Marketing strategy for ASIA food ingredient company in launching non dairy creamer 2011 to 2015

PHAN BAO THUY TRAN MARKETING STRATEGY FOR ASIA FOOD INGREDIENT COMPANY IN LAUNCHING NON-DAIRY CREAMER 2011-2015 TRƯÌNG ĐẠI Hột M TP.HCM THƯ VIỆN MASTER PROJECT MASTER OF BUSINESS ADM

PHAN BAO THUY TRAN

MARKETING STRATEGY FOR ASIA FOOD INGREDIENT COMPANY IN LAUNCHING

NON-DAIRY CREAMER

2011-2015

TRƯÌNG ĐẠI Hột M TP.HCM

THƯ VIỆN MASTER PROJECT MASTER OF BUSINESS ADMINISTRATION

HO CHI MINH CITY

2010

EXECUTIVE SUMMARY

AFI is a new start up factory in Vietnam as the pioneer in NDC production, was given business license in 2008 and located at My Phuoc industrial park in Binh Duong Province The company is the joint-venture of ACC and Vinamilk, the first NDC producer in Vietnam to invest modern technologies from Europe

Giving the fact that there are huge opportunities in Vietnam for NDC products especially

in instant coffee segmentation, it is the right time for AFI to make an investment in building the factory to meet the local market demand on NDC which is imported from oversea so far As the pioneer in NDC, it is always difficult to penetrate into the market to build up the brand name and can gain market share from existing imported NDC competitors The thesis then goes deeply into analyzing the internal and extemal environment of the company to find the best marketing strategies for the company

The thesis conducts an external environment assessment to figure out the opportunities and threats Following the external assessment, an internal environment analysis is conducted

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to illustrate the strengths and weakness of the company The 4Ps strategy is chosen to build

up marketing strategies for AFI based on the assessment of the company‘s SWOT

Making the thesis more realistic and result-oriented, a customer survey and a depth interview of top management, salesperson in AFI and ACC have been conducted The results of the surveys and information collected are consolidated and refer to the company SWOT’s analysis to figure out 4Ps strategies and some recommendations have been suggested to build up marketing strategies for the company

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TABLE OF CONTENT COMMITIMMENT so «ch TH TH HH ng TH TT nà Hà ng T414 8031491414458 i ACKNOWLEDGEMENTS - nh HH 2E HH nga H4 rat ii EXECUTIVE SUMMARY càng HH HH 00 4114110151101 000178 iii IV.Ÿ102209722600/0270007575551.1.1 iv LIST OF ABBREVIATIONS .ccsssssrsscasssossenesensseceseuecssescesecsscersssasnesencersessonseearseessnronanenes vii LIST OF EIGURLES << Ăn T1 0800108408 00018.56 1800171000870 005 viii LIST OF TABLUES -s<- 52th nang 01100 80 4841048 T8 400-1.81100-040154 10 ix INTRODUCTIONN - 5n HH n0 10 H004 0501070016001100040100078 1 RATIONALE OE THE PRO.JECTT óc <6< 9 2.22141111128140 102013 083719440040 500 1 PROBLEM STATEMENT .scssssssssssssssssssssssccasssneensreosassenssensesesssassssnseseneonsvocsnssnatsseansssesates 2 Ig:403)000/29):3/20u0A2715515155851.111 2 PROJECT QUESTION < ánh H02 HH HH4 HH ng T008 080840040re 2 SCOPE AND LIMITATION OF PRO.JECTT «<< + Sen nen rhemeresnrera 3 SIGNIEFICANT OF THE PROJECT TT 11 n00nnà 3 STUDY METHODOLOOY con HH HH H1000003 1040101511 T1000010200880100208 54 3 CONCEPTUAL PFRAMEWORE HH HH ng gu 1á 80014001 4.0014 3 SAMPLING e9 ng ng 11480 00814480020111240140.01202000200102402047075004 919 4 STRUCTURE OF THE PRO.TECTT -. - 5-5-5 5< 5< ong ng ren 00000 5 CHAPTER I: LITERATURE REVIEẨN HH Hung Ha ng TH nano 6 1.1 Marketing definifion HH HH HH HH HH 6 1.2 Role and function of marketing «0.0.00 csescscseesessestsccseeneneecencneesccasenenneeeeseeeconenenes 6

