Project of vinamilk in south africa vina clover joint venture

I. INTRODUCTION 3 1. The Company 3 2. The Product Line 3 3. Project Purpose 4 4. Project Scope and Objectives 4 5. Target Market Overview 5 II. MAIN CONTENT 6 1. MarketBusiness Environment Research 6 1.1. Macro Environment 6 1.2. Industrial Environment 9 1.3. Market Environment 10 2. Market Entry Strategy 12 2.1. Market Segmentation and Target Customer 12 2.2. Mode of Entry 13 2.3. Marketing and Sales Plan 17 3. Estimated Profits and Growth 20 III. CONCLUSION 21 IV. REFERENCES 22 LIST OF TABLES Table 1. VinaClover UHT 100% Fresh Milk – Product description 4 Table 2. Scope and Objectives of the VinaClover Project 5 Table 3. Market segmentation 12 Table 4. Evaluation of Key different popular market entry modes 14 Table 5. Overview of the VinaClover Joint Venture Project 16 Table 6. Overview of the Marketing and Sales Strategy 17 Table 7. Communication timeline for VinaClover Project in phases 20 Table 8. The estimated Profits, Growth, and ROI of the VinaClover Project 21

Faculty of International Business

-o0o -International Business Project of Vinamilk in South Africa: Vina-Clover Joint Venture

GROUP

Hanoi, June 2023

TABLE OF CONTENTS

I INTRODUCTION 3

1 The Company 3

2 The Product Line 3

3 Project Purpose 4

4 Project Scope and Objectives 4

5 Target Market Overview 5

II MAIN CONTENT 6

1 Market/Business Environment Research 6

1.1.Macro Environment 6

1.2.Industrial Environment 9

1.3.Market Environment 10

2 Market Entry Strategy 12

2.1.Market Segmentation and Target Customer 12

2.2.Mode of Entry 13

2.3.Marketing and Sales Plan 17

3 Estimated Profits and Growth 20

III CONCLUSION 21

IV REFERENCES 22

LIST OF TABLES Table 1 Vina-Clover UHT 100% Fresh Milk – Product description 4

Table 2 Scope and Objectives of the Vina-Clover Project 5

Table 3 Market segmentation 12

Table 4 Evaluation of Key different popular market entry modes 14

Table 5 Overview of the Vina-Clover Joint Venture Project 16

Table 6 Overview of the Marketing and Sales Strategy 17

Table 7 Communication timeline for Vina-Clover Project in phases 20

Table 8 The estimated Profits, Growth, and ROI of the Vina-Clover Project 21

LIST OF FIGURES

Figure 1 South Africa position in the African map (Source: WorldAtlas.com) 6

Figure 2 Overall situation and business structure of Clover – our partner 16

Figure 3 Sub product (Pasteurized Milk) 18

Figure 4 Main product (UHT 100% Fresh Milk) 18

I INTRODUCTION

1 The Company

Vinamilk is Vietnam's largest dairy company and one of the top 10 valuable brands in the country It offers a wide range of dairy products such as condensed milk, powdered milk, fresh milk, yogurt, cheese, ice cream, and more Founded in 1976, Vinamilk started as a state-owned company and has grown into one of Vietnam's largest corporations Over the years, it expanded its operations, opened new factories across the country, and went public in 2003 Vinamilk has also diversified its production capabilities by investing in facilities in countries like New Zealand and the USA

Vinamilk's core competency lies in its expertise in dairy processing and production, strong brand reputation, consumer trust, and extensive distribution channels With a vision to become a world-class brand in the food and beverage industry, Vinamilk aims to provide trusted and nutritious products to communities The company focuses on quality, innovation, and a consumer-oriented approach

The brand has successfully exported its products to nearly 60 countries worldwide, particularly

in Southeast Asia, the Middle East, and China Its global expansion has been driven by its commitment to maintaining high product quality standards, adhering to international food safety regulations, and adapting its products to suit consumer preferences It has also engaged in strategic partnerships and collaborations with international distributors

2 The Product Line

The product line invested in for this factory project in South Africa is UHT Fresh Milk, a high-quality dairy product line offered by Vinamilk It

is made from fresh cow's milk and undergoes a special UHT (Ultra High Temperature) process to ensure its safety, quality, and extended shelf life

The main product in the line is Vina-Clover UHT 100% Fresh Milk, known

for its superior taste and nutritional value It contains essential nutrients like protein, calcium, vitamins, and minerals, making it a wholesome beverage

milk, maintaining its freshness and nutritional integrity.

