Vietnam Dairy Products Joint Stock Company (Vinamilk)

Marketing Plan

1
Table of Contents
I. Introduction ................................................................................................................... 3
II. Product Description and Analysis ............................................................................. 5
1. Three levels of product ........................................................................................................... 5
2. Type of Product Category ....................................................................................................... 6
III. Product Competition ................................................................................................. 8
1. Level of Competition ............................................................................................................... 8
2. Decide on Competitors ............................................................................................................ 9
3. Category Attractiveness ........................................................................................................ 10
a. Aggregate market factors .......................................................................................................... 10
b. Category factors ........................................................................................................................ 11
c. Environmental factors ............................................................................................................... 12
IV. Competitors Analysis ................................................................................................ 14
V. Conclusion .................................................................................................................... 17
VI. Reference .................................................................................................................. 18

2
 I. Introduction
Vinamilk (VNM) Corporation has established in 1976 and has developed over 40 years in
Vietnamese market.
In a study of Sacombank Securities Company (2012) discovered:

VNM is the market leader with more than 40% market share of milk and production
capacity far ahead of other competitors. VNM has a processing factory and nearly 178,000
retailers are scattered all over the country at convenient locations, which is a big advantage,
because milk is a product that can be easily damaged. VNM has access to 50% of the total
domestic supply of milk, allowing the Company to immense control over ex-farm prices.
VINAMILK stands among the most affordable brands in the market while maintaining a
dominant position in some segments such as condensed milk (~ 85% market share) and
yoghurt (~ 90% market share).

In 2016, Vinamilk pioneers in the field of organic fresh milk, product "Fresh-milk Organic" is
launched to meet the increasing demand of consumers. An interesting view was expressed by Ms.
Mai Kieu Lien - CEO of VNM that 'To manufacture one of leading products in the market, we
must be always innovate. Innovation is a vital element!'

Figure 1, 2 - Fresh-milk Organic and famous quote of Ms. Mai Kieu Lien

Selecting product competition and analyzing them is the main object of this report, it helps the
company determine the overall market and know where you are on the map of the industry.
The report of Sacombank Securities Company (2012) pointed out:

Roughly 54% (2010) of Vietnam’s population is under 30 year-old, and this demographic
group is more inclined to consume dairy products. Rapid urbanization (~3%) in Vietnam
and its improving living standard (GDP per capita grew by 13.5% CAGR during the 2006-
2011 periods) will also be the impetus for dairy demands. VINAMILK has laid out an

3
 ambitious plan for the 2012-2016 periods, in which the Company will achieve revenue of
USD3billion by 2017. Production capacity will double to 1.6 million tonnes per year by
2016.

Population vietnam is a young population, so the consumption of milk is very high, the milk market
continues to expand as a piece of cake attractive to many investors.
Sacombank Securities Company (2012) showed off:

The competition with high-end foreign brand names such as Abbott, Mead Johnson, Dutch
Lady, etc. will only get worse. At the same time, more domestic companies are also putting
their names to the challenge. One of the prominent cases was TH True Milk, a domestic
company who has already invested USD350m in almost 45,000 dairy cows.

In this report, the PESTEL analysis, Porter's Five Forces and other analysis be mentioned to
support for future strategy. The corporate social responsibility is really important because it helps
the firm to have sustainable development and long-term growth. So it will be expressed in this
report.

4
 II. Product Description and Analysis
On 15/06/2016, Vietnam Dairy Products Joint Stock Company (Vinamilk) was the first dairy
company in Vietnam to pioneer high-quality organic milk in accordance with USDA (United
Stated Department of Agriculture). To be right with the name "Fresh-milk Organic" this premium
product line is made with organic fresh milk from a herd of cattle that is grazed in a large natural
pasture. All cow care and production procedures ensure strict adherence to the "3 NO's standards"
mode of the USDA organic standard. That is, no gene modification, feed for cattle; do not use
growth hormone; do not use antibiotics, pesticides, chemical fertilizers.