13 Target consumer, market segmentation and positioning -. -< + 7

17 External environmen( analysis

1.9 Strategy Formulation ccs eeeeceseeneeeetenenseerenasene „12

CHAPTER 2: ANALYSIS OF AFDS EXTERNAL ENVIRONMENT 13

2.1 Introduction of Non-dairy creamer (NDC) - nt HH H Hs rrrey 13 2.1.1 Non-dairy creainer đ€finitIOH HH nh ng ng ch 13 2.1.2 Non-dairy creamer characteristic and its corIpOrI€ïIt sec sec 13

iv

2.1.3 Non-đairy creamer”s benefits and applicaHO'S -.‹ -cccerrrereerrrrrrerrrre 14

2.2 Macro environment analysis

ZQ.QA Ecomomic factors ccccccscsscscsscseccssscsssecssscsessetssescsusscatsccerseacsascsesesacacsenessereeessnestens 15 2.2.2 Demographic and income .cccecsscsessecresssesesssentseaesesesnsescanesanesssnsesersievereavaces 16

2.2.5 Beverage and drinking OVeTVICW ve „.L7 2.2.6 Coffee outlook n2 HH 2221441422211 18 18 2.2.7 SWOT analysis ofbeverage industry In Vietnam c cxccserrererrrrrrre 18 2.3 Micro environmenft anAÌySÏS các non 2212121124442 014 012141111112 1111k rree 20 2.3.1 Non-dairy creamer market overview in Vietnam - ‹c«xexverieserrrieiee 20 2.3.2 Competitors analySIS ch 10.1211 H1 mm.n 21 2.3.3 Cusfomer analySIS SH tưng 312441 T16 25 2.3.4 Buying behaviOr -cc Sen HH1 m1 T.111171.A2.11 27 2.3.5 Supplier analySiS -cs+cccr chư 12401411.141 1014011 10 28

CHAPTER 3: ANALYSIS OF AFI?S§ INTERNAB ENVIRONMENT "— 29

3.1 Introduction 6f AFÍÌ 22H HT 1g HH 110 tr tk 29 3.I.1- AFT hisfOTW à S2Q2nK HH HH H211 11 Teen 29 3.1.2 Stakeholder analySiS - - 7s S2 2+ St E218 H HH HH kg H121 1X 29 3.1.3 Organization SfTUCẨUT€ sen nh 111.1111124 01121172 1 11111 29 3.1.4 Vision & MiSsSion ceecersrerrerrrrrrrrirk 1112.1.11 11.1 e 31

3.1.6 Technology «con HH2 .111117111 11.110 32 3.1.7 SWOT analysis cnnnnHH HH ng HH HH2 411111 1171114 cty tere 33

CHAPTER 4: MARKETTING S TRATEGY FOR AFPS NDC PRODUCT 36

4.1 Company Goal - son 12.22 2.1 tre 36 4.2 — Marketing objectiVeS cu cành th, 0t kề 36 4.2.1 Break-even poinl c- c2 11k TT 36 4.2.2 Shorf-term HS HH HH HH 4T 21.01141181171011114 011 111 36

4.3 Marketing strategy formulafion à hai 37 4.3.1 Cost leadership test HH1 rHetr 37 4.3.2 Brand stratepy chen nén HH HÀ H111 1111.111110 7T 38

4.3.3 Market scpmenl c cà rsee

4.3.4 Target market stratepy

45 Budget and Implementation plan Set Hưmirrớ 46

REEERENNCES «vn nh nh TH 3 mong kh 010198411 70000148410004000012800040080000 49 APPENDIYX 5c nĂ ng TH TH TA 3 101011 1334680030T10081100101400008000114448000040020000400408e4 50

vị

LIST OF ABBREVIATIONS

UNCTAD United Nation Conference on Trade and Development

USDA United States Department of Agriculture

GSO General Statistics Office

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LIST OF FIGURES

Figure À: Thes1s mOdeÏ + 7< <1 HH HH HH HH TH T1 HT HH che 4 Figure B: ProJject rescarch DTOC€SS c2 HH HH HH HH rời 4 Figure 1.1: A model ofbusiness buyer behaViOUT vs HH 4x khe xe 9 Eigure 1.2: The four P components of the marketing II 11 Figure 2.1: The relation of GDP and inflation in Vietnam (2004-2010) 15 Figure 2.2: The quantity of NDC were imported from 2005-20 Í0 -c s.ccee 21 Figure 2.3: Lanscape of main competitors’market share, .-ccc se nseceeccec 24 Figure 2.4: The marketshare of using NDC from end-consum€[s - -ccccc«e 26 Figure 2.5: The evaluation result of NDC suppliers from custorn€rs 28 Figure 3.1: Organization chart Of À FÌ - - cóc LH HH th H 7v, 30 Figure 3.2: The process of producing NDC ố.ẻốố 33 Figure 4.1: The marketshare of NDC consumption by application -.« xxcee 39