Table 1 Vina-Clover UHT 100% Fresh Milk – Product description

Product name Vina-Clover UHT 100% Fresh Milk

Ingredients  Fresh milk (95.9%)

 Sugar (3.8%)

 Stabilizers (471, 460(i), 407, 466)

 Vitamins (sodium ascorbate, A, D3)

 Synthetic flavorings for food use

 Minerals (sodium selenite)

Shelf life 6 months from the manufacturing date

3 Project Purpose

Africa is a continent with immense potential for growth in the 21st century With its largepopulation of over 1,4 billion people and increasing urbanization, there is a growing demand forhigh-quality and nutritious food products, including UHT fresh milk By investing in Africa,Vinamilk can tap into Africa's growing demand for high-quality UHT fresh milk by investing inthe continent With its expertise in dairy production and commitment to quality, innovation, andsustainability, Vinamilk is well-positioned to meet the nutritional needs of African consumers

By entering the African market, Vinamilk can expand globally, gain valuable insights, andcontribute to the continent's socio-economic development

4 Project Scope and Objectives

Table 2 Scope and Objectives of the Vina-Clover Project

Brand Awareness Brand recognition level of 50% among the target

consumer segment

1 year

Distribution

Network

Establish partnerships with at least 100,000 retailing points

in all channels across South Africa to ensure widespreadavailability of Vinamilk’s products

1 year

Corporate Social

Responsibility

50% recyclable or biodegradable packaging materials 1 years

5 Target Market Overview

South Africa offers a significant and well-established market for dairy products, with agrowing middle class and urbanization (GDP/capita: 6,965 USD, GDP growth rate: 1.9%)

driving increased demand for UHT milk The country's robust infrastructure and efficientdistribution networks provide Vinamilk with the means to establish a strong supply chain andeffectively reach consumers across the nation.

In 2019, the South African dairy products market was divided into 62% liquid and 38%concentrated products Pasteurized liquid milk and ultra-high temperature (UHT) processed milkwere the major liquid products, with hard cheese the main concentrated product The estimatedcomposition of the markets for processed milk was estimated to be 71% in 2020, with a stablepositive growth in retail demand for UHT milk of 5.5%, which is also one of the core products ofVinamilk in both domestic and foreign markets

Besides, the amount of milk produced in the country wasalways much higher than the amount imported in nearly adecade (2011-2020), which indicates that South Africa has

a comparative advantage and a trade surplus in milkproduction Vinamilk can use this leverage to develop amilk production factory here with a broad future prospect

of expanding its export scales to neighboring markets.Furthermore, South Africa boasts a relatively stablepolitical and economic environment compared to otherAfrican countries, offering a favorable business climateand reduced investment risks The country's

Figure 1 South Africa position in the African

map (Source: WorldAtlas.com) strategic location serves as a gateway to the larger

African market, providing access to neighboringcountries and facilitating export opportunities Moreover, South Africa's stringent quality andsafety standards align with Vinamilk's commitment to delivering high-quality products,enhancing consumer trust

II MAIN CONTENT

1 Market/Business Environment Research

1.1 Macro Environment

South Africa is located in the continent of Africa, gaining the position of being in the top 3economically productive regions The country is in a developing phase which creates a blend ofopportunities and risks for businesses The PESTLE analysis of South Africa outlines thesedifferent factors present in the external environment of the country

Political

 The country still experiences political instability and violent outbreaks that disrupt

business activities

 In 2021, South Africa faced violent unrest resulting in the death of 340 people, followed

by ongoing conflicts within local communities and tensions between military veterans and government officials.

 The turmoil has caused disruptions in business operations, leading to losses for approximately 40,000 organizations.

 Positive development trends in South Africa have been observed politically, with

efforts to combat racial discrimination and violence after the apartheid

 South Africa maintains close political ties with countries within Africa, such as

Angola, as well as countries beyond its borders, including the UK

 Despite criticism from other countries, South Africa maintains friendly relations with Russia, despite Russia's involvement in the Ukraine war.

