The undisputed dairy market leader in Vietnam is the largely state-owned firm Vinamilk, which currently leads the market in categories such as condensed milk (81% of market), yoghurt (66%), drinking milk (42%) and powdered milk (27%), according to Euromonitor statistics, and there are also various other local players dominating the sector such as TH Milk, Nutifood and Ba vi Milk.
Despite this, there is a growing segment of Vietnamese consumers looking for more premium milk variants such as organic products, and this is an area where foreign dairy firms with an eye on the Vietnamese market are encouraged to focus on.
“The normal UHT milk market is extensively dominated by domestic manufacturers currently, but there are potential market segments for foreign players, such as organic milk or A2 milk,” Vietnamese consulting firm B&Company Linh Dao told FoodNavigator-Asia.
“In recent years, we have observed the rising trend of organic products [in Vietnam], and the dairy industry is no exception. Many brands from Australia and New Zealand with products from free ranged cows and organic fields as advertised can be seen on the shelf or available on e-commerce platforms.
“In addition, the growing of Korean and Japanese convenient stores and retail chains has also introduced many Japanese and Korean dairy products into Vietnam market.”
This is not limited to the liquid milk sector either – according to Linh, a similar trend is also being seen in powdered milk.
“The powdered milk market in Vietnam is quite fragmented with a large variety of product options, tapping into different demands and preferences,” she said.
“As the local middle class in Vietnam is expanding, and the country income per capita is increasing gradually, [we expect] there will [increasingly] be more demands on high quality dairy products addressing different demographics’ needs.”
“Overall, we have already seen both domestic and foreign brands launch organic dairy products, and many experts expect the organic market will continue to grow - The current sales volume of this segment only accounts for about 0.2% of the total retail revenue of the milk sector at the moment.”
The advice would also be to move fast as although the space is still growing, as it is local players are existing foreign players are starting to take notice and bring in or produce their own organic products for the market.
“Amongst the top three market leaders, Vinamilk and TH Milk joined the organic market in 2016 and 2017 respectively, while FrieslandCampina started to import organic milk products from the Netherlands since 2018,” said Linh.
“Nutifood has also signed a contract with the Sweden Backahill Group to invest in the organic milk market, [so local and foreign players are all definitely taking notice].”
COVID-19 boost
Although many food and beverage industries in Vietnam took a hit during the COVID-19 pandemic outbreak, dairy was one of the lucky sectors which remained stable and even saw growth.
“According to our recent study, the market capitalization of the dairy industry increased 19.1% in 2020,” said Linh.
“Other research has also shown growth in various dairy sectors including drinking milk, yoghurt, cheese, butter and milk powder. It is believed that COVID-19 drove up consumer demand leading to this – one of our recent surveys revealed that many [Vietnamese consumers] have the tendency to stock basic daily products in fear of sudden lock-down or shortages, and milk products are among the top things being stocked for an average length of 2 weeks.
“Dairy products like drinking milk and yogurt are also perceived as good for health or can help to improve immunity, and increased home baking and bakery consumption also contributed to the rise in demand for products like butter and cheese.”
Cheese in particular has seen an explosion in popularity locally, a situation known as ‘cheese-mania’.
“Cheese of all kinds [have also] been very much in favour recently - Besides popular imported products from Europe, there is also a noticeable increase of local cheese makers, supplying fresh cheese products ‘from farm to table’ or in many supermarket and convenient store chains,” she added.
“The so-called ‘cheese-mania’ is expected to remain a key driving factor for the increase in cheese consumption in household and in the F&B industry [in the near future].”