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Production and consumption of coffee in Vietnam - -.-«sesresererreerie 18

Total demand of NDC was imported monthly ín 2010Ô «.- sexy 23 The total demand of NDC fiom end-cus†OIm€fS .- - set s4srsterererrer 26 Summary of SWOT analySÌS -ó- sscSosv vn HH 01L 00344341114014 14 1 2B 35 Break-event point ssasusenenseceseasscaesaueeuevassaccestguerensaaevaescsacsersevesnasseesacasseesscsenerey eres 36 Segmentation of NDC market by product application 00 essssssseeeseecetesesteneens 38 Net cost price for NDC production sovecntrecneninnnnnrnrneenretneuies 41 The sclling pice om some NDC suppliers in Vietnam -.‹ + c+esserees 42 Implementation pÏAT1 - s2 +++2+ 2+ tt n tt HH 11017111444 1 x00 47

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INTRODUCTION

Vietnam with population of 85 million has been one of the fastest growing economies in

the world for over 5 years and will strive to reach to an annual GDP growth rate of 7-8%

on average in 2011-2015 Growth over the past 5 years has boosted household incomes in Hochiminh City and Ha noi and established a middle income group in these two city Joined the WTO in 01/2007, Vietnam have many chances to participate in market access liberalisation under its ASEAN Free Trade Area commitments It is currently in the process of introducing WTO compliant import regulations and systems and is phasing in its WTO bound tariffs over the period from 2007 to 2012 This process will provide new and increasing opportunities for food processors and exporters over the next 5 years and into the longer term

Vietnam’s Non-dairy creamer (NDC) product consumption grew from about 4,900MT of NDC in 2005 to 12,000MT in 2009 The growth rate was estimated at about 25-30% per annum The main source of this product in Vietnam market is imported from Thai Lan, Indonesia, Malaysia, China during many last years ,

Over the next 5 years, it is forecast to be the ASEAN region’s fastest growing economy, with rates of between 6% and 8% per annum This growth will be driven by new foreign investment in businesses that create new jobs for the Vietnamese, and positively booming local demand for consumer products, including processed food and drinks It will further boost household incomes in Vietnam that will result in another boom in demand for locally produced and imported raw materials

Recognition the needs of producing domestic raw materials will develop in next 5 years, AFI saw through this opportunity and decided to invest the first factory to produce NDC

by modem technology worldwide With the aiming to meet local demand of NDC, AFI also want to utilize some local advantages such as labor force, tax preference to bring the benefits to Vietnamese

This study was performed to identify competitors, customers, market environment and build the marketing strategy for NDC’s development from 2011-2015

RATIONALE OF THE PROJECT

Asia Food Ingredient (AFI), the joint-venture with ACC and Vinamilk, was set up since

1998 This is the first and pioneer manufacturer producing cream powder or non-dairy

creamer (NDC) used for foods and beverage such as instant coffee, milk tea, chocolate drink, bakery, soup etc

In Vietnam, the demand of consuming food and beverage is increased year by year In

2010, around 1,500 to 2,000 MT/month imported NDC are consumed in Vietnam market

At present, all NDC used by local companies are imported from Thailand, China, Indonesia and Malaysia With such growing demand for NDC, the establishment of a local company to produce NDC is seen to be a great success

Therefore, aiming to penetrate into the market and sustain in long term, the requirement of AFI must have the marketing strategy to build awareness and company brand name to customer's mind

PROBLEM STATEMENT

As a pioneer manufacturer: producing NDC in Vietnam, AFI should be faced many

challenges at the beginning because very few of customers know about AFI’s brand name

and product quality Market awareness is the biggest problem and challenges for AFI as a

mission have to succeed The company has to ,fight against many competitors who

experienced long time ago in Vietnam market such as Kerry, Kievit, Thailand and Chinese

company Therefore, AFI has to build the marketing strategy to penetrate the NDC market

and make customers to recognize and acknowledge the AFI’s image

This project has to define the following questions:

- What is the competitive environment of NDC market in Vietnam?

- Who are the key players driving the market? What are their SWOT?

- Who are the company target customers? What are their behaviours, buying decision and process?

- How to build a marketing strategy to position AFI’s brand awareness?

- What are the company strategies in terms of product, price, distribution, promotion, service?