 Inflation has been a concern, with a rise from 4.1% in 2010 to over 7% in 2023,

indicating economic challenges

 South Africa faces the ongoing challenge of poverty, which has been exacerbated during

the pandemic and lockdown measures

 Major trade partners for South Africa include countries in the BRICS bloc, particularly

India and Brazil The US is also an important trading partner, benefiting from a bilateraltax treaty

 The mining sector, including gold, platinum, and coal, plays a significant role in SouthAfrica's export industry

c.

Social

 South Africa's population 59.39 million (2021), with the largest segment being black African and other ethnicities also present

 Post-apartheid, discrimination against people of color has declined, but complete

elimination of deep-rooted bias is still a challenge

 Consumer spending in South Africa has gradually increased, providing

opportunities for business growth.

 The growing population offers expansion prospects as businesses cater to a

larger customer base.

 Economic changes and post-pandemic complications have influenced consumer behavior, with a focus on necessities due to higher inflation, unemployment, and lower

income

 During the lockdown, there was a positive trend of consumer shift towards online purchases.

 Rural construction experienced growth during the pandemic as people moved to rural

areas for settlement, driven by the ease of constructing residences

d.

Technological

 South Africa is adopting technological advancements, incorporating wireless networks

and virtual business interactions

 It is recognized within Africa for having a strong IT foundation.

 Technology availability benefits organizations in South Africa, enabling innovation.

 However, further investment is needed to advance the country's technological

capabilities and support businesses

 Developed countries offer better business innovation opportunities due to access to upgraded technology

 The South African government should invest more in strengthening the technology sector

to maintain a favorable business outlook

 Some sectors still rely on a combination of manual and semi-automated tools,

indicating room for technological improvement

e.

Environmental

 The South African government, through the Department of Environment, Forestry &

Fisheries, is prioritizing sustainable practices.

 High carbon emissions are a major challenge in South Africa, mainly due to coal usage

for energy generation and non-sustainable business practices

 Carbon tax and stricter environmental policies have been implemented to

mitigate environmental harm.

f Legal

 Organizations in South Africa must comply with business regulations related to

domains, employment, and business practices

 The Competition Amendment Act aims to restrict price-based competition and prevent

unfair pricing practices

 Mergers involving organizations operating in other countries require government approval.

 Post-apartheid, South Africa has implemented measures to promote workplace

equality, such as Broad-Based Black Economic practices.

 However, corruption remains a significant challenge, hindering business growth and

contributing to slower economic growth and poverty in the region

Overall, it can be seen that South Africa is facing numerous challenges and strugglingeconomically However, there are growth opportunities as well The factors discussed abovehave to be taken into consideration by organizations in South Africa for their decision makingprocess

1.2 Industrial Environment

The South Africa dairy and soy food market size was $9.9 billion in 2021, representing a compound annual growth rate (CAGR) of 5.2% between 2016 and 2021 The performance of the market is forecast to decelerate, with an anticipated CAGR of 2.8% for the five-year period

2021 - 2026, which is expected to drive the market to a value of $11,330.0m by the end of 2026.

a.

Competitive Rivalry

The competitive rivalry within the milk industry in South Africa during 2021 and 2022 was quite

intense There are around 32 companies including top 4 key players in the South Africa dairy

and soy food market namely Clover SA, Groupe Lactalis SA, Danone Group, Upfield, andDarling Romery Clover SA accounted for the largest value share (24%) in the market.Competition is primarily based on factors such as price, product quality, brand reputation, anddistribution capabilities

b.

Bargaining power of Suppliers

The bargaining power of suppliers in the milk industry in South Africa can vary depending on

the specific segment of the supply chain There are currently about 1200 dairy farms and 1.2 million dairy cows in South Africa with 26,000 workers Due to the presence of such multiple suppliers of, the bargaining power of dairy farmers supplying raw milk was moderate.

c.

