: cacao

- Package size: 110ml, 180ml

- 1 flavor: cacao

4.3 Market players’ analysis

Figure 10: Comparison between the differentiation on product and brand awareness

of the micro-nutrient fortified milk players

Figure 11: Spotting position of Vinamilk ADM+’s competitors in the micro-nutrient

fortified milk market

Vinamilk is currently a leader in the micro-nutrient fortified milk market It also has the high differentiation in relation to product from its competitors While most players focus strongly on improving height and brain development, Vinamilk ADM+ aim is eyesight improvement

20+ from Dutch Lady is one of the strong competitors and competes directly to Vinamilk ADM+ It also has strong product differentiation as providing the essential nutrients that human body cannot produce itself 20+ has similar number of outlets like that of Vinamilk Grow from Abbott might become a direct competitor of Vinamilk ADM+ in the near future It currently sees as premium class and narrows down to segment for children aged

6-10, which is a smaller target group compared to Vinamilk ADM+ and 20+ However, as coming from a popular foreign brand and having healthy financial from mother brand-Abbott, it has many advantages to increase its market share portion

Nuvita Grow and Izzi S+ have the same traditional focus on height and brain However, Izzi S+ is getting attention on the micro-nutrient fortified milk market It is the first brand

to have the certification for the micro-nutrient fortified milk issued by the Ministry of Health It also develops the specific formula for Vietnamese children Both brands have poor marketing activities that lead to the low brand awareness in the liquid milk market Izzi S+ is only popular in the Southern area with no outlet

Milo has its own customers who need additional energy for sporty activities It has been recognized in the liquid milk market for a while but only for providing instant energy for users, not micro-nutrients for improving body development Ovaltine Power 10 is one of the brands moving into this micro-nutrient fortified milk segment It now produces liquid milk with added micro-nutrients Although it is extremely active online, not many people knows about this new product and brand awareness is low It is still a challenger for Vinamilk ADM+ as it also has certain groups of customers

- Systemize and improve the existing marketing system

- Enhance brand awareness with correct and consistent positioning statement and theme in all marketing activities

6 Segmentation

6.1 Product segments - Liquid milk

VND tn

Figure 12: Vietnam liquid milk market size - VND tn (Source: EMI)

The potentiality of Vietnam liquid milk market is extremely huge The consumer needs in

this segment has been evaluated to be increasing by year It is predicted that the total

around 21 trillion VND The emergence of new players and new business strategies of current ones will make the competition harsher and harsher

Table 5:Vietnam Liquid Milk Consumption, 2012-2017 (Sources: General Statistics

Office of Vietnam, BMI; FAPRI, BMI)

According to EMI (2011), the total sale value of liquid milk products in Vietnam reached VND10,700.2 bn in 2010, in which Vinamilk held around 40% market shares; following closely behind is Friesland Campina Vietnam Co Ltd and its widely known brand Dutch Lady with roughly 24% market shares Competitions are particularly harsh within this segment Vinamilk and Dutch Lady are in the lifelong competition, along with other well-known domestic brands, namely TH True Milk, Hanoimilk, Long Thanh, Moc Chau, and a few other imported brands However, Vinamilk does have certain substantial advantages, including (1) a well-known brand name, (2) manageable controls over domestic supplies of raw milk, (3) widely dispersed distribution channels which help bringing products to end consumers in time, (4) a system of modern processing plants throughout Vietnam which help minimizing transportation cost The latest figures announced in 2012 reveal Vinamilk

is holding more than 45% market shares in this segment

Figure 13: Liquid milk market share (% of total) (Source: IBM, Bloomberg 2011)

There are four main products: pasteurized milk, fresh milk, micro filtered milk, UHT milk Pasteurized milk is heated to72-75 degrees Celsius with a holding time of 15-20 seconds before it is cooled With correct cooling and proper chilled distribution, pasteurized milk has a shelf life of 5-15 days

Using UHT treatment, liquid food products are exposed to brief, intense heating to temperatures in the range of 135 to 140 degrees Celsius UHT treatment is a continuous process which takes place in a closed system that prevents the product from being contaminated by airborne microorganisms The product passes through heating and cooling stages in quick succession Aseptic filling is an integral part of the process that avoids re-

Vinamilk 40%

Freisland 24%

Nestle 7%

Hanoi Milk 5%

Mead Johnson 3%

Fonterra 3%

F&N Vietnam 2%

Others 16%

infection The end result is a product that can be conserved for around six months without refrigeration