SCOPE AND LIMITATION OF PROJECT

With the limitation of time, I just focus on building the marketing strategy for AFI’s Non dairy creamer in B2B customers, particularly manufacturers in food and beverage

SIGNIFICANT OF THE PROJECT

This particular project have important role to the managements and sales team of AFI It

can help to have better understanding of the external and internal environment, competitor,

market demand, customer’s behavior toward non-dairy creamer product

STUDY METHODOLOGY

The study was conducted by qualitative and quantitative approach Data sources are collected in both primary and secondary data

Secondary data on food and beverage industry, competitors, market demand of NDC is

gathered from food journals, magazine, Internet web sites, Vietnam statistical year book,

General Statistic Office, import statictis, sales review reports from ACC, internal data and other sources This information help to understand more about external environment,

Primary data was collected by in-depth interview and a survey questionnaire The target interviewees for in-depth interview are the top management and sales person from AFI, ACC, Trung Nguyen, Vinacafe The question for qualitative information is described in Appendix 1 with the purpose to identify customer needs, explore perceptions, generate idea and describe behaviour

The quantitative information was conducted by doing survey 30 selective companies in food and beverage producer to understand their business buying behaviour and expectation

on NDC product The questionnaire also aim to define the position of competitors and then help to build a suitable launching marketing strategy

CONCEPTUAL FRAMEWORK

The model of this study is the business strategic - planing process as described

Figure A: Thesis model

Source: Kotler et al (2002, p.29)

The marketing research process also follow: define the problem (set research objective);

develop research plan (identify needed data, determine how to collect data); collect

relevant infomation (qualitative, quantitative); develop findings (analyze data, present result); take marketing actions (implement recommendations, evaluate results)

Marketing research process as following:

Figure B: Project research process

Characteristics of data sample are the participants for the survey are identified and selected

on the following criteria:

- For conducting questionnaire survey, customers or companies have consumed Non-dairy

creamer product such as purchasing department, R&D department, manager from some company in coffee and food manufacturers such as Trung Nguyen, Vinacafe, Nutifood,

Bibica, Bich co, ect

- Another target group for in-depth interview are management and salesman of AFI, ACC company.

- This project is studied in B2B, so the sample size was able to conducted with 30 selective companies for questionnaire survey

STRUCTURE OF THE PROJECT

This study report is presented in four chapters as follow:

Introduction part provides a brief introduction to food and beverage industry, overview

of AFI company, the project problem, project objectives, scope of the study and structure

of the study

Chapter 1 - Literature Review provides some conceptual definitions of marketing and its function Also it define segment and target market, customer behavior Introduction of marketing mix and strategy formulation which can be applied during the study

Chapter 2 — Analysis of AFI’s external environment introduces non-dairy creamer product and its benefit as well as application Then it describe extemal macro environment analysis including GDP, income, culture, food and beverage overview, coffee, SWOT industrial analysis In micro environment analysis, it give information of competitive analysis customer and supplier analysis ,

Chapter 3 — Analysis of AFI’s internal environment presents the description of AFI organization structure, vision, mission, competitive advantage, SWOT analysis

Chapter 4 - Marketing strategy for AFI’s NDC product describe company marketing objective, market segmentation, target market and positioning product Then build strategy formulation and marketing program with 4Ps, implementation, budget, break-even point Conclusions and Recommendations summarizes and discusses the key findings of marketing strategy, then suggests recommendations for the development of NDC to entrance the market in long-term

CHAPTER I: LITERATURE REVIEW

I.1 Marketing definition

Marketing is not solely advertising or selling Real marketing is less about selling and more about knowing what to make (Philip koler, 1999, p.9)

Marketing is the delivery of customer satisfaction at a profit The goal of marketing is to attract new customers by promising superior value, and to keep current customers by delivering satisfaction Therefore, marketing must be understood not in the old sense of making a sales-“selling”- but in the new sense of satisfying customer needs

The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering, and communicating customer value to its chosen target markets

The marketing management are as the analysis, planning, implementation and control of programmes designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives Thus, marketing management involves managing demand, which in turn involves managing customer relationships 1.2 Role and function of marketing

1.2.1 Function of marketing

Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts: “Selling focuses on the needs of the seller; marketing on the needs of the buyer Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.” The selling concept takes an inside-out perspective It starts with the factory, focuses on existing products, and calls for heavy selling and promoting to produce profitable sales The marketing concept takes an outside-in perspective It starts with a well-defined market, focuses on customer needs, coordinates activities that affect customers, and produces profits by satisfying customers

1.2.2 Role of marketing towards corporate

Marketing plays a key role in the company's strategic planning in several ways First, marketing provides a guiding philosophy - company strategy should revolve around

serving the needs of important consumer groups Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm's potential to take advantage of them Finally, within individual business units, marketing designs strategies for reaching the unit's objectives

