Vietnamese dairy readies for growth

Saigonmilk was formed by Vinamilk​ back in 2001, at a time when the company was waiting for government approval for equitization. Now the merger aims to finally bring together the two dairy producers, a move that will consolidate the companies position in this highly competitive sector but still growing market.

Saigonmilk is known for a variety of dairy products brands ranging from Merry Cow condensed milk, Fortune cheese, Smart fresh milk, Yao yogurt to Soybe soya milk, all of which will now fall under the Vinamilk umbrella.

Vinamilk produces a range of fresh milk, soyabean milk, yoghurts, condesensed milk and milk powders. The product range includes brands such as Ong Tho, Dielec and Yomilk and are distributed throughout Vietnam as well as the US, Australia, the Middle East and Cambodia.

In 2003 Vinamilk had pre-tax profits of VND700 billion, compared to VND653 billion in 2002. Saigonmilk's 2003 profit remains undisclosed.

Vinamilk says that following the merger it will wait for government approval before divesting existing State investment and listing on the bourse. Vietnamese regulations state that a public listing on the bourse means that at least 15 per cent of shares in a company must be publicly owned. Currently Vinamilk the percentage of publice shares in the company is only 4.8 per cent, with 80 per cent of shares being held by the State.

Currently Vinamilk is the national market leader for milk and dairy products in Vietnam. The company estimates that it holds 75 per cent of the market for milk powders and around 80 per cent for yoghurt and ice cream.

In recent years milk consumption has grown exponentially throughout the region as Asian people grow more accustomed to dairy produce and become more aware of its health-giving properties. One of the biggest health problems for Asia's fast-growing elderly population is osteoporosis, a disease which is said to be largely derived from a lack of calcium - of which dairy products are a rich source. Increasing awareness of the cause of the disease is said to have had a significant impact on dairy sales throughout the region in recent years.

Since 1990 the Vietnamese milk consumption has grown from just 0.47kgs per person each year to 7.50kgs per person per year in 2001. In response to this rise in demand the national dairy industry has also grown significantly. In 1990 Vietnamese milk output was 12,000 tons a year, whilst in 2001 that figure had grown to 64,000 tons.

The milk production rate of the national industry is still relatively small, with analysts estimating that that the national industry only manages to meet around 10 per cent of total demand. Obviously this indicates that demand is still outstripping national supply, a situation that bodes well for Vietnam Dairy Milk's future expansion.