Campina joins forces with Vinamilk

Related tags Campina Milk Powdered milk

Vinamilk, the state-owned Vietnamese dairy group, is to form a
joint venture with Dutch counterpart Campina which will see the
latter group step up its investments in an Asia region turning
increasingly to dairy products, writes Chris Jones.

The two companies will create a 50/50 joint venture focusing on the value-added segment of the Vietnamese market - yoghurts, dairy drinks and desserts - which will be marketed under the Dutch company's brand.

Vinamilk is Vietnam's biggest dairy producer with seven plants spread around the country and a large national distribution network, making it the ideal partner for Campina as it seeks to accelerate its expansion in the Asian region. Moreover, with Vinamilk's output focused on the lower end of the dairy market (sweetened condensed milk, milk powder and liquid milk), Campina has a strong but complementary base on which to build sales of its higher margin products.

The joint venture will operate under the somewhat prosaic name of the Campina Joint Venture company, and Campina will contribute not only its brands but also its marketing know-how and its R&D capacities. Vinamilk, for its part, will contribute its production facilities and distribution network throughout Vietnam.

Campina's brand know-how will be vital if Vinamilk is to build on its market-leading position. Although it is the biggest volume producer in Vietnam, rival Dutch Lady is the biggest brand - a position it will hope to overturn with the help of its new partner.

Vietnam's economy is growing quickly, due in part to foreign investment, and over the past ten years, average growth has hovered around 7 per cent or more. Dairy products have grown in popularity as consumer incomes have increased, with their nutritious and healthy image helping to spur growth, particularly among children following the creation of a school milk programme.

Distribution improvements and economic growth will also contribute to the expected growth in dairy consumption, according to Campina. Industry analysts Euromonitor predict that Vietnamese dairy sales will reached VND4.3 trillion (€2.1 billion) in 2005.

Campina has been stepping up its operations in Asia over the last year or so, acquiring Parmalat's activities in Thailand back in spring 2004 and then following that move with the creation of a new organisation in Ho Chi Minh City focusing on the marketing and sale of long-life milk and products under the Campina brand.

While there is no talk at the moment of an acquisition by Campina, the Vietnamese government has been steadily reducing its stake in Vinamilk over the last few months. In February, for example, the State Securities Commission sold 15 per cent of the company to a group of foreign investors, reducing the state's share in the company to 60 per cent.

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