Marketing plan for liquid milk of vinamilk company

International School Viet Nam National University  MARKETING PLAN FOR LIQUID MILK OF VINAMILK COMPANY GROUP 4 Member of group Nguyễn Thùy Linh 19071410 Nguyễn Xuân Tùng 19071553 Lê Thảo Hương 190.

International School Viet Nam National University

4 Current marketing strategy and marketing mix of Vinamilk 7

PART 1 : CURRENT MARKETING SITUATIONAL ANALYSIS

Completed the acquisition of 75% share capital of GTNFoods JSC, thus factory were

inaugurated and

put into

operation

Factory and Sai Gon Dairy Factory

Buiding the first cow farm

in Tuyen Quang

the world’s most morden factory, 100%

automation

controlling Moc Chau Milk JSC whose total head cows are 25,000

Cow farm in Nghe An was opened with the size

of 3000 cows

Inaugurated Angkormilk Dairy Factory in Combodia

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

Vinamilk commits to bring best-quality nutrition to communities that reflects their

(Vinamilk.com)

2 Vietnam's liquid milk market

For the period from 2010 - 2015, fresh milk production capacity increased by an average of 16% per annual from 520,6 million liters in 2010 to 1.093 million liters in 2015

According to the General Department of Statistics, in 2015 the dairy sector in Vietnam has

recorded the highest milk production capacity so far, mainly focusing on names such

as Vinamilk, TH Dairy Food Joint Stock Company, etc In 2016, output and consumption of

dairy products continued to flourish

In June 2016, fresh milk production capacity was estimated at 99.1 million liters, increasing by 1.3% compared to the previous month In general, for the first 6 months of 2016,

fresh milk production capacity was estimated at 553.1 million liters increasing by 4% over the

same period in 2015 In the first half of this year, production capacity of these two dairy

products was also higher than the same period last year, signaling a continued year of output

growth

The liquid milk market in 2018 revenue reached 48.9 trillion, with a steady growth rate of 10% CAGR is expected to decrease but still reach nearly 7% to reach 66 trillion by

2023 Due to limited income and distribution conditions, dairy products are skewed towards

urban residents in terms of sales as well such as the variety of items

COMPLIANCE

To comply with legal regulations, the Company’s Code of Conduct and the Company’s procedures and

policies

RESPECT

To have self-respect, to respect

colleagues To respect the

Company and partners To

cooperate with respect

Core values

To respect the established ethical standards

and act accordingly

The forecast of growth in milk production in Vietnam from 2015 to 2045 is as follows:

- Period 2015 - 2025: Growth 12.0%/year

- Period 2026 - 2035: Growth rate of 5%/year

- Period 2036 - 2045: Growth of 3.0%/year

Competitive strategy: on product quality Natural quality is what this company aims to help them increase market share

Objective: Expand market, increase market share

Strengths: Owning TH clean fresh milk production and processing factory with a capacity of more than 5000 tons/year (in Nghia Binh commune, Nghia Dan district, Nghe An province) This is the largest modern clean milk production and processing factory in Asia in terms of

 Dutch Lady

Dutch Lady Fresh Milk: Friesland Campina Vietnam is a joint venture company established in 1995 in Vietnam between Binh Duong Import-Export Company (Protrade) and Royal Friesland Campina - a leading dairy group in the Netherlands with 140 years of

experience operating worldwide In 2002, the name was changed to Dutch Lady Vietnam 100% pure fresh milk produced according to Dutch standards with more than 140 years of experience in the dairy industry, Dutch Lady pasteurized fresh milk with delicate taste and full

of nutrients, is the freshest and most suitable choice for the whole family

Competitive strategy: Expanding the market

Objective: Due to the specificity of Vietnam, all Dutch Lady's products are traditionally family-oriented, ie Dutch Lady's dairy products are intended for all audiences and all ages In fact, Dutch Lady's TVCs are all community-oriented with the slogan "Drink Ducth lady milk

to express love to your mother"

Strengths : Stable market share , reputable brand name , advanced and modern production technology , high product quality , reasonable prices , wide distribution system

Weaknesses : Market share is not large enough , slow response to market changes , lack of autonomy in the supply of raw materials , products are not diversified , mainly focusing on children

 Ba Vi

Established on 5/5/2009, with the main task of developing cows, purchasing milk from farmers, processing dairy products, the company always focuses on developing raw material areas

Business Strategy: Lower prices than competitors

Objective: Building a brand associated with quality

Strengths: Produced in one of the most modern dairy factories in the North, with Tetra Pak technology of Sweden and APV of Europe, Ba Vi fresh milk product wishes to bring

consumers the best High quality and nutritious natural products

Weaknesses: Products are not diversified, vision is limited, distribution system is still narrow

