Vinamilk Company AnalysisPhân Tích Công Ty Vinamilk

Company analysis: 1.1 INTRODUCTION - Vietnam Dairy Products Joint Stock Company Vinamilk - Founded: August 20th, 1976 - Headquarters: 10 Tan Trao, District 7, Ho Chi Minh City, Vietnam

TRƯỜNG ĐẠI HỌC KINH TẾ - TÀI CHÍNH KHOA: KINH TẾ

BÁO CÁO ĐỀ ÁN CUỐI KỲ MÔN: QUẢN TRỊ MARKETING

Giảng viên: Đỗ Thị Hoàng Mai

Section 1: Vinamilk Company Analysis

Section 1: Vinamilk Analysis

I Company analysis:

1.1 INTRODUCTION

- Vietnam Dairy Products Joint Stock Company (Vinamilk)

- Founded: August 20th, 1976

- Headquarters: 10 Tan Trao, District 7, Ho Chi Minh City, Vietnam

- Area served: Vietnam, Middle East, Africa, Asia, Australia, New Zealand, Europe, North America (Canada and the United States)

- Products: Liquid milk, condensed milk, powdered milk, yogurt, infant cereals, special nutritional products for adults, beverages, ice-cream, cheese Viet sugar, soymilk

- Website: https://www.vinamilk.com.vn/en

Launched its first batch of powdered milk and nultritional powder for children to the Vietnam market the first time

1990 – 1991 Started the “White revolution”

Pioneered in building fresh raw milk area First time introduced UHT milk products and yogurt

to the Vietnam market

1997 – 1998 Exported its first product batch of powdered milk and Dielac nultrional powder

to Middle East market

on Ho Chi Minh Stock Exchange (HOSE) on 19 th

January 2006

Inaugurated its first dairy farm (in Tuyen Quang Province)

2013 Inaugurated two mega- dairy factories with large scale and applying the most modern technologies in Binh Duong Province:

Vietnam Milk Factory and Vietnam Milk Factory (producing fluid

milk)

2010 Vinamilk started its strategy of investment overseas by owning 22.8% of shares at Miraka Milk Factory in New Zealand

1.2.2 Event

2006

Vinamilk is officially listed on the Ho Chi Minh Stock Exchange

In 2006, the company had the best business result since equitization, earning after tax of VND4,601 per share, worth VND10,000, up 20.6% from the same period last year fiscal year 2005

2007

Vinamilk currently has

10 farms including 7 farms following Global G.A.P

Vinamilk has produced more than 50% of raw material to serve their whole production line Thus, there is a reduction of importing the raw materials for production

2014

The Dairy Farm in Nghe

An Province was the first

in Southeast Asia and one

of three farms in Asia to

qualify the the Global

G.A.P standard certificate

2016 Celebration for 40 th anniversary of establishment Continued the strategy to reach out the world market with the inauguration of Angkor Milk Factory (Cambodia) Acquired 100% stake in Driftwood Diary Holdings Corp (US) and exported condensed milk product (with the Drifwood brand) to US market First time introduced Organic Fresh Milk product, which was directly produced by Vinamilk in Vietnam qualifying EU Organic standard and being certified by Control Union (Netherlands)

2011

Vinamilk exports dairy products to 15 countries around the world

In 2011, Vinamilk's revenue reached more than US $ 1 billion, officially joining the team of large enterprises in Asia-Pacific

Revenue increased by 37.2% over 2010, export turnover reached over 140 million US dollars, up 67.4%

a promotion program to maintain the market in these provinces

+ Affected area: diluting adverse information by means of media such as TV, Newspaper Attempt

to trust Dielac faith and quality

by organizing reporters to visit the factory

- Public press conference of test results are no impurities in suspicious shipments

- However, the aftershock of this disaster is still smoldering, seriously affecting the off-take of Dielac, especially the Dielac Alpha mainstream Mothers with young children in the provinces

_In 2007, the growth rate

of Dielac revenue was 139% compared to 2006, while the Vietnamese powdered milk industry

_After the Dielac milk scandal, many mothers still believe in consuming this item This shows that

affected by this challenge have expressed reluctance to choose products that have been

"published" and "may have problems" The safe solution that mothers give at that time is simply to choose another milk label for their child So Vinamilk implemented the "Mother's Love" campaign to reposition Dielac in July 2007

Vinamilk has solved the scandal very well

_ At the time of Fonterra's scandal

of milk scandal, Vinamilk also continuously informed consumers, including Fonterra's refusal to supply materials to Vinamilk

_ Business results for the first 6 months increased

by 22% in the same period (VND 3,355 billion), paid dividends with 20% and paid regularly, the profit fund was not distributed at the end of the second quarter, more than 6,100 billion dong

1.3 VISION, MISSION, CORE VALUES

1.3.1 Vision

To become a world grade brand in food and beverage industry, where people put all their trust in nutrient and health products

● To have self-respect, to respect colleagues

● To respect the Company and partners

● To cooperate with respect

- Fairness: To be fair with employees, customers, suppliers and other parties

- Ethics: To respect the established ethical standards and act accordingly

- Compliance: To comply with legal regulations, the Company’s Code of Conduct,

and the Company’s procedures and policies

1.3.4 Company Sustainable Strategy

Vinamilk’s sustainable developmet orientation focuses on the 5 following points:

1.3.4.1 Human nutrition

❖ Commitment

Indentifying food safety as top priority, Vinamilk commits that each of its products

is the result of a closed-loop production cycle which meets one of the most rigorous requirements for the quality, including:

- RESEARCH AND DESIGN FOR SAFE AND NUTRITIOUS PRODUCTS

Vinamilk’s product development strategy aims at safety and health benefits for its consumers, both intellectually and physically Therefore, we have been extremely careful in every production process, from establishing product formula, deciding materials to packaging design, in order to ensure the safety for consumers

Moreover, we absolutely say “no” to unhealthy ingredients that can result in negative impacts on consumers’ health such as preservatives in all Vinamilk’s present and future products

- SAFE MATERIALS

Vinamilk Fresh milk 100% with immune system support is produced from farm fresh milk mainly sourced from our dairy farms, strictly selected and controlled to ensure food hygience and safety

Imported raw materials are sourced from the prestigious suppliers of America, Australia, New Zealand, France, etc

- MODERN EQUIPMENT AND TECHNOLOGIES

To ensure the perfect quality of its products, Vinamilk has consistently been researching and investing in modern equipment and technologies We proudly own one of the most advanced manufacturing chains that keep up with the world’s leading milk production technologies

- MANAGEMENT AND QUALITY CONTROL IN COMPLIANCE WITH INTERNATIONAL STANDARDS

Vinamilk has highly paid attention to product quality control and management We have therefore applied advanced management systems such as BRC and ISO 17025

to strictly and thoroughly manage all manufacturing stages including pre, mid and post production in order to ensure the quality and safety of Vinamilk’s products In addition, a product tracking system has also been applied to the product recall and the disposal process of faulty products in order to minimize the possible negative impacts on consumers and society

- EXPLICIT AND THOROUGH INFORMATION FOR CONSUMERS

Vinamilk commits to deliver explicit and thorough information about its products including ingredients, nutritional values and preservation guidelines to help consumers choose and use Vinamilk’s products that fit and satisfy their needs

❖ Plan

VINAMILK’S MAIN DAIRY FARMS

Understanding the key importance of fresh materials in high–quality milk production, in 2013, Vinamilk continued to promote the development of its modern and large-scale dairy farms to boost the supply of safe and highly nutritious fresh milk

- Vinamilk’s dairy farm system and its subsidiaries are currently running six dairy cow farms in Tuyen Quang, Nghe An, Thanh Hoa, Lam Dong , Binh Dinh and

Ha Tinh provinces with the total herd size of about 10,000 dairy cows In 2013, Vinamilk implemented its investment in three more new dairy farms in Tay Ninh, Thanh Hoa, which are expected to operate in the period 2015 – 2016

Together with the development in scale, Vinamilk’s dairy farms have also promoted

to increase the quality of its business performances Till September 2014, five dairy farms of Vinamilk were verified to meet the ISO 9001:2008 by the Breau Veritas organization and three farms were verified to have Global GAP by Control Union organization

- SAFE PRODUCTION

● Managing safe production

In 2013, Vinamilk was certified for obtaining the HACCP system with the new version RVA5 (released in 2012) In 2014, Vinamilk was certified to Halal standard (specified for Muslim food consumption) In the 3rd Quarter of 2014, five manufacturing plants of Vinamilk continue to be certified to FSSC 22000 and the remaining plants are expected to have certification in 2015 All international standards prove that Vinamilk’s products meet severe requirement of all continents

in the world

● Advanced production technologies and equipment

In 2013, Vinamilk began to put into operation two production plants with high capacity and one of the world’s most modern milk production technologies, Vietnam Children’s Powdered Milk Factory in Binh Duong and Vietnam Milk Factory The production lines used in these two plans have a high level of automation and the products are produced under a closed-loop production cycle which can minimize faults and external effects on products

● Standardizing method and equipment for quality examination

In 2014, all laboratories at Vinamilk’s factories were granted ISO 17025 certification (standards for laboratory) and standardized all testing methods to meet quality assurance and control in our laboratories

- INCREASING PRODUCT VALUES FOR HUMAN HEALTH

Vinamilk continues to do research and put on the market more products of increasing quality, applying the world’s latest state-of-the-art studies on nutrients

and bringing a wide range of healthy products that meet the nutrional requirements

of all customers

1.3.4.2 Enviroment & Energy

❖ Commitment

Energy goals set for the period from 2012 to 2017

1 Saving energy by at least 3% after 5 years of implementation

2 Minimizing the amount of CO2 emissions and waste that cause greenhouse effect

3 Building and applying energy management in compliance with the ISO 50001:2011 standard on Energy Management to all Vinamilk's factories

- EFFICIENT ENERGY USE

Being aware that energy efficient has been one of the biggest concerns in recent years and may also be in the future, Vinamilk has been in the process of achieving its goals of energy efficiency by applying various measures, including:

● Improving management quality

● Increasing the use of clean and renewable energy resources

● Using energy saving equipment for lighting

- EFFICIENT AND ECONOMICAL WATER USE

Water is an important natural resource, utilized in all Vinamilk’s production processes Being aware of the importance of water to human life, espeacially in the context that groundwater has been depleted and polluted, Vinamilk commits to effective and economical use of water by applying economical recycling solutions

- EMISSION CONTROL AND TREATMENT

With its goals of minimizing negative impacts on the environment, Vinamilk has approached the emission issues since the first stage of construction planning procedures As a result, during its operation process, Vinamilk has always strived

to strictly manage these issues We are proud that Vinamilk has been operating the management mechanism of waste and emission treatment to ensure the safety of the environment by applying advanced standards to all Vinamilk’s activities and to continuously improve in the future

- OTHER COMMUNITY ACTIVITIES

Environmental activities call for the joint participation of the whole society

Therefore, besides focusing on its own business activities, Vinamilk has also shows interest in community activities that aim to promote the environmental awareness and contributes to create a healthy living environment “One million trees for Vietnam” Fund is one of those activities that reflects this strategic orientation More details of “One million trees for Vietnam” Fund