Within each business unit, marketing management determines how to help achieve strategic objectives Marketing plays an important role in strategic planning It provides information and other inputs to help prepare the strategic plan Strategic planning is also the first stage of marketing planning and defines marketing’s role in the organization The strategic plan guides marketing, which must work with other departments in the organization to achieve strategic objectives

Customers are attracted by promises and held by satisfaction Marketing defines the promise and ensures its delivery However, because actual consumer satisfaction is affected by the performance of other departments, a// functions should work together to sense, serve and satisfy customer needs Marketing plays an integrative role in ensuring that all departments work together towards consumer satisfaction

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There are three stages of strategic marketing planning: first, the strategic plan and its implications for marketing; secondly, the marketing process; and thirdly, ways of putting the plan into action

1.3 Target consumer, market segmentation and positioning

1.3.1 Target consumer

To succeed in today's competitive market place, companies must be customer centred - winning customers from competitors by delivering greater value However, before it can satisfy consumers, a company must first understand their needs and wants So, sound marketing requires a careful analysis of consumers

Companies know that they cannot satisfy all consumers in a given market - at least, not all consumers in the same way There are too many kinds of consumer with too many kinds of need, and some companies are in a better position to serve certain segments of the market

As a consequence, each company must divide the total market, choose the best segments and design strategies for profitably serving chosen segments better than its competitors do This process involves five steps: demand measurement and forecasting, market segmentation, market targeting, market positioning and competitive positioning

1.3.2 Market segmentation

If the demand forecast looks good, the company next decides how to enter the market The market consists of many types of customers, products and needs The marketer has to determine which segments offer the best opportunity for achieving company objectives Consumers are grouped in various ways based on geographic factors (countries, regions, cities); demographic factors (sex, age, income, education); psychographic factors (social classes, lifestyles); and behavior factors (purchase occasions, benefits sought, usage rates)

The process of dividing a market into groups of buyers with different needs, characteristics

or behaviour, who might require separate products or marketing mixes, is market segmentation

1.3.3 Positioning

After a company has decided which market segments to enter, it must decide what

‘position’ it wants to occupy in those segments A product's position is the place the product occupies in consumers’ minds If a product were perceived to be exactly like another product on the market, consumers would have no Teason to buy it

Market positioning gives a product a clear, distinctive and desirable place in the minds of

target consumers compared with competing products, Marketers plan positions that

distinguish their products from competing brands and give them the greatest strategic advantage in their target markets

1.4 Customer buying behavior

respond to its marketing strategies will have a competitive advantage

Generally, buyers are classified either as consumers or business buyers Consumer

behaviour has been defined by Summers et al (2003, p 24) as:

Processes a consumer uses to make purchase decisions as well as to use and dispose of

purchased goods and services; also includes factors that influence purchase decisions and the use of products

Contrast this definition with that which Summers et al (2003, p 67) provide for business- to-business marketing:

The marketing of goods and services to individuals and organizations for purposes other than personal consumption So the basic distinction between the two is whether or not the purchase is for personal consumption

1.4.2 B2B Business buying processes

Kotler provided a useful model of business buyer behaviour as below

Figure 1.1: A model of business buyer behaviour

The organisation Buyet ESDONSES

marketing ther strraHi The buying certre Product or service choita

i

process \ Delivery terms and tirnes

eee rottical | (interpersonal and Service terms

promotion techne legicat

Source: Kotler et al (2004, p 288)

The buying centre concept is useful in understanding the various influences on the business buying process The business marketer, such as a port, terminal or shipping service, needs to be aware that in any purchasing situation there is not only the buyer, but users, influencers, deciders and information gatekeepers as well These are discussed for you on pages 292-293 of Kotler et al (2004) All these roles comprise the buying centre,

and its size and composition vary depending on the nature of the purchase as well as the

type of business

The buying decision process has a number of major steps that vary from text to text The following table, as you will observe, has close counterparts to consumer buying:

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Table 1.1: Steps in a business buying decision

1 | Anticipate or recognize a problem/need/opportunity and a general solution

2 | Determine the characteristics and quantity of a needed good or service

| 7 Selection of an order routine

8 | Performance feedback and evaluation

Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’

four Cs.14

Product > Customer solution

Price > Customer cost

Promotion > Communication

Winning companies are those that meet customer needs economically and conveniently

and with effective communication

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Figure 1 2: The four P components of the marketing mix

Packaging Price Promotion Trans

1.6 SWOT analysis

The SWOT analysis is the overall evaluation of a business’s strengths, weaknesses, opportunities, and threats SWOT analysis consists of an anlysis of external and internal

environments

1.7 External environment analysis

There are many factors affect of company business to earn profit, a business unit has to monitor key macroenvironment forces (demographiceconomic, technological, political- legal and social-cultural) and microenvironment factors (customers, competitors,

distributors and suppliers)