4 Current marketing strategy and marketing mix of Vinamilk

4.1 Current marketing strategy of Vinamilk

Other Milk Substances (Soy Milk, Nut Milk): 12%

This is the segment that is forecasting to have the highest CAGR in the coming year at 18% due to the trend of gradually replacing cow's milk to nut milk of some consumers

Target market

Liquid milk segment of Vinamilk includes a lot of product lines that have ability to meet needs and requirements of various and large number of consumers, such as: UHT 100% non-fat fresh milk, especially aims at people who are on diet or want to avoid fat, Twin Cows 100% UHT milk imported targets customer segment that loves imported products, fresh milk plus canxi low fat for lack of canxi or overweight people Huge demand for liquid milk results in high competition in this industry Applying business - to - business sale form, we choose supermarkets and schools as main customers to deal with

To supermarket, Vinamilk decides to corporate with Metro Con because we want to expand our distributors Metro is one of the biggest wholesale traders in the world By

2002, Metro decided to enter Vietnam market by establishing Metro Cash and Carry Vietnam Company with the first center located in Ho Chi Minh City Up to now, Metro

is the only wholesaler in Vietnam with 19 branches located in big cities and provinces throughout Vietnam

To schools, we aim at boarding school syytems throughout Vietnam by demonstrate to these venues and facilities mulk demonstraths to students "meals at schools, showing the influence of milk to students health care and height growth that attracts participants

Target group

In the context of the region’s rapid growth, companies that do not have at least

a third of their revenues coming from Asia cannot hope to remain sustainable global players Companies wanting to sell to Asia should not look at Asia city by city; they should look at Asia as market centers In approach, they should not differ one from another But selling to urban and rural within the ten-same country can be very different (Naisbitt, 1997) Although Vinamilk offers a wide product range, from for children to the elder generation, the group of under 14-years-old is considered as the target market for the company

At this moment, Vinamilk has strong position and distribution channels in all the big cities and urban areas However, the brand awareness in the rural is relatively weak, therefore, this is one of the target group for Vinamilk in the future (Vinamilk, 2016)

4.2 Marketing mix of Vinamilk

4.2.1 Product

Vinamilk's products are very diverse in types with over 200 dairy products and dairy products: condensed milk, powdered milk, nutritional powder, fresh milk, ice cream, yogurt, cheese And other products such as: soy milk, fruit juice, cake, Instant coffee, bottled water, tea, instant chocolate With a wide range of products, Vinamilk has fully met the consumption needs of customers and contributed to spreading risks for the company However, there are also difficulties such as management, product preservation, product distribution The solution that needs to be given here is to focus

on products that are being consumed a lot, and remove those products unpopular products, improve product quality Some products that bring high revenue to the company that need to be focused are:

 Condensed milk (accounting for 34% of sales) Condensed milk is the product line that accounts for the highest proportion in the company's domestic revenue structure In 2007, this product line achieved a growth rate of 38% and accounted for 79% of the market share

 Fresh milk (accounting for 26% of sales)

In 2007, fresh milk achieved a growth rate of 18%, accounting for about 26% of the company's total revenue and the second highest contribution to revenue compared to all product lines of the company Vinamilk fresh milk accounts for 35% of the market share This is a highly diversified product line with many brands However, Vinamilk had to cede the leading position in this market segment to Dutch Lady because the company has stronger public relations and better marketing strategy

 Milk powder and instant cereal (24% of sales) Powdered milk accounted for 24% of Vinamilk's 2007 sales Vinamilk (along with Abbott and Dutch Lady) is one of the three leading companies in the Vietnamese market in terms of powdered milk sales, in which Vinamilk holds 14% market share

 Yoghurt (accounting for 10% of sales) Vinamilk drinking yogurt accounted for 26% of the market share and eating yogurt accounted for 96% of the market share In 2007, this product line achieved a growth rate of 10% compared to 2006

Dairy materials are always a matter of special concern to dairy companies because the current raw materials are mainly imported, the prices are very high and the supply is passive Some strategies have been launched and considered quite successful, such as controlling the quality of fresh milk such as re-signing contracts with mandatory terms, absolutely not accepting milk from hired milkers… In addition, the company also combined with Campia Joint Venture Company to build a dairy cow farming technical training center in Lam Dong To be proactive in the source of raw materials for milk processing factories, to ensure stable and long-term production, leadership Vinamilk has a policy of developing domestic raw materials, gradually reducing imported materials The company decided to invest in developing forms of closed industrial-scale dairy farms with modern technology It is expected that Vinamilk will build high-tech dairy farms in the provinces of Nghe An, Vinh Phuc, Lam Dong, Binh Dinh, Binh Duong, Soc Trang , with a scale of 2,000 cows each provides an average of 30 million liters of milk per year