❖ Plan

- IMPROVING THE QUALITY OF MANAGEMENT

At present, all Vinamilk’s factories have been established and are operating the energy management system pursuant to the ISO 50001:2011 standard According to its plan in 2014, Vinamilk will have an exterior audit conducted on its implementation of this standard

- PROGRAM TO REPLACE TRADITIONAL ENERGY WITH CLEAN AND RENEWABLE ENERGY RESOURCES

As per the program’s orientation in protecting energy resources and reducing greenhouse gas emissions, Vinamilk has transferred to the use of clean and renewable energy resources such as CNG and BIOMASS to replace the traditional

FO and DO oils

Vinamilk’s goal is to apply these energy resources to all its factories, in which:

● Biomass fuel is used in factories that meet the requirements of ground area

● CNG fuel is used in factories where ground area is limited

- PROGRAM TO USE ENERGY SAVING LIGHTING EQUIPMENT

In 2013, Vinamilk completed a pilot project to increase the effectiveness of energy consumption in lighting at Saigon Dairy Factory This project included a design adjustment to optimize capacity and the use of energy saving lighting devices such

as LED and and Compact T5-T8 lamps This helped to save up to 70% of the energy consumption in lighting compared with traditional high voltage lamps

- ENVIRONMENTAL MANAGEMENT AND WASTE CONTROL

The most modern waste control system was first put into operation at the Vietnam Milk Factory and Vietnam Powdered Milk Factory in 2013

These two have been the biggest liquid and powdered milk factories of Vinamilk Due to their large scales, we have considered implementing the waste management project at these two facilities from the design stage to meet our environmental management target

Waste treatment process at factories

● Solid waste Solid waste is classified into two groups, hazardous and non-hazardous Solid waste

is collected and stored in separate places Hazardous solid waste and sludge will be transferred to licensed waste treatment services which have the specialized knowledge and competence to collect and process waste

● Liquid waste Sewage is disposed of during the production, equipment cleaning and other activities at Vinamilk’s factories Sewage will be collected and processed in the sewage treatment system Vinamilk commits to ensure that only treated water that satisfies disposal standard can then be disposed to the general discharge system or into the environment

● Exhaust fumes Exhaust fumes are produced from the fuel burning process in stream boilers and treated with absorption towers

Waste treatment process at farms

In 2013, Vinamilk continued investing in the sewage treatment system for a new farm in Lam Dong and completed building the complete processing solutions for its remaining farms It is expected that the implementation of the treatment system will start in mid-2014

In 2013, the Fund implemented the tree-planting program at two provinces, Hue and Dalat In Hue, the program planted twenty valuable species of trees including Erythrophleum fordii, Michelia, Sindora siamensis, Wild almond, Baobab, etc At the Quang Trung Emperor memorial campus, a national historical monument on Bân mountain, An Tay, Hue In Dalat, the Fund contributed 2,700 woody bougainvillea and golden wonder trees to Dalat University’s campus

1.3.4.3 Local Economic Development

❖ Commitment

In all of its activities, Vinamilk always aims at connecting the company’s growth to the common development of both local and national economies

- FUNCTIONING IN COMPLIANCE WITH LAW

● Always complying with laws and regulations stipulated in where Vinamilk has operation activities

● Ensuring that all statistics and numeric data reported to the authority agencies are precise, honest, complete and timely

● Activity participating into programs launched by the Government to stabilize and develop the national economy

● Completely fulfilling tax duties and other obligations stipulated by the law of the countries in which Vinamilk operates

- DEVELOPING LOCAL ECONOMY

In the localities where Vinamilk has its business and production activities, the

company always aims at connecting its production scale expansion with the development of local economy:

● Investing in facilities, contributing to the local infrastructure development

● Creating jobs and vocational training opportunities for local labour force

- DEVELOPING DAIRY INDUSTRY

● Applying the world’s advanced technologies in dairy cow breeding to Vinamilk’s farms to contribute to the development of Vietnam’s dairy cow breeding industry

● Supporting farmers by providing them with finance, facilities, techniques and technologies in breeding

● Having policies in procurement of agricultural commodities to ensure farmer’s benefit through the commitments of stable purchasing quantities and competitive prices

❖ Plan

- DEVELOP DAIRY COW BREEDING INDUSTRY

Establish farms and apply advanced breeding techniques

Vinamilk is proud to be one of the leading companies contributing to the development of the dairy cow breeding industry with modern methods and effective improvements to enhance product values for both Vinamilk and dairy cow breeding households in Vietnam

Till the end of 2013, Vinamilk owns five dairy cow breeding farms with stable operations on total 170 hectares and total herd size of 8,800 dairy cows The consistent objective throughout the company’s strategy of developing material areas

is to always keep updates and be determined in investing and applying advanced breeding technologies

Develop along with dairy cow breeders

Apart from developing its large-scale farm model, Vinamilk has accompanied the dairy cow breeders in developing material areas and improving operational efficiency of breeding households

● Creating stable output and reasonable purchasing prices for the breeders

● Supporting the breeders in production development and effective improvements

● Promoting the development of related agricultural products including feed products for dairy cows (such as corn, King grass or fresh straw, etc)

In 2013, Vinamilk promoted activities to encourage agricultural development, such

as training programs on breeding techniques to share with the farmers modern techniques and technologies:

● Conducted 44 training courses “Instruction on dairy cow breeding techniques” with the participation of 1,605 households across the country

