Vietnam’s dairy industry attractive to local and foreign investors
In mid-December, VinaCapital Vietnam Opportunity Fund (VOF) and Japanese partners Daiwa PI Partners announced that they would invest $45 million into the International Dairy JSC (IDP - Ba Vi brand). VinaCapital and Daiwa hold a 70% share of IDP and the family of Nguyen Tuan Khai and the General Director of IDP Tran Bao Minh own the remaining 30% stake.
Explaining VinaCapital’s move into the dairy market, its CEO Andy Ho said this sector has great potential for development in the future. Meanwhile, IDP is in the top 5 milk producers in Vietnam, with 2014 revenue estimated at $80 million. In the coming time, with charter capital increasing to $460 million, IDP will launch new products.
A representative of Daiwa PI Partners, Mr. Go Fujiyama said this is the first investment of Daiwa in the dairy market of Vietnam.
He said in 1960 the per capita milk consumption in Japan was 12kg and increased to 28,8kg in 1970 and 46,6kg in 2010. Vietnam’s per capita milk consumption at present is 14kg, approximately to that in Japan in 1960.
"Perhaps the growth chart in Vietnam would not be similar to Japan, but future demand for milk in this 90 million people market will continue to increase," he said.
Although running Anova Milk JSC, Nova Group has not had famous milk products in the local market yet. Recently, to increase its competitiveness, Nova Group announced its cooperation with Kerry Group from Ireland in the development and supply of formula milk.
Nova, which has interests in real estate, veterinary medicines and food, will invest over US$50 million in developing modern dairy cattle farms in Ireland and product distribution systems.
The two will also focus on developing a system for tracing product origins – from raw materials to final product — to ensure their best quality and the safety of children.
Vo Thuy Anh, CEO of Anova Milk Joint Stock Company, an affiliate of Nova, said the two sides would inaugurate the Anka product line for children in late March or early April before beginning research to develop other nutritional products for the Vietnamese market. Anka milk products would be of high quality but 20 per cent cheaper than similar products in the market, she said.
Nguyen Hieu Liem, Vice President of Nova Group, said the partnership will maximize the strengths of Kerry and Nova Group, and at the same time, help the corporation realize the strategic development of creating the new segment of products in the Vietnamese market (meat, fish, eggs, and dairy).
Nova Group was formed in 1992 with agriculture and chemicals of Annova brand and real estate brand of Novaland as its forte.
Anticipating the future fierce competition of the market milk, Vinamilk, which holds 50% of the Vietnam`s dairy market has continued to invest in new products and expand its network at home and abroad.
Speaking at Vinamilk shareholders` meeting early this year, Vinamilk Chair Mai Kieu Lien also expressed concern about the decline of the company’s milk share in the domestic market as more and more local and foreign businesses have invested in the dairy industry. Therefore, the company`s profit growth has declined although its revenue was higher.
However, this is motivation for Vinamilk to promote investment this year. After the construction of two big plants producing powder and liquid milk in the southern province of Binh Duong, with a total investment of more than VND4 trillion, in early 2014 Vinamilk kicked off a $23 million project in Cambodia, of which the company holds a 51% stake.
Vinamilk has received a license to invest $3 million in Poland. This project will help it reach and expand the European market. Earlier, Vinamilk spent VND1.6 trillion in the hi-tech dairy farms in Sweden and the US in order to localize 40% of inputs by 2016. This company aims to achieve sales of $3 billion and reach the Top 50 world`s largest dairy companies in 2017.
DFB Hanco Nutrition has marked its return after many years of restructuring by building a VND700 billion milk and cereal powder factory in the southern province of Dong Nai in September.
Hoang Anh Gia Lai Group, which has never distributed or produced milk, recently signed a cooperation agreement with Nutifood and Vissan to develop cows, dairy cows and a milk processing factory. In particular, Hoang Anh Gia Lai will invest in cows, Nutifood will be responsible for building the milk processing plant and Vissan is in charge of the outlet for beef. The total investment in this project is VND12 trillion, of which Vissan and Nutifood contributed 50% of capital.
This year foreign and domestic firms strongly invested in the dairy market because Vietnam is a market with a young population and large consumption power.
Data from the General Statistics Office showed that imports of milk and milk products from Vietnam in 2013 were approximately $1.1 billion, an increase of over 130% compared to 2012. The figure for the January-November period of 2014 is approximately $1.1 billion. It is forecast that in 2017, the liquid milk market will reach a value of VND34 trillion and it will be VND48 trillion for the powdered milk market.