As a result, the problem of milk materials has been solved for Vinamilk

During the past few years, the distribution network of Vinamilk has continued to

be consolidated and strongly grown in both domestic and international market Due to the research scale, the author only focuses on the domestic distribution system in this part Nationwide distribution systems In Vietnam’s dairy industry, there are two major distribution channels, which are traditional trade (distributors - wholesalers - retailers - consumers) and modern trade (distributors - supermarkets - consumers) (Vietnam Research Team, 2014) Currently, the domestic distribution system of Vinamilk follows these two models with over 250 exclusive distributors and more than 250 000 retailers nationwide.(Vinamilk Annual Report 2019)

4.2.4 Promotion

 Highly investing in advertisements Vinamilk topped the list of aggressively spending money on advertising In the first 6 months of 2019, Vinamilk spent more than VND 901 billion on advertising and market

research, an increase of more than 11% over the same period in 2018

As General Director Mai Kieu Lien once shared at the annual general meeting of shareholders in April, in order to gain market share, Vinamilk had to spend money on

advertising

Despite the largest amount of money spent on advertising, the profit that Vinamilk brings to shareholders is also commensurate when it reached VND 5,689 billion in the first six months, up nearly 6% over the same period in 2018 That is not to mention other expenses, which are the cost of Vinamilk's product promotion, display and introduction services in the past 6 months, which amounted to VND 4,088 billion

Thus, the total budget for advertising and marketing of Vinamilk in the first 6 months

of 2019 is VND 4,989 billion, an increase of VND 430 billion compared to the same period in

5.Macro environment

5.1 Political Factor

Vietnam’s political system also has critical impact on Vinamilk In 1995 and 2007, Vietnam became a member of ASEAN and WTO In July 2010, Vietnamese Ministry of Health approved a regulation that requires milk products – especially those for children – to meet certain quality standards At the same time, the government allowed development budget

of 2,000,000,000 VND with expiration date in 2020 for the dairy industry, and lowered tax rate for dairy products In 2012, policymakers also approved initiatives to increase Vietnam’s average height (Vietnam Government Portal) Notably, the government has also

supported Vinamilk directly Politicians have approved Vinamilk’s Dairy Processing Plant construction project in Cambodia (Astley, Dairy Reporter 2014), and governmental bodies including National Fund for Children of Vietnam, Ministry of Education and Training,

National Institute of Nutrition… have been partnering with the company to implement social programs (Vinamilk 2014)

Recent political changes have created critical challenges for Vinamilk Vietnam’s membership of world organizations and lifted tax rate on foreign dairy products have created conditions for foreign dairy brands to enter Vietnam’s market As a result, Vinamilk will face even more severe competition and may lose its market share to global brands However, as Vietnam became a member of WTO and ASEAN, Vinamilk can construct processing

factories in neighboring countries, and thus reducing production cost The government’s propaganda to increase average national height leads to the growing perspective “Vietnamese use Vietnamese products” (Sacombank 2012) This is a favorable condition for domestic businesses such as Vinamilk to compete against foreign brands To Vinamilk, it is also an opportunity to partner with government bodies to implement corporate social responsibility campaigns and reinforce its brand image as a responsible entity It can be said that

governmental sup- 25 port has facilitated many Vinamilk’s projects, including both business- related and community-related ones

Viet Nam is Socialist Republic with single State and Vietnamese politics is under communist system Besides, Viet Nam is considered as the country has the most stable political, and that is competitive advantage to attract many foreign investments

Therefore, Vinamilk Corporation can feel secure in running business in Vietnam as well as launching and develop its brands and products During the pandemic, Vietnam has 1.321 total cases that are positive with Covid-19

However, the number of recovered people is 1.153, which significantly dominates

35 deaths in total (Worldometer 2020) According to a report, Vietnam is successfully

dealing with the pandemic and became the country adopting Covid-19 preventive measures effectively (Toan, Huynh 2020) Eventually, this result has positively affected

the Vinamilk 100% organic product

5.2 Economic factor

The GDP in Vietnam reached around 261.92 billion USD in 2019 (Trading Economics

2019) (Appendix 9) Moreover, the GDP number increased roughly to 7% in 2019 and from