Figure 3 - Certificate of EU Organic

1. Three levels of product

Consumers often thinks a product is simply the physical item that he or she buys. When
considering the theory three levels of product, Philip Kotler and Gary Armstrong (2014, pp. 249,

5
250) maintain that there are three levels of product - the core product, the actual product, and
finally the augmented product. The core customer value is the intangible of product, but it is the
basic benefit the customer receive from consuming product. The actual product is the tangible,
physical product. It included brand name, quality, packaging, design, features, etc. Product
development from the core value products to the actual products that marks the competition
between products. Products that differ in quality, packaging, and branding will make the difference
between the same category of products that lead to competition between products. Finally, when
every product has reached a certain level of completion. Competing for quality, design is no longer
a prerequisite for a brand's winning. Product will advance to the final level augmented product.
The augmented product is the non-physical part of products. It consists of some added value, such
as delivery service, warranty, after-sale service, etc.
In this cases, the core value product: Solves thirst, and a basic part of human nutrition. The actual
product: Due to Fresh-milk Organic come from Vinamilk, it easier for consumers to accept this
product when it is launched, because Vinamilk is a long established brand name in the Vietnamese
market; more than this, due to the application of Organic standard from USDA, it helps Fresh-milk
Organic safer and more friendly with environment in the eyes of consumers. The augmented
product: Nationwide distribution network is also an added value, a competitive advantage of the
product, accompanied by instructions when using the product in the food processing (the recipes
are published on the website) are other values that the company's products bring to consumers.
In the Annual Report of Vinamilk (2016):

2016 witnessed a dramatic change in the intensifying presence of Vinamilk’s products in

the market. This is stemmed from Vinamilk’s extensive distribution system with
distribution rate of over 85%, retailers with up to 220,000 outlets served directly by
distributors, and 100% of supermarkets and convenience stores selling Vinamilk’s
products.

2. Type of Product Category

According to Leon G. Schiffman and Joseph Wisenblit (2015, p. 165), low-involvement purchases
is the buying process to be applied for the products are not very important, have little perceived
risk, limited information processing. In the other hands, high-involvement purchases is applied for
the products that consumers spend more effort in research information, take care about the
perceived risk. Fresh-milk Organic is product that higher than low-involvement product, but not
reach to high-involvement product. Because, consumers make effort to find information about

6
them, for instance, they know about organic certification of Vinamilk, but they don't spend too
much time learning about this product. Simply, they just understand, this product is fresh, certified
100% organic, so I will buy it. They may not be clear about how Vinamilk has done this, or whether
there is a big difference between this product and the regular fresh milk.
Philip Kotler and Gary Armstrong (2014) concluded that convenience products are consumer
products or services that is cheap price, consumer often buy frequently with minimal effort and
comparison to respond for immediate consumer demand. These products are usually grocery
products, or consumed daily product. In fact, most consumers still buy milk by visiting grocery
stores, or convenience stores to buy it. They simply aim for convenience, and the retail price of
the product. Vinamilk's dairy products in general and Fresh-milk Organic in particular are not
outside of this consumer behavior. Understanding that, as mentioned above, Vinamilk has invested
in the development of a wide distribution network, aimed at the convenience for consumers in
finding products. And towards the future, the market, and customer gradually more intelligent,
developing the quality of product is a good thing that Vinamilk has done well.

7
III. Product Competition
1. Level of Competition

Figure 4 - Level of competition model Lehmann & Winer (2005)

Based on the level of competition model (Lehmann & Winer 2005), the narrowest competition is
called product form. The product in this area is serve in the same market segment, and their value
is similar. "Fresh-milk Organic" of Vinamilk has been competing in directly to "TH true milk
Organic" from TH Food Chain Joint Stock Company. These brands appeal to similar consumers:
those using milk and would like to find the Organic standard from these products. The second level
of competition is based on the product or service with the same features. This level of competition
called product category, is what product in the same industry. In this cases, a product category
included liquid milk, condensed milk, flavoured milk, powdered milk, etc. from any dairy
company also be accepted in this list. In two level above, the competition level focus in any product
have similar or exactly feature and market segment, so it is the short-term view of market
definition. The third level of competition is termed generic competition, the product and service is