In addition, to support breeding households for a warm traditional Tet (Lunar New Year holidays), as well as to consolidate the relationship between Vinamilk and the households, the company implemented a program named “Accumulate points with Vinamilk for a warm and joyful Tet” In this program, Vinamilk supported 4,724 households with over VND 18 billion, which is on average VND 3,8 million per household

- CREATE JOBS FOR LOCAL LABOUR FORCE

With the strategy of expanding dairy farm scales, Vinamilk started to implement its investment in projects in Ha Tinh, Thanh Hoa and Tay Ninh in 2013 When these projects come into operation in the period 2014 – 2015, Vinamilk will, in both direct and indirect manner, contribute to create job opportunities for local people Moreover, by developing its product distribution network, Vinamilk has contributed

to establish a system with more than 250 enterprises and over 4,500 stable jobs in different provinces and cities across the country

- MARKET STABILIZATION PROGRAMS

The market stabilization program for dairy products in Ho Chi Minh City is a program which was launched and promulgated by the People’s Committee of Ho Chi Minh City It aimed at helping consumers to approach safe, high-quality and nutritious dairy products at reasonable prices while contributing to social security

Vinamilk has actively participated in this program since 2008, Accordingly, Vinamilk commits to supply dairy products for the market at a stable and reasonable are committed to supply commodities under the coordination of the City’s Department of Industry and Trade

1.3.4.4 Employees

❖ Commitment

- WORKPLACE SAFETY AND HEALTHCARE

The desire for working under safe conditions and good health care is a legitimate aspiration of the workforce Therefore, Vinamilk commits to:

● Fully provide employees with PPE – personal protective equipment and safety measures to ensure the safety for employees during their working process

● Organize annual safety guidelines and drilling programs for employees

● Establish anti-fire systems at the headquarters and all working facilities and ensure that 100% of employees are trained on fire prevention and suppression once a year

● Implement health care programs and provide employees with comprehensive health and accident insurance, in addition to the health insurance coverage under the provisions of Vietnam’s Law

DIFFERENCES AND ANTI-DISCRIMINATION

With its current scale, Vinamilk is the workplace of approximately 5,000 employees from various fields and industries who work in different conditions (offices, manufacturing factories, farms, etc) Our desire is to create a cultural and civilized working environment for our employees To this end, we have always been consistent with and encouraged our employees to follow the principles of respectful and equal treatment to each other, regardless of their genders, regions and religions

- EMPLOYEE’S RIGHTS UNDER VIETNAM’S LAW GUARANTEED

The relationship between the Vinamilk corporation and its employees is established

on a voluntary basis Vinamilk commits that:

● All employees rights under Labour Law are guaranteed

● Vinamilk absolutely does not use child labour and forced labour

● The collective labour agreement is applied to all employees

● Trade Union represents employees and protects their rights

- EMPLOYEES CONTRIBUTION RECOGNIZED AND PROPERLY AWARDED

In recognition and appreciation towards employee efforts to contribute to Vinamilk’s growth and success, we ensure that all of our employees receive what they deserve At Vinamilk, we have policies of pay transparency and equality to ensure that employees salaries are in respect to their efforts and contribution In addition, Vinamilk offers its employees a portion of the company’s profits based on the business’ annual performance in order to encourage their efforts

- STAFF DEVELOPMENT

At Vinamilk, we are clearly aware of the importance of staff development in terms

of creating a positive and efficient working environment A significant part of our budget is thus allocated for annual staff training programs, both internally and externally Our desire is to create the best opportunities and conditions for our staff

to improve their knowledge and personal development and in turn, contribute to the development of the company and community

- EMPLOYEES OF PARTNERS IN VINAMILK'S SUPPLY CHAINS

In its viewpoint of employees, Vinamilk is concerned not only about its own employees but also its partners’ who work in the supply chains

Labour providers are supposed to follow Vinamilk's requirements:

● To sign labour contracts with employees who are going to work for Vinamilk

● To pay social insurance premiums, organize trade union activities and implement other policies for employees in accordance with the Labour Law

● To provide 24/24 accident insurance for employees

All these requirements are clearly indicated in the contracts between Vinamilk and labour providers We also agree to include all incurred charges into our service costs

Partners in the distribution chains

Ensuring the rights of employees is one of the most important criteria which helps Vinamilk in selecting partners and maintaining a collaborative relationship During the cooperation, we always attempt to support our partners in terms of ensuring the best benefits for their employees

❖ Plan

- ACTIVITIES TO ENSURE EMPLOYEES’ SAFETY AND HEALTH

Activities on labour safety in the year 2013:

● Labour safety training for 100% of employees working in factories, plants and farms

● Fire training and fire drill for 100% of employees

● Personal hygiene and safety network (ATVSV) set up at 13 factories and 02 warehouses ATVSV teams take charge of checking labour hygiene and safety at their workshops This force is also in charge of propagandizing knowledge of safety and hygiene to their group members These in-charge teams are frequently trained and make periodical reports

- Employees’ health care

Health care divisions set up at all Vinamilk's fields of operation

● Annual check-ups for hundreds of employees as per the collective labour agreement: once a year for male employees and twice a year for female

● Anti-flu vaccination for all Vinamilk’s employees in the year of 2013

● Accident and health insurance coverage provided in addition to the insurance program under the provisions of Vietnam's law in order to bring a better healthcare for all Vinamilk’s employees This program has expanded for all employees since 2014 The insurance limit includes:

+ 24/24 accident insurance for employees

+ Overall health insurance coverage: employees will be insured for both inpatient and outpatient treatment, maternity and dental care + As for deaths or injuries caused by work-related accidents: the value of insurance compensation is up to that of the least 30 monthly salaries