The perception of fresh, long-life/UHT, and micro filtered milk was rather confused in Vietnam Most consumers think that micro filtered is the same as fresh or long-life/UHT Vietnamese consumers were more interested in taste and a guarantee of good quality, as he demand for milk in Vietnam is not sophisticated

6.2 Demography segmentation

Vietnam has a young population with high rate of children from 0 to 14 accounting for nearly 25% of the entire population Population growth rate is steadily around 1 % annually Besides, perception of drinking milk for health improvement has become popular widely among the X Y Z generations in Vietnam Children and teenagers who prefer flavoured liquid milk start to consider milk their indispensable diet every day All come together to make the vision of a potentially fertile market of dairy products particularly liquid milk for children in Vietnam

Vietnamese dairy consumption growth will remain strong over our forecast period to 2015 Strong economic growth will filter through into rising disposable incomes, pushing up demand for non-essential foodstuffs The main consumers of milk products remain people living in urban areas, with high incomes and being well-educated and fully aware of the benefits of milk For years, the Vietnamese Government launched a number of initiatives

to raise Vietnamese citizens’ average height and complete children development In response to these initiatives, drinking milk product manufacturers also ran a number of campaigns such as supplying milk to children in remote provinces and price promotions, to raise consumer awareness of health benefit related to drinking milk products, and at the same time, enhancing the image of their brands

Table 6:Vietnam Dairy consumers (Source: GSO, MOIT, CIA World Factbook)

Based on the facts and figures presented above, dairy market is segmented by age group with different demands and needs Each group has their own favourite dairy product type which can satisfy their special purposes

- New-born babies are almost breastfed by mothers In some particular cases, powder milk with the right formula which is suitable for the age of the new-born is used along with breastfeeding

- 2-12 children need extra nutrition to get the full organism development and prepare for the puberty when they enter adolescence phase

- Teenagers also need a consistent amount of vitamins, minerals and other nutriments for the continuous organism development

- Adults in Vietnam hardly have the habit of milk drinking However, these days nutrition awareness has dramatically increased, which encourages milk consumption among Vietnam population Milk drinking habit has become more and more common For this segment, milk is often understood as pasteurized fresh milk

- The elderly need special care and nutrition to reduce disease risks Milk for this segment

is also exceptionally researched and developed to respond directly to the market demands

- The sick should be fed with specific food and drinks on the purpose of supporting medical treatment that they are undergoing Products targeting at this segment can be powder milk or drinking milk developed with particular nutrients

6.3 Micro-nutrient fortified milk for children from 2 to 12

Sales of liquid milk products grow by 21% in 2012 (EMI 2012) and are forecast to grow at

a CAGR of 6% in constant value terms over the forecast period That proves liquid milk market relentlessly develops and expands in terms of size and purchase power To meet the market’s increasing demands and adapt to the new market trends, Vinamilk continued to focus on developing products that enhance health and beauty and are good for both physical and intellectual development (VNM annual report 2012)

The today market witnesses the emergence of the micronutrient fortified milk in the liquid milk segment Many milk manufacturers start moving from producing fresh milk, pasteurized milk, UHT milk to micronutrient fortified milk It has become an attractive market to current players in the dairy product manufacturing industry When the market of liquid milk started to be saturated due to the harsh competition among plenty of old players and newcomers, micronutrient fortified milk becomes a fertile sub-segment

The milk manufacturers who are famous for their nutrition research activities have gradually entered this promising and unyielding market There have been Dutch Lady with 20+ milk, Nutifood with Nuvita, Abott with Pediasure liquid milk for young children and Grow, Vinamilk with Vinamilk ADM+ milk, Izzi S+ milk of Hanoi Milk, and so on… The unique function of each kind is different but normally for height and brain development: Nitvita is for better height, 20+ is for strong bones and digestive system Pediasure is for proper immune system, and Vinamilk for strong build and bright eyes…Although this market has just started to be really effervescent since 2011, this now can be more dynamic and exciting in the very near future due to its high potential of growth ADM+ milk of Vinamilk is considered to be one of the most possible leaders in this sub-segment

Though plain white milk and flavored milk still dominate the market, there emerges the tendency of vitamin and mineral added products and low fat milk However, choices among micronutrient fortified milk have not so diverse and multiple This opens huge opportunities for existing players but also leads up to a promising fierce competition for market share in this market

7 Targeting

The last five years has witnessed many changes in Vinamilk revenue contribution among different segments Primary revenue-generating product categories now give up what is

theirs due to other segments

Condensed milk is the segment where Vinamilk is the leader with 88% market share However, the needs in this segment have gone down dramatically these days It is expected