Bargaining power of Buyers

Consumers in South Africa have a wide range of choice in terms of products range and purchase location (offline and online) The top cities in the South Africa dairy and soy food

market are Johannesburg, Cape Town, Durban, Ekurhuleni, Tshwane, Nelson Mandela Bay,

Buffalo City, and Mangaung This availability of choices provides consumers with the ability to compare prices and switch brands easily As a result, dairy companies need to focus on

product quality, branding, and competitive pricing to retain and attract customers

d.

Threat of Substitutes

While milk alternatives like soy milk, almond milk, and oat milk have gained popularity in

recent years, traditional cow's milk remained the dominant choice for most consumers However, the growing health-consciousness and changing dietary preferences of some

consumers may have led to an increased demand for these substitutes Dairy companies may

have responded by diversifying their product portfolios to include plant-based alternatives.

e.

Threat of New Entrants

The threat of new entrants in this market was relatively low The dairy industry requires significant investment in infrastructure, including farms, processing facilities, and distribution networks Additionally, established players often benefit from economies of scale and strong brand recognition, making it challenging for new entrants to compete effectively Therefore, currently there are not so many new players in South Africa.

1.3 Market Environment

a.

Strengths

 Strong brand name: Vinamilk is the largest dairy enterprise in Vietnam with a market

share of 37%, of which 45% market share in liquid milk market, 85% market share incondensed milk and yogurt Therefore, Vinamilk has the ability to set the selling price inthe domestic market

 Product diversification: Vinamilk offers a wide range of dairy products with over 200 dairy products and dairy products, serving a wide range of consumers Vinamilk's

products are diversified with different packaging sizes, providing customers in theVietnamese market with convenient dairy products as well as product categories toincrease serviceability and maximize profits in the market segment that Vinamilk targets

 Invest in modern, high-quality equipment and technology: 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 Vinamilk always innovates technology, installs complete andmodern production line systems, welcomes new technologies with the best technical andfood hygiene and safety standards

 Financial Stability: Vinamilk has a fairly safe capital structure and good financial

autonomy Vinamilk announced the consolidated financial statements of the third quarter

of 2019 with both revenue and profit targets growing with a net profit of nearly VND8,380 billion in the first 9 months, fulfilling 80% of the year plan According to data fromKantar Worldpanel, in April, May and June 2019, milk and dairy products continued to

be the leading FMCG market with impressive growth

Weaknesses

 Heavy dependence on foreign supply for raw materials: Due to the increasing demand

for fresh milk of users, domestic raw materials only meet about 30% of production needs,while 70% are imported from New Zealand, the US, the EU and Japan Therefore, inputcosts increase and product prices also increase With this dependence, Vinamilk'sproduction and business situation will be affected by the external environment as well asfactors such as inflation, economic crisis, etc

c.

Opportunities

 Large young labor force: According to one statistics the 65% of total population of

South Africa is aged between 15 to 65 years of age i.e 65 % of people of South Africacan do work easily (Department, 2008) A large number of people who can do work bothphysically and mentally is an asset for the country and would help the country to develop

at a much faster rate

 Online Selling: There is a large scope for the South African retailers and other retailers

to develop an online store for selling Their products to retail customers The number ofpeople aware of the internet in South Africa has gone up many times The number ofinternet users in South Africa in 2009 were 4.42 million which is 54 in countrycomparison to the world (Countries of the World)

 Transshipment point: The location of South Africa gives it an opportunity to become

the largest transshipment point in the world South Africa is between the Asian andAmerican continents as well as between the Indian and Atlantic ocean Transshipmentpoint would help South Africa to fetch large revenue as all the ships would be using theport and the machinery of South Africa Furthermore, people of South Africa would getexposure to new products that have been used by developed countries

 Renewable source of energy: South Africa is situated in the southern hemisphere

subtropical zone so it's clear dry hot weather there most of the time A cheap electricitysupply would help the industries to produce goods at lower price and with economies ofscale

d.

Threats

 Supply chain/Procurement: Domestically, South Africa has faced some unique

challenges in terms of its supply chain In October 2022, workers at the national freightand logistics company Transnet went on strike – costing the country billions every daywhile pausing import and export activity Regarding their Renewable EnergyIndependent Power Producer Programme (REIPPP), delays, corruption, and red tape haveled South Africa to fall short on renewable energy procurement