1.8 Internal environment analysis

It is one thing to discern attractive opportunities and another to have the competencies to

succeed in these opportunities Thus, each business needs to periodically evaluate its

internal strengths and weaknesses in marketing, financial, manufacturing, and organizational competencies Cfearly, the business does not have to correct all of its weaknesses, nor should it gloat about all of its strengths The big question is whether the

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Figure 1 2: The four P components of the marketing mix

Marketing Mix

1.6 SWOT analysis

The SWOT analysis is the overall evaluation of a business’s strengths, weaknesses, opportunities, and threats SWOT analysis consists of an anlysis of external and internal

environments

1.7 External environment analysis

There are many factors affect of company business to earn profit, a business unit has to monitor key macroenvironment forces (demographiceconomic, technological, political- legal and social-cultural) and microenvironment factors (customers, competitors,

distributors and suppliers)

1.8 Internal environment analysis

It is one thing to discern attractive opportunities and another to have the competencies to

succeed in these opportunities Thus, each business needs to periodically evaluate its

internal strengths and weaknesses in marketing, financial, manufacturing, and

organizational competencies Clearly, the business does not have to correct all of its

weaknesses, nor should it gloat about all of its strengths The big question is whether the

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business should limit itself to those opportunities in which it possesses the required strengths or consider better opportunities to acquire or develop certain strengths

1.9 Strategy Formulation

According to Kolter et al (2001, p.31), goals indicate what a business unit wants to achieve; strategy describes the game plan for achieving those goals Every business strategy consists of a marketing strategy plus a compatible technology strategy and sourcing strategy Although many types of marketing strategies are available, Michael Porter has condensed them into three generic types that provide a good starting point for strategic thinking: overall cost leadership, differentiation, or focus

> Overall cost leadership: Here the business works to achieve the lowest production and

distribution costs so that it can price lower than competitors and win more market share Firms pursuing this strategy must be good at engineering, purchasing, manufacturing, and physical distribution; they need less skill in marketing

> Differentiation: Here the business concentrates on achieving superior performance in an important customer benefit area, such as being the leader in service, quality, style, or technology—but not leading in all of these things

» Focus: Here the business focuses on one or more narrow market segments, getting to know these segments intimately and pursuing either cost leadership or differentiation within the target segment

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CHAPTER 2: ANALYSIS OF AFV?’S EXTERNAL ENVIRONMENT

2.1 Introduction of Non-dairy creamer (NDC)

2.1.1 Non-dairy creamer definition

Non Dairy creamer are liquid or granular substances intended to subsitute for milk or creain as an additive to coffee or other beverages They do not contain lactose and are therefore not dairy products, is suitable for some people are allergic They impart a desirable cream-like flavour, as well as the desired body, flavour and colour to the food

Non-dairy creamers have several advantages over the dairybased creamers, including:

* Longer shelf-life

» Ease of storage and handling

* Lower cost of production

2.1.2 Non-dairy creamer characteristic and its component

Nestle coffee-mate, introduced in 1961, was the first powdered non-dairy creamer To replicate the mouthfeel of milk fats, non-dairy creanfers often contain vegetable-based fats

Each ingredient in a non-dairy creamer formulation serves a characteristic function which,

when combined, optimally assists in producing a superior non-dairy creamer The functions of each major component are briefly described below:

Vegetable fat: generally from 20-80%, used in place of milkfat Give the creamy texture,

tich flavor and opacity

Sweeteners: Corn syrup, glucose syrup or maltodextrins are most commonly used

Sodium caseinate: A milk protein which gives opacity, solubility, heat stability, a mild dairy flavour and rich mouth feel

Emulsifiers and stabilisers: Mono- and di-glycerides play the main emulsifying role in non- dairy creamers; helping to create a simple oil-in-water emulsion Lecithin is also often used

in powdered creamers, making the product soluble even in lukewarm beverages

This is percentage of the main ingredients to produce NDC:

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Table 2.1: Ingredients constitute non-dairy creamer

intolerant individuals

Unlike milk and cream products from animals, non-dairy creamers contain no cholesterol

Cholesterol builds up on the inside of your arteries, contributing to blockages that lead to

heart attacks While some factors such as genetics contribute to your overall cholesterol level, eating cholesterol-rich foods, such as cream or high-fat milk, can also increase your levels If you have high cholesterol, your doctor may recommend eating less fat and

cholesterol from meat and dairy products to help lower it Substituting the cream or milk in your coffee with a cholesterol-free non-dairy creamers can help lower your cholesterol

levels Most major brands of non-dairy creamers, such as Coffee-Mate, Coffee-Rich, Safeway brand, Hood, Hannaford and Anthem are all cholesterol-free