+ Health insurance coverage for relatives of the management board

- GUARANTY FOR EMPLOYEES’ RIGHTS AND BENEFITS

A mechanism of receiving and solving employees' feedback and complaints has been established and maintained This includes:

● The Human Resource Department of the company and the Administration - Human Resource Division at all of its operating units

● Local trade unions

● Direct channel to receive information: compliance@vinamilk.com.vn Trade unions and youth unions at each operating unit organize after-work entertainment activities for employees

EMPLOYEES’ CONTRIBUTIONS

Vinamilk's pay scale is built upon the Merce system Vinamilk monthly conducts employee evaluations based on the methods of Performance Appraisal and Management by Objective The evaluation results are the basis of the decisions regarding annual salary increases and year-end bonuses

In 2013, the average salary increase is 22.7%, higher than those of earlier years (2012: 18.5%, 2011: 10%)

- EMPLOYEES’ TRAINING AND DEVELOPMENT

In 2013, Vinamilk spent VND 6.5 billion for the internal and external training programs

The successive staff promotion program was organized to develop potential staff to fill the key positions in the company This program brought opportunities for employees to be trained, challenged and developed in their career for their contributions towards the company The program finished its 1st stage in 2013 and continues in 2014

- IMPACTS ON THE PARTNERS

Distributors

In 2013, Vinamilk started to support its distributors in purchasing the 24/24 accident insurance coverage for their sales teams working at the distribution locations It is expected that in 2014, 100% of these distributors’ employees will be provided with this accident insurance coverage

1.3.4.5 Support & Community Development

❖ Commitment

- THE "STAND TALL VIETNAM” MILK FUND

There are currently many disadvantaged Vietnamese children who have not received the right nutritional care, with diets that consist of little milk—or sometimes they even have no idea of what milk is This has led to a limitation of physical and intellectual development in children The Stand Tall Vietnam Milk Fund was established in 2008 under the chairmanship of the National Fund for Children of Vietnam - Ministry of Labour, Invalids and Social Affairs in collaboration with Vinamilk The fund aims to assist disadvantaged children all over the country by a simple and practical act: providing cups of nutritious milk to support their physical and mental development for a brighter future The Milk Fund’s 6-year journey is a significant humanitarian undertaking The activity has helped hundreds of thousands of children have the opportunity to drink milk more frequently to improve their development, contributing significantly in reducing the rate of malnourished Vietnamese children in recent years Up to now, the Milk Fund

has provided milk to more than 310,000 disadvantaged children in Vietnam—equivalent to 23 million glasses of milk, or about 84 billion VND In 2010, the Stand Tall Vietnam Milk Fund was honored as "1 of the 10 most prestigious programs in Labour, Invalids and Social Affairs”

- THE "VINAMILK – NURTURING VIETNAMESE YOUNG TALENT" SCHOLARSHIP FUND

Proposed by Vinamilk and approved and chaired by the Ministry of Education and Training, the "VINAMILK – Nurturing Vietnamese Young Talents" Fund was established in 2003 The program aims to encourage primary school pupils across the country who have outstanding academic results and strong efforts in study With this activity, Vinamilk is proud to contribute towards education and was honored the merit award "For the Development of Vietnam's Education” by the Ministry of Education and Training

- COMMUNITY SUPPORT ACTIVITIES

Vinamilk has been consistently promoting our Vietnamese traditional value "whole leaves wrap torn leaves”, and identifying this as a guideline for all of our community support activities These activities, organized by Vinamilk’s Executive Board and always received the positive support from all of the company’s employees, are for:

● Offering financial supports to people at different provinces and hospitals who have illness, incurable diseases or life-threatening diseases

● Supporting and offering gifts and milk for children with special situations at orphanages and abandoned children at humanity centers

● Supporting people experiencing natural disasters

● Participating in blood donation programs

❖ Plan

- "STAND TALL VIETNAM” MILK FUND

In the school year 2013-2014, the Fund donated 1.2 million glasses of milk to more than 13,000 children in 57 provinces and cities nationwide

Milk donation on the occasion of the inauguration ceremony of two new factories

At the inauguration ceremony of one of the Vietnam's largest dairy factories, and also on the occasion of celebrating the 20th anniversary of the National Malnutrition Prevention Program, Vinamilk and the "Stand Tall Vietnam” Milk Fund donated 150 thousand packs

of Vinamilk UHT 100% Fresh Milk "Immune system support" - which were the very first ones produced by the factory's modern production line - to Vietnamese children in 10 provinces that had the highest percentage of malnutrition in children under 5, with total value of VND 1 billion On the opening day of the Vietnam Powdered Milk factory,

Vinamilk's General Director signed to donate "10,000 tins of Dielac Alpha (powdered milk for young children)” at the value of VND 1 billion These products which was also the very first ones produced by the factory's modern production lines, to the poor and disabled children via Vietnam Children Support Fund and Children Support Fund of Binh Duong province

- THE "VINAMILK - NURTURING VIETNAMESE YOUNG TALENTS" SCHOLARSHIP FUND

In the school year 2013, the program was implemented to:

● Grant 1,000 scholarships worth VND 1 billion

● Celebrate the 10th anniversary of the "Vinamilk - Nurturing Vietnamese Young Talents" Scholarship Fund in cooperation with the Ministry of Education and Training, and organize the "Shining Vietnamese Talents" playground for primary school pupils with the participation of more than 2,000 pupils

- COMMUNITY SUPPORT ACTIVITIES

The implemented programs in the school year 2013 include:

Scholarship grants for poor students in Ben Tre province

Vinamilk cooperated with Vietnam Association for Victims of Agent Orange/Dioxin in Ben Tre province to grant scholarships 180 million to 280 orphans, disabled and poor students

Vinamilk's support for flood victims in central Vietnam

In responding to the call of National Committee of Vietnam Fatherland Front towards the northern central provinces affected by the typhoon No 10 in 2013, during 12th-

15th October, Vinamilk visited and presented gifts worth VND 2.3 billion in cash to those severely suffered from the typhoon in the provinces of Quang Tri, Quang Binh, Nghe An and Thanh Hoa In December 2013, Vinamilk supported severely flooded areas in Quang Ngai Province with the total value of VND 250 million for people to repair their homes and stabilize their lives

Participation in the "Pink blood" campaign

In 2013, Vinamilk's staff from 12 operating units participated in blood donation campaign, with the total of 850 units of blood donated At the same time, the trade unions at Vinamilk's operating units also participated in financial supporting for the treatment of disadvantaged people with illness, incurable diseases or fatal diseases at different locations and hospitals with the total amount of VND 956 million, which was partially extracted from Vinamilk's operational funds and partially from the contributions of all its officers and employees In addition, Vinamilk also participated in supporting the "The fishing nets

of love” Program for fishermen in Hoang Sa (Paracel) and Truong Sa (Spratly) islands with the total amount of VND 300 million

1.4 COMPANY COMPETITIVE ADVANTAGES

The competition in the market segment of fresh milk is increasingly fierce because there are a lot of redoubtable rivals Locally, the strongest rival of Vinamilk is none other than Dutch Lady, followed by the Hanoi milk and TH True Milk are as new players in fresh milk market for children segment, which seems like potential big rivals in recent years Besides, Vinamilk is also being challenged by imported products following WTO accession commitments Due to Dutch Lady is supported by capital inflows from its holding company so it does not have the same need to maintain profitability Therefore, its competitive strangegy is more flexible than Vinamilk

The first argument is in terms of the distribution channels; an extensive distribution channel

is an important growth aspect for companies to build a mojor barrier towards several new entrances In particular, Vinamilk has the largest distribution channel with approximately

250 exclusive distributors and more than 24,000 retailerss throughout the country, while Dutch Lady builds the second largest dairy distribution network with 145 distributors and Nestle with only around 95 distributors nationwide

About the purchasing power in raw material inputs, Vinamilk is leading in buying raw milk

in the country, purchasing up to 50% of the total indigenous production, while Dutch Lady

is the second largest raw milk buyer with approximately 20% of local fresh milk Nestle and at least 17 other companies account for the remaining 30% of local fresh milk supply However, Vinamilk meets a serious problem the purchasing price of fresh milk from local farmers According to the article on The Saigon Times webpage, the original milk price of Vinamilk is lower than Dutch Lady Vinamilk’s buying price is only VND 7,000 per kilogram at 50 cow-raising families in the country, while the current price offered by Dutch Lady is VND7,500 per kilogram Moreover, the commission or bonus for the farmer of Vinamilk is quite low while the bonus policy of Dutch Lady is maintained frequently Dutch Lady takes care more beneficial to their farmers who are facing huge difficulties due

to the rising production cost, while Vinamilk tend to cut into farmers benefits and send many farmers into hardship through purchasing fresh milk with the lower price

Thirdly, the market share is the most important factor that decided the success of Vinamilk today As it requires no refrigeration and has a long shelflife, UHT milk is the dominate product

1.5 COMPANY PARTNERSHIP ACTION SELECTION CRITERIA

13/9/2016 Swiss DSM

corporation

Strategic cooperation "International standard nutrition application into Vinamilk powdered milk products"

- Applying advanced and high-quality nutritious micronutrients to Vinamilk's products In addition, it will support Vinamilk

in product research and development, clinical trials to evaluate the effectiveness of use, as well as support Vinamilk in nutrition training and communication, aimed at bringing the best for Vietnamese consumers

21/9/2017 Danish Chr Hansen

corporation

Strategic cooperation "Pioneering the application of advanced Probiotic strains into Vinamilk dairy products

- Applying clinical and European-standard probiotics for powdered milk, yogurt, drinking yogurt and nutritious powder for children, helping to support digestion, enhance absorption, and strengthen resistance for children and families

* Hau Giang Pharmacy and Vinamilk signed the Strategic Cooperation Agreement on key issues:

- Build products with new brands or develop from existing products to serve the needs of community health care with many different subjects;

- Coordinate the source of raw materials to put into the production of functional products, supplement and improve health;

- exploit the strengths of each party's specific distribution resources, to help people easily access and use nutrition and health care products

1.6 COMPANY FINANCIAL STATUS

- The company's revenue increases steadily every year (about 13.5% / year)

- Liquidity of good business (due to short-term payment ratio = 1.99): Short-term asset value

is greater than short-term debt, so the company's assets are sufficient to ensure the payment short-term debt

- Quick liquidity situation of enterprises does not face difficulties if it is necessary to immediately pay short-term debts (due to quick payment ratio = 1.6): Short-term asset value is faster than price Short-term debt, or short-term assets, can ensure immediate payment of short-term debts if creditors demand money at the same time

- Vinamilk invests heavily in inventories, making the company's quick payment ratio only average (because the inventory turnover is 6.2 rounds, making the inventory days 58 days)

- The number of average days of receivables of Vinamilk is quite low, showing that enterprises do not have to pay capital in the payment process, do not encounter bad debts, and the speed of debt collection is fast and effective high management In addition, it also showed that the mobility of strong assets, very good short-term payment capacity (due to receivables turnover is 17.6% -> The number of average days of receivables is 20 days)