2002 to 2019, GDP per person in Vietnam rose 2.7 times, worth 2.700 USD

in2019 (Worldbank 2020) Due to the Covid-19 pandemic, the Organization for Economic Cooperation and Development (OECD) predicted that the world economy would decrease to 4.5% in 2020 However, the economy of Vietnam shows the opposite trend In the first 9 months in 2020, GDP of Vietnam continuously increased to 2.12% (GSO 2020) (Appendix 10) Furthermore, there is a trend that more and more Vietnamese people are paying attention

to healthy and high-value products because of the dynamic economy and the rise in proportion

of middle-income families (Euromonitor 2020)

Overall, the success in controlling the pandemic, the increase in GDP and the demands for high-value products would develop the profit of Vinamilk and the sales of Vinamilk 100% organic products (Vietnamnews 2019) During the pandemic, Vietnam has 1.321 total cases that are positive with Covid-19

However, the number of recovered people is 1.153, which significantly dominates

35 deaths in total (Worldometer 2020) According to a report, Vietnam is successfully

dealing with the pandemic and became the country adopting Covid-19 preventive measures effectively (Toan, Huynh 2020) Eventually, this result has positively affected

the Vinamilk 100% organic product

5.3 Social factor:

Energy has always been the biggest problem ever since,therefore Vinamilk has involved different methods in the milk production chain such as improving products’ values, increasing inexhaustible resources (Vinamilk 2020) Furthermore, the company had

established a particular mindset for its energy saving from the year 2012 to 2017 which avoided wasting energy by at least 3% and cut down on the amount of CO2 leading to

greenhouse effect (Vinamilk 2020) Not only concentrate on their procedure butVinamilk also has other community activities such as “One million trees for Vietnam'

fund (TAINGUYEN&MOITRUONG 2020), “An used milk carton for a tree’’

of 27 transfer stations were upgraded to international standards, raising the number of globally standardized stations to 45 (Vinamilk 2014) With modern, globally standardized production

system, Vinamilk has been able to offer consumers products of international quality

Increasing production capacity allows the company to expand its business; this could explain why Vinamilk is expecting a growth in sales in the short term (Vinamilk 2014)

PART 2 : SWOT ANALYSIS AND OBJECT

- As the largest dairy enterprise in Vietnam with a market share of 37%, of which 45% market share in liquid milk market, 85% market share in condensed milk and yogurt

- Therefore, Vinamilk has the ability to set the selling price in the domestic market Vinamilk was voted by consumers as "Top 10 High Quality Vietnamese Goods" from

 Wide distribution network

- Vinamilk's dairy product distribution network stretches across the country and also exports to foreign markets, combining many modern and traditional distribution channels

- Vinamilk now has a wide distribution network throughout 64 provinces, more than

250 distributors and more than 135,000 points of sale nationwide This large network helps Vinamilk capture a large number of customers and ensure the introduction of new products and effective marketing strategies across the country

- Multi-channel distribution system: Present at all shelves in supermarkets and shops Even users can easily order online on websites or e-commerce sites

- All Vinamilk's dairy factories are invested in modern and advanced technology, imported from European countries such as Germany, Italy, and

- Switzerland to apply to the production line Vinamilk is the only company in Vietnam that owns a system of machinery using spray drying technology developed by Niro of Denmark, ensuring quality dairy products to consumers

 Quality natural milk source, international standard farm

- The company invests in building organic dairy farms according to international standards, supporting dairy farmers to take initiative in input materials

- Vinamilk's milk factories are located at strategic locations near the farm, allowing Vinamilk, in addition to maintaining and strengthening relationships with suppliers, also ensures the purchase of fresh milk of good quality

 Advanced technology application

- Vinamilk owns European production technology that meets global standards, Vinamilk's sterilization equipment is imported from Sweden and other equipment is sourced from European countries

- International standards such as ISO 50001:2011 and HACCP are all applied to control the production system

- With a modern production system that meets global standards, Vinamilk has been able

to provide consumers with products of international quality, helping the company expand its business and achieve sales growth expectations short-term sales

1.2 Weakness:

 Depends on foreign raw materials : Dependence on imported raw materials is one of Vinamilk's weaknesses When domestic raw materials only meet about 30% of production demand, 70% of supply and input ratio depend on the milk supply-demand relationship of the world

 The import of raw materials from abroad causes Vinamilk's revenue to be significantly affected by the domestic and foreign economies The worst scenario is when Vinamilk is affected by the global economic crisis, causing the price of raw materials to increase, and at the same time is affected by the high inflation rate in Vietnam, which causes the profit margin to decrease

 Not only that, changes in foreign exchange rates are also a factor affecting Vinamilk's revenue when 50% of the Company's raw materials are imported and 30% of revenue comes from exports If there is any fluctuation of the exchange rate, it will definitely affect the business activities of the company

 Marketing activities are mainly concentrated in the South, while the North, accounting for 2/3 of the country's population, has not been heavily invested