8
fulfilling the basic need of customer. It focuses in long-term and broader category of product
(substitutable product categories). Example: the soft-drink, tea, coffee, juices, wine, beer, etc.
There are all liquid drinks, and there are used to satisfy the thirsty needs of consumers. The final
level of competition is budget competition. This is a broadest level of competition, it considers all
products and services demand customer spend for the same cost. For example, a customer has to
pay VND44,000 for a batch of "Fresh-milk Organic"; if they don't use this amount of money to
pay for milk, they can do some other things such as consume fast-food, or ice-cream, go to PC-
Bang (internet coffee shop), etc.
2. Decide on Competitors
In a competitive market, defining a competitor is one of the top issues for survival and
development. Companies in the same industry are interdependent, and the actions of the company
lead to the response of other companies. According to Lehmann & Winer (2005, pp.61 - 68) there
are many methods to identify competitors, the simplest way is to do nothing, there will be someone
doing it for you (the market research firm, or the research organization of government, etc.).
Another is Standard Industrial Classification system, that is the code used by the U.S government.
For example: In case, based on a government SIC system (United States Department of Labor
1987) "Fresh-milk Organic" assigns in major group 20: food and kindred product, three-digit group
is 202: dairy product, four-digit industries 2026: fluid milk. As a result, relying on these categories
will ignore the generic and budget competitors. The other two methods are Managerial Judgment,
and Customer-Based Measures, both of them also require experience, salesperson call reports,
distributor, or other company sources to aggregate data. It consumed a lot of time and money to
making research and collecting data. Some model can use for these methods are show below:

9
Figure 5 - A variant of Ansoff's (1965) well-known growth matrix

Figure 6 - Perceptual Mapping (Marketing News, 1982)

3. Category Attractiveness
a. Aggregate market factors
The information be combined from the report prepared by Vietnam Industry Research
and Consultancy Company (2017) and the Annual Report of Vinamilk (2016) showed

10
the total revenue of the dairy industry is estimated at over VND95,000 billion, of which
Vinamilk alone generated VND46,965 billion. Spending on milk accounts for more
than 10% of total food expenditure in Vietnam. Per capita GDP growth is an important
factor in boosting milk consumption. In recent years, dairy sales in cities have not
grown or continued to grow negatively, while rural milk consumption has steadily
grown at double digits. Vietnam joining the TPP will help reduce the import duty on
milk and dairy products gradually to 0% by 2018. Vietnamese enterprises are expected
to face many difficulties in the powdered milk market, which is already dominated by
foreign firms (up to 75% market share). Local firms are dominating the liquid milk
market with the two companies Vinamilk and TH True milk. The market share of
yoghurt products in Vietnam is only about 12%, much lower than many other countries
in the world (about 50%). Vinamilk dominates the yogurt segment (33.9% market
share) and Yakult - a Japanese brand that predominates in the yoghurt segment. The
size of Vietnam's dairy market has grown at an average rate of 15% in the last five
years. Increased consumer incomes, changing consumer tastes and the development of
the retail system are the main drivers of the industry. Vietnam is always considered to
be a low quality source and unstable milk inputs, investing in farms, livestock systems
contributing to quality enhancement and reducing input material cost is also one of the
main reasons.
b. Category factors
Porter (1980) has laid out a framework that helps managers identify the opportunities
and threats faced by businesses in an industry. This model included:
• Bargaining power of suppliers
The dairy industry is consumer goods with short shelf life and the main ingredients are
from agricultural products such as milk, sugar and so on. Its price depends on the
weather, how to support the farmer. In addition, the current dairy industry in Vietnam
is unstable, so raw materials still have to import about 75% for milk production.
• Bargaining power of buyers
Total milk production in Vietnam only meets part of the domestic demand, while
consumption of milk will increase according to economic growth. Thus, the milk
market in Vietnam will grow significantly in the future. The presence of well-known