Applications

Non-dairy creamers are used in a wide range of applications, besides their traditional use

for instant drinking as whitener in coffee 3 in I which contain 35-40% of NDC and tea

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include of 18-20% of NDC It is also being used more and more in many other products as

well such as formulated milk powder, ice cream, bakery, confectionary industry like candy, chocolate, pudding Non dairy creamer even can be used in the industry of instant noodle, instant food soup seasoning and baked goods

2.2 Macro environment analysis

2.2.1 Economic factors

Vietnam’s gross domestic product (GDP) growth rates in the first nine months of 2010 was posted at 6.52 percent over the same period of last year, according to the statistics released

by ministry of planning and investment

Figure 2.1: The relation of GDP and inflation in Vietnam (2004-2010)

GDP growth and Inflation in Vietnam (2004-2010)

Source: Vietnam statistics data, www.gso.gov.vn

This is the first time that Vietnam has reported achieving GDP growth rate of over 6.5 percent within this year In details, within the period of January-September, GDP growth in

agriculture, forestry and seafood sector surged by 2.89 percent, industry and construction

up 7.29 percent and services of 7.24 percent

Vietnam's inflation rate this year may stay below 7 percent, below earlier government as forecasted Vietnam government's inflation targets for this year to 8 percent from 7 percent, and the central bank will increase liquidity in the economy by boosting money supply The monthly consumer price index in January-August rose an average 8.61 percent

from a year ago, while annual inflation in August eased to 8.18 percent from 8.19 percent

in July and 8.69 percent in June 2010

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15 | = GDP growth (%)|_

_ 40 |—e Inflation (%) iB|

Government urged businesses to pay more attention to expanding retail sales in order to stabilize domestic markets in the remaining months of this year and avoid unexpected price changes caused by intermediaries and central bank devaluation of the dong did not affect the country's consumer price index The Vietnamese government has also projected inflation next year at around 7 percent and the economic growth at 7.5 percent

For GDP, Vietnam expects economic growth to pick up from next year The main task for 2010's socio-economic development plan is to try to achieve a GDP growth of 6.5-7 percent Vietnam’s government proposed the gross domestic product targeting for this year be lowered to about 5 percent, although it’s expected to be be a difficult mark to hit as the global economic recession pushed the Southeast Asian country's first quarter GDP growth to its lowest level in years

Last year, GDP growth was 6.2 percent and in 2007 it was 8.5 percent Vietnam is also setting an economic growth target of between 7 and 8 percent a year in the 2011-2015 period, lowering by half a percentage point the floor of the range as compared with its

target for the previous five years Vietnam's economy grew at an average annual rate of 7.5

percent between 1996 and 2005, according to the Ministry of Planning and Investment and

Vietnam government target for gross domestic product growth in the five years from 2006

to 2010 was 7.5 percent to 8 percent

2.2.2 Demographic and income

The feature of today's Vietnam is a young population with high density Household income

in recent years has also been improved, hence the quality of life is higher than before In

the future, Vietnam will become a potential market for branded products of food and

beverage to ensure food safety and sanitation

With average economic growth of 7.3% per year over the past 10 years, the proportion of middle class population is increasing in Vietnam, followed by increasing consumer demand for food According to the reports of BMI, there was more optimistic assessment

about Vietnam's growth that reached 4.4% compared with the initial forecast of 2.9%

Vietnam will return to growth trajectory in 2011

2.2.3 Social-cultural

In today's modern life, people are increasingly busy with more work, so they will tend to choose fast and convenient food and beverage products like instant noodles, coffee, tea etc

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2.2.4 Food industry overview

Business Monitor International (BMI) has studied food consumption data in Vietnam in the second quarter of 2008, together with data on household expenditure from General Statistics Office (GSO) These figures reflect expenses on food and beverage GSO also provided other information sources to have the most accurate assessment of the prospects

of food consumption in Vietnam from 2006 to 2014

Table 2.2: Food consumption indicators - Data & Forecasts

per capita (USD) 133,1 | 148,9 | 168,3 | 163,1 | 164,6 | 185,3 | 208,8 | 234,3 | 263,1