- High financial autonomy of enterprises, because enterprises currently use less debt to finance assets However, on the other hand, the company does not take advantage of financial leverage and lose the opportunity to save tax from debt use (Debt ratio / Total assets = 31%)

- Financial autonomy and the ability to get high debt, because Vinamilk uses less debt than using equity to finance assets But the company does not take advantage of financial leverage and loses the opportunity to save taxes from debt use (Debt / Equity = 45%) 1.7 COMPANY SWOT ANALYSIS

- Having a long history and strong

foundation makes VINMILK become

the biggest brand in the dairy product

industry and VINAMILK does not do

their business only in domestic

market, but they also does in 46

foreign countries

- Modern technology and machine

system are used to produce the best

quality products from milk which are

reached the international standard

VINAMILK has the ability to produce

variable type of milk products

Therefore, they have a diverse product

- Affected by the global economic crisis, and the high inflation rate in Vietnam, profits and sales revenue of the company decreased recently

- Most of raw materials for manufacturing are imported; thus, the fluctuation of exchange rate affects the material-buying price

- Exporting market includes countries in Asia, especially South-East Asia

Therefore, it is still a long way to penetrate the EU or the USA market

- Marketing activities in Northern Vietnam is still weak

list in order to satisfy the customers’

demand in Vietnam

- VINAMILK also develops its

distribution system and expands into

nationwide range, include: 202

exclusive distributors, 250.651 retail

outlets and directly sells for over

2.250 supermarkets Moreover, the

company has export into 46 countries

around the world

- The experienced Research and

Development department cooperates

with the leading Research companies

to advance the best quality products to

meet the variable demand of

customers in different group of ages

- Applying modern technology in

Enterprise Resource Planning from

producing, qualify management to the

circulation and distribution of

commodity stage

- The operating managers have the

ability and experiences in milky

production that have strong

attachment to the company for years,

understanding the market and

consuming trend in Vietnam

- High-quality milk of international

standards

- Relatively cheap prices

- Environment-friendly packages

- Continual product innovation

- Globally recognized cow farm

- Effective marketing activities in

Southern Vietnam

- Marketing có hiệu quả cao: các

chương trình quảng cáo, PR

- The big and continuous development in years unintentionally creates stress for the new managers and employees

- The breeding productivity is lower than the general standard and high price of milky material also influences the profit

Opportunities (O) Threats (T)

- Supply of raw materials is supporting

by government, imported materials

have reduced tax rates

- High potential customer and great

demand:

+ With the development of

economy, consumers has more

concern about your health and

consume more dairy products

+ The average milk consumption of

Vietnamese is 28l/people/year

+ Vietnam has young population

(children accounts for 33% of

population), and the population

growth is above 1% This is a potential

market

- Now, a lot of people pursue healthy

life → organic milk and cereal milk

are popular

- Global and domestic economic situation face many challenges such as the inflation, crisis which threatens all Vietnamese enterprise

- There is more competitive in milky market, especially with the famous international brands

- Commitment of the Vietnamese government about reducing taxes leads

to the cutthroat competition between businesses: large foreign corporations have opportunity to participate in the market

- Intensive competition with domestic brands

- Milk consumption in urban and rural regions varies considerably

II Human resources:

Definite term of 1 – 3 years 905 248 1,153 898 244 1,142

Support activities (administrative,

office, accounting, etc.)

Vinamilk is an experienced company in dairy industry for more than 40 years

+ Having profuse human resources, up to more than 6000 people and they all have experience working in dairy industry

Therefore, Vinamilk is qualified to launch a new dairy product

III Supplier:

- Vinamilk’s input includes:

Input oversea raw materials

Purchased domestic’s raw materials from farmers' cows or dairy cattle farm

1 Source of oversea raw materials:

Only around 35% milk powder from domestic but 65% from overseas that

Vinamilk needs to produce milk

Not only from developed agriculture with high standard but also qualified

assurance and high-safety food requirements are always the source of raw

materials selection of Vinamilk's strategy which has been continuously carrying out until now

Imported milk materials can be mediated or directly imported and shipped to production plants Main sources of Vinamilk raw material are from the US, New Zealand, and Europe

List of imported milk material suppliers of Vinamilk:

2 Raw material sources purchased domestically:

- In addition to raw materials from Vinamilk farms, Vinamilk also purchases milk from cattle farms to ensure sufficient domestic demand It is estimated that by 2021, the amount of milk from Vinamilk farms will be 157,000 tons, meanwhile milk purchased from households and domestic farms will reach 251,000 tons

- Raw fresh milk: Cow farmers and cattle ranches have the role of supplying input milk for production through milk collection stations Milk purchased from farms must always reach the standard quality agreements between Vinamilk and domestic dairy farms

- Fresh raw milk must be tested through a rigorous inspection process by the following criteria:

● Sensory: Naturally delicious, the characteristic of fresh milk is that there is no taste at all

● Ensure the milk freshness

● Ensure compliance with Acid Concentrations

● Ensure the requirement of microbiological criteria

● Assure to maintain the metal level below the allowed level

● Ensure control of the concentration of pesticides and veterinary drugs

● Ensure the origin, which do not use the milk from illness cows

- Particular for the production of sterilized fresh milk, fresh milk must strictly ensure the freshmen, not precipitated by alcohol 750

3 Advantages and disadvantages of the input supply system:

- Advantages:

Cow milk is purchased from Vietnamese farmers, through many inspection stages at the buying and transshipment stations There is always a specialists team in order to support farmers in raising cows, feeding, cleaning cages, milking, storing and purchasing milk, etc After the acquisition of raw fresh milk,it will be coldy stored in the vehicles once arrived to the factory, it will be carefully checked before being put into production Low quality milk containing antimicrobial will definitely not be accepted,

Milk powder, milk fat, (used in the production of reconstituted milk, pasteurized milk, yogurt, and other products) are imported from worldwide leading and reputable production source such as the USA, Australia, New Zealand,

- Disadvantages: Import costs are exceedingly high

IV Products analysis:

1 Powdered Milk

I Product Description:

- Vinamilk powdered milk provides essential nutrients for moms and babies due to the need of each fetal growth stages, from fetal stage to the point when the baby reaches 6 years old

- Products in Vinamilk powdered milk line:

High-class products:

● Optimum Mama Gold: A premium nutritional product with Opti-Immune

formula that effectively enhances mom's digestive & immune system in moms, provides vital nutrients to meet the increased nutritional needs during pregnancy and lactation, and provide strong foundation for healthy fetal growth

● Optimum Gold: With 20%-more DHA from pure algae together with Lutein can

boost brain, height and immune system growth

● Optimum Comfort: A special powdered milk which reduces Gastroesophageal

Reflux, a phenomenon in which baby frequently spits up

Special treatment products:

● Dielac Grow Plus 2+ (Red and Blue) : A high energy, nutritionally complete

formula for young children with faltering growth (including catch up growth) which contains vitamins and minerals that meet 100% Recommended Nutrition Intakes (RNI) established by FAO/WHO

● Dielac Grow: The new Dielac Grow - specially formulated to support height

development with a breakthrough, innovative Grow-Pro formula to meet US Daily Reference Intakes (DRI), and other essential nutrients such as energy, protein, fat, vitamins and minerals based on international standards

● Dielac Pedia: Dielac Pedia is a joint project between Vinamilk and its strategic

European partners to help Vietnamese children:

- Recover from the problematic eating disorder, anorexia

- Reach their developmental milestones on time

- Healthfully gain weight and thrive

Middle-class products:

● Dielac Alpha Gold IQ: A good memory often signals intellectual capability The

new Dielac Alpha Gold with IQ formula to boost height and weight gain is clinical certified by DSM Switzerland

● Dielac Mama Gold: Contains nutrients that improve moms' general health like

iron, iodine and soluble fiber Oligofructose

● Dielac Alpha: Dielac Alpha with a 3-in-1 nutritional formula provides adequate

essential nutrients to support brain development, weight gain and height growth,

as well as enhance immune system

Source: Vinamilk's annual report 2017

II Market Segmentation:

1 B to C:

- Income Segmentation:

High-class products aim to families whose income is above 1500$/month;

Middle-class products aim to familíe whose income is under 1500$/month

- Demographic Segmentation:

For Pregnant women;

For Anorexic children;

For Malnourished children;

For Increasing height;

For Increasing brain’s abilities;

For Improving resistance and digestive system

- Age Segmentation:

From 0 - 6 months old;

From 6 - 12 months old;

From 1 - 2 years old;

From 2 - 6 years old

2 B to B:

- Geographic Segmentation: Local and foreign partners

- Objective Segmentation: Partners distribute products and Business Customers use

Vinamilk products as raw materials for their products

- Sale Segmentation: Wholesaler and retailer

III Product Strategies:

1 Objective and Target:

- Objective: Breastfeeding is the best choice for children’s growth But, in fact, there are

two serious problems:

A lot of women need their children to be weaned earlier than 12 months

For some reasons, they have no (or little) milk for breastfeeding They need to find other ways to supplement nutritions their children

Vinamilks powdered milk line was developed to solve these problems

- Target: This is one of Vinamilk main product lines in both local and abroad market

Vinamilk target for powdered milks are:

Growing steadily and sustainably

While staying at leading position, increasing market share by 1% each year in the next 5 years (45% market share of powdered milk industry in 2023)

2 Promotion Strategy:

- Powdered milk is one of Vinamilk main product line, so they are spending a lot on promoting this one Specifically, they are placing advertisement on TV, Youtube, Social networks and more while running PR activities, free advisory services for pregnant

women and moms Not only exhibiting product to improve brand awareness, they are also boosting online and offline sales In these following lines, we will analyze 4 aspects

of promoting which are being used by Vinamilk for their product

- Target Audience: Parents and their children

- Advertisement:

Target: Increase sales and Improve brand awareness

Strategy:

● Content: Must be funny, creative and specific Especially, the content must focus

on special use of each product

● Cost: Occupy the largest proportion of Vinamilk cost

● Frequency: Daily

● Advertising Media: Focus on advertising on TV, especially on the golden hour Running ads on youtube, Facebook, Instagram, …

Vinamilk always focuses on advertising - especially on TV

● Build a team of diabetologists and maternity experts to counsel anyone, anytime

on Vinamilk website

App for pregnant women (Source: Vinamilk.com.vn)

- Promotion:

Target: Boost customers' demand to raise revenue

Strategy:

● Frequency: Monthly

● Cost: Second place in total Vinamilk cost

● Individual Customer: Promotions, Sale, Buy-3-get-1, etc must be hold every month

● Business Customer: Give out discount (base on turnover) Particularly,

Vinamilk always holds a promotion program every month

● Build teams of professional, well-trained counselors, customer care staff, telesales

to introduce Vinamilk product and receive feedbacks from customers

● Maintain customer services and sale by email, mail

● Develop Loyalty Program

3 Perceptual map