11
dairy brands such as Abbott, Nestle, Mead Johnson, etc. has also shown the appeal of
the dairy market in Vietnam.
• Threat of alternative product
In the Vietnamese market, there are many kinds of cereals, health drinks, etc. However,
their nutrition and quality can not completely replace milk. However, functional foods
are being marketed in Vietnam and therefore they can put pressure on the dairy
industry.
• Threat of new entrants
A good condition for newcomers is the retail network available in Vietnam. Due to
these advantages, there are many famous foreign products entering the Vietnamese
market. In addition, a newcomer who wants to enter the industry has had to invest huge
sums of money. In addition, imported products will be subject to import duties and thus
domestic firms will remain competitive, but this advantage will only be maintained
until 2017.
• Rivalry among competitors
Because the Vietnamese market has grea1t potential, Vinamilk has many domestic
competitors and foreign competitors. Domestic competitors include TH True milk,
Hanoimilk, Nutifood, Bavi, Moc Chau, etc. and foreign competitors Abbott, Mead
Johnson, Nestle, Dutch Lady, etc. Due to the attractiveness of the Vietnamese dairy
market, there will be more foreign competitors who will enter the Vietnamese market
in the future, and domestic competitors will increase their investment to win market
share.
c. Environmental factors
PESTEL analysis helps an organization identify the external forces impact to the
market or direct impact to the business. In fact, an industry or a firm is in a large macro
environment, included: political, economic, social, technological, environmental, and
legal. Fluctuations in each component may affect the industry or business differently,
alter the competitive relevance of the business, and eventually change the attractiveness
of the industry.

12
 • Political
Vietnam is considered to be the country with the most stable political status, and it is a
competitive advantage to attract more foreign investment. Therefore, Vinamilk may
feel safe in running its business in Vietnam.
• Economic
The gross domestic product per capita in Vietnam was last recorded at 1770.3 US
dollars, and the growth rate was 6.68% at the time of recognition at the end of 2016.
This will increase the standard of living, leading to higher milk consumption.
• Social
The total population in Vietnam was estimated at 92.7 million people in 2016, with a
young population structure, so the demand for nutritional needs is relatively large.
Therefore, the milk market in Vietnam can continue to grow well in the next few years.
• Technological
In this market, technology plays an essential role in gaining competitive advantage and
reducing costs. Vinamilk has constantly improved, both in the production line and the
farm system. Organic certification is proof of that.
• Environmental
Environmental factors play a significant role in the production, including climate, water
resources that will contribute to the health of cows. This leads to the quality of the milk
being affected. Not to mention, the production will lead to waste, if not handled well,
discharged into the environment, it will significantly affect the image of the company.
• Legal
Today, Vietnam's legal system is being improved to comply with international laws
and regulations since Vietnam's accession to the WTO in 2008. The law will control
companies, avoid corruption, protect rights of workers and towards sustainable
development. In addition, legal factors in Vietnam are quite stable and Vinamilk can
develop well in this market.

13
IV. Competitors Analysis
In study of Lehmann & Winer (2005, pp. 101 - 118) claimed that Competitors Analysis should be
follow to the system, that was showed below.

Figure 7 - Competitor Analysis System Lehmann & Winer (2005)

First of all, company need to think about the data. There are two types of data: secondary data, and
primary data. This data help to answer some questions about the competitors and make some model
to analyzing them, such as product features matrix, marketing mix, etc.
In this cases, the dairy product market of Vietnam, only Vinamilk and TH True milk announced
the product line organic milk. So this chapter focus on the main competitor of Vinamilk is TH
True milk.
Product feature matrix below show the average nutritional value in 100ml of milk.
The information in the website of TH True milk (2017):

Features TH True milk

Energy 60.9 Kcal
Fat 3.3 g

14
 Protein 3.1 g
Hydrogen carbon 4.7 g
Vitamin A 80 IU
Vitamin B1 21 µg
Calcium 100 mg
Objective of TH True milk is becoming the Vietnam's leading manufacturer of dairy products.
Today, TH is the second ranked dairy manufacturer, and their goal is meet 50% of demand for
milk in Vietnam in 2020. In addition, TH True Milk always want to care for the Vietnamese
physical and spiritual with the products from nature, clean, safe fresh, nutritious. Their core values
are derived from the words "True Milk" or "True Happiness". All products are made from "fresh
clean pure milk" produced in the commercial farm (thmilk.vn, 2017).
SWOT analysis about TH True milk
• Strenght: Profuse finacial resource provided by North Asia Bank: VND1.2
billion. The modern production and distribution system is more perfect.
Marketing team has high creativity and adaptability.
• Weakness: Prestige of TH True milk hasn't been popular when compare with
Vinamilk. High production cost leads to high price of product.
• Opportunity: Large scale and high demand of the market. The growth rate is
stable.
• Threaten: The danger of material shortage because of material cost increasing.
The import duty is 0% in 2018, so the foreign product will more competitive in
Vietnamese market.
Marketing Mix
• Product: Organic products of TH launched late in the market compared to
Vinamilk, so the competitiveness was reduced.
• Price: Because orientation is a high-end product line, the product is priced to
the highest possible value. In addition, TH is also trying to hit the consumer
psychology that quality comes with price.
• Promotion: TH combines many types of promotions such as advertisement,
sales promotion, public relations, sponsorship, internet marketing, etc. with the
right orientation as the name of the company, "True Happiness" means that the
company will bring true joy to the community.