The total food

consumption

growth (annual) 13,12 | 13,49 | 14,58 | 6,36 | 7,74 14,19 | 11,16 | 10,62 | 10,58 Growth of food ’

consumption per

capita (annual) 11,51 | 11,9 13 | 4,92 |ó,29 12,66 | 9,68 | 9,17 | 9,09 Food consumption

| (% GDP) 18,94 | 18,31 | 16,23 15,51 14,92 | 15,14 [15,1 | 14,91 | 14,8 | Excluding beverage consumption e / f - estimated / forecasted data of BMI

Source: General Statistics Office Vietnam, BMI

2.2.5 Beverage and drinking overview

The key elements that positively impact non-alcoholic beverage industry include: economic growth, urbanization process, foreign investment and tourism development Although consumers in Vietnam are still quite interested in healthy lifestyle and despite

Western influences affecting consumption habits, BMI believe that canned non-alcoholic

beverage will gain highest growth in the beverage industry in Vietnam from now to 2014

Table 2.3: Food and Beverage commercial indicators - Data & Forecasts (USD million)

2.2.6 Coffee outlook

Though Vietnam is a major exporter of coffee and second only to Brazil, our coffee industry only has advantages in exports while domestic consumption accounts for only a very small proportion of primarily urban However, with the industry's efforts in increasing value and profitability, domestic consumption tends to increase and is predicted to occupy about 10% of total crop output in 2009 The stability of coffee price in the world has created more opportunities for farmers and exporters of coffee in Vietnam, contributing

about 42% of total output in the period 2004 to 2008 Also during this period, domestic

consumption has increased 3 times

Opportunities still open to coffee producers in Vietnam GDP strong growth has boosted

the demand for foods and beverages In addition, Vietnam's population is quite young, so the habit of going to coffee shops is more and more popular BMI is forecasting that the

sales of beverages (including coffee and tea) will continue to rise by 67.6% in value during

the period 2009 to 2014 thanks to people’s consumption habit as well as advertising campaigns and marketing businesses

Notes: *: estimated; **: forcasted; Sources: USDA, Vicofa, BMP

2.2.7 SWOT analysis of beverage industry in Vietnam

Strengths:

Consumers in Vietnam, especially the young and wealthy, pay more and more attention to

the product brand Currently, the known products of the western countries, with strong

investment in marketing programs and promotions, are very popular in Vietnam market

The luxury urban centers of Hanoi and Ho Chi Minh City is becoming a market of

potential customers and customers are more interested in the quality of the products and

ready to pay more for better healthy drinks and target with branded products

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Weaknesses

There is great disparity in income between urban and rural areas, creating the difference in consumption based on income

Food processing industry in general is still very fragmented, except in some key areas such

as dairy and confectionery

Infrastructure of Vietnam is still weak Roads, railways and ports do not meet the economic growth of the country as well as links with the outside world

Opportunities

Vietnam's joining WTO in January 1/2007 will continue to be profitable for the exporters

of Vietnam by gradually removing market barriers and trade restrictions to increase competition

Large domestic market, increased export opportunities, low labor costs along with the successful privatization of food companies offer many more investment opportunities in Vietnam

The tourism industry which is booming increases profits for all kinds of packaged convenience goods in general, including alcoholic beverages and soft drinks

Consumers’ income increase means that branded beverage products bring more growth opportunities, especially alcoholic beverages and soft drinks

The general trend that consumers worldwide are moving towards is to ensure their health Grasping this opportunity, beverage manufacturers have diversified products that are beneficial to consumer’ health

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2.3 Micro environment analysis

2.3.1 Non-dairy creamer market overview in Vietnam

Vietnam is quickly becoming a top sourcing destination for the industry’s leading companies and the most rapidly developing market in Asean region As statistic report, ingredients consumption increased by over 40% in Vietnam in the last five years The processed food industry is growing by 28% annually The retail sector is expanding rapidly, fuelled by increasing consumer awareness and purchasing power Therefore, The Vietnamese economy is growing at an impressive 7.2% per annum and 34% of average growth rate in processed food consumption over the last 5 years

The demand for non-dairy creamer is increasing in the world, especially in South East Asia and Vietnam In Vietnam, around 1,500 to 2,000 tons/month imported NDC are consumed

in Vietnamese market and the growth rate is 25-10% per annum as the ACC’s internal estimation

Moreover, Vietnam is one of the biggest exporters of instant coffee in over the world Therefore, the demand of NDC for producing expost processing coffee will increase At present, all NDC used by local companies are imported from Thailand, China, Indonesia and Malaysia There’re always a shortage of supplying NDC in domestic Hence, the

demand of NDC will be predicted surely increase in next 5 years and the establishment of a

local company to produce NDC like AFI is seen to be a great opportunity as a pioneer to capture the local market

The data show that consuming quantity of NDC imported from 2005-2010

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