15
• Place: TH True Mart chain stores are similar to Vinamilk's " dairy Vietnamese
dream" chain, TH confidently competing with Vinamilk in terms of
distribution, TH's coverage is spreading nationwide.

16
 V. Conclusion
The company provides the best working environment to employees. The firm creates good work
condition for employees so that they can work comfortable and efficient. The company ensures
health for all employees have to have insurance and ensures safety and healthy working conditions
as well as maintain them. In the Anual Report of Vinamilk (2016) Vinamilk joined hands with the
"Stand Tall Vietnam" to supply milk to 40,000 poor children in remote areas with a total value of
22.5 billion dong. Vinamilk want to reduce the rate of malnourished children in Vietnam and
ensures "every child has the right to drink milk every day".
The report has used a variety of tools to analyze and assess Vinamilk's current situation. For
example, PESTEL analysis is used to find out the external factors that affect the business
operations of Vinamilk Corporation. Porter of the Five forces to analyze the industry and compete.
In addition, the social responsibility of Vinamilk is also reflected in this report. If a company has
a good corporate social responsibility, it can increase sales and profits, build goodwill for its
customers, and receive support from local authorities. In other words, a company is difficult to
develop in the long run if it forgot the code of ethics and social responsibility. However, there are
also many arguments against morality and social responsibility. In short, adherence to business
ethics and corporate social responsibility will ensure sustainable organizational development.

17
VI. Reference
Ansoff, H. (1965). Corporate Strategy. New York: McGraw-Hill.
Kotler, P. and Armstrong, G. (2014). Principles of Marketing. 15th ed. Global Edition: Pearson
Education, pp.249 - 251.
Porter, Michael E. (1980). Competitive Strategy. New York: Free Press.
R. Lehmann, D. and S. Winer, R. (2005). Product Management. 4th ed. International Edition:
McGraw-Hill Companies, Inc., pp.53 - 55.
Schiffman, L. and Wisenblit, J. (2015). Consumer Behavior. 11th ed. Global Edition: Pearson
Education, p.165.
United States Department of Labor (1987). STANDARD INDUSTRIAL CLASSIFICATION
SYSTEM (SIC). Occupational Safety and Health Administration.
Mai, K. (2015). [image] Available at: https://www.vinamilk.com.vn/en/ve-cong-ty [Accessed 22
Sep. 2017].
Marketing News (1982). [online] p.3. Available at:
https://www.ama.org/publications/MarketingNews/Pages/About.aspx [Accessed 26 Sep. 2017].
Sacombank Securities Company (2012). Vinamilk. Ho Chi Minh city: SBS Investment gateway,
pp.3, 5.
thmilk.vn. (2017). True Book. [online] Available at: http://www.thmilk.vn/information/true_book
[Accessed 27 Sep. 2017].
Vinamilk Company (2016). [image] Available at: https://vinamilk.com.vn/sua-tuoi-
vinamilk/vi/nhan-hang/sua-tuoi-100-organic/ [Accessed 22 Sep. 2017].
Vinamilk Company (2016). Annual Report 2016. Annual Report. [online] pp.11, 47. Available at:
https://www.vinamilk.com.vn/en/bao-cao-thuong-nien [Accessed 23 Sep. 2017].
Vietnam Industry Research and Consultancy Company (2017). Dairy Industry Report. [online]
Vietnam. Available at: http://viracresearch.com [Accessed 26 Sep. 2017].
Vinamilk Company (2016). Annual Report 2016. Annual Report. [online] p.121. Available at:
https://www.vinamilk.com.vn/en/bao-cao-thuong-nien [Accessed 23 Sep. 2017].

18