Microeconomics assignment about Vinamilk

NATIONAL ECONOMICS UNIVERSITY
BUSINESS SCHOOL
BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH

**********************

MICROECONOMICS
FINAL GROUP PROJECT

Class:
Group:
Lecturer: Dr. Tran Thi Hong Viet


CATEGORY
A) INTRODUCTION……………………………………………………………………3
B) DISCUSSION………………………………………………………………………...3
I) DAIRY MARKET COMPETITION……………………………………………….3
1) The reality of Vinamilk's competitiveness in the dairy market …………………3
2) Market structure of dairy products in general…………………………………...4
2.1) Definition of monopolistic competitive market…………………………….4
2.2) The specific characteristics of monopolistic competition…………………..4
3) The competitive market characteristics of Vinamilk dairy products in Vietnam..4
3.1)This is a market with many suppliers and products of each company are
differentiated from the products of the remaining firms…………………………………4
3.2) Non-price competition forms are adopted by the company…………………5
II) VINAMILK DIARY GOODS MARKET………………………………………….5
1) Demand of Vinamilk dairy products in Vietnam………………………………..5
1.1) Overview of Vinamilk's demand in Vietnam………………………………..5
1.2) Determinants of demand……………………………………………………..5
1.2.1) Prices of related goods…………………………………………………..6

1.2.2) Consumer income………………………………………………………6
1.2.3) Tastes and Preferences of consumers…………………………………..7
1.2.4) Expectations…………………………………………………………….7
1.2.5) Market size……………………………………………………………...7
2) Supply of Vinamilk dairy products in Vietnam………………………………….7
2.1) Current situation of Vinamilk milk market in Vietnam……………………..7
2.2) Determinants of supply……………………………………………………...8
2.2.1) Input cost………………………………………………………………..8
2.2.2) Technology……………………………………………………………...8
2.2.3) Government policies…………………………………………………….8
2.2.4) Seller expectations………………………………………………………9
2.2.5) Number of sellers in the market………………………………………...9
3) Growth expectation in the coming years…………………………………………9
C) CONCLUSIONS…………………………………………………………………….10
I) CONCLUSIONS…………………………………………………………………..10
II) RESOLUTION…………………………………………………………………….10


A) INTRODUCTION
The economy of Vietnam after the period of world economic integration has made great
progress and achieved certain achievements. Economic development means that people's
lives are much higher than before. People are increasingly concerned about nutrition and
one of them, milk is a very good nutritional supplement. Therefore, in that joint
development, it will be a shortcoming without mentioning the Vietnamese dairy market.
On the market today, the number of suppliers in the market is increasing with a variety of
quality and designs. Including Vinamilk (Vietnam Dairy Products Joint Stock Company)
- the leading enterprise of the milk processing industry. With more than 40 years of
development, the name Vinamilk is no stranger to Vietnamese consumers.
With a desire to better understand the market of Vinamilk milk in Vietnam, our group
decided to choose the topic:

“SUPPLY, DEMAND AND COMPETITIVENESS OF VINAMILK IN
VIETNAMESE DAIRY MARKET”
Due to limited time and limited knowledge, our essay is still inadequate, looking forward
to receiving your comments and opinions so that the essay can be improved. We sincerely
thank you!

B) DISCUSSION
I) DAIRY MARKET COMPETITION
1) The reality of Vinamilk's competitiveness in the dairy market
By 2018, according to Vietnam Report, Vinamilk's liquid milk segment has risen to the
top of the industry with about 55% market share. In addition, Vinamilk holds more than
80% market share of yoghurt, more than 80% market share of condensed milk, more than
30% market share in powdered milk industry. With efforts to improve technology and
pioneer with new product trends, Vinamilk continues to consolidate and affirm its
position as the No. 1 dairy company in Vietnam.


Revenue of some big milk companies in Vietnam in 2016 ( million dong)

2) Market structure of dairy products in general
2.1)

Definition of monopolistic competitive market

Monopolistic competition is the market structure with many manufacturers and providing
products that are interchangeable at a high level but different special
2.2) The specific characteristics of monopolistic competition
 There are many small sellers
 Firms' products differ slightly from each other
 There is freedom to enter and exit the market

 Firms apply strong forms of non-price competition through advertising, product
differentiation
3) The competitive market characteristics of Vinamilk dairy products in Vietnam
3.1) This is a market with many suppliers and products of each company are
differentiated from the products of the remaining firms.
This distinction is expressed through design, packaging, design, ... These points help the
company create its own appeal, maintain traditional customer base. With the image of a
milk cow in the pasture, this symbol has become familiar and associated with
generations. This is also the reason why Vinamilk suppliers in the development strategy
and product PR always focus on taking advantage of the unique, preeminent and
exclusive characteristics of its products. Vinamilk milk is produced from organic fresh
milk from cow herds grazing on natural grassland, the process of caring, raising cows and


processing milk complies with regime “3 No” in accordance with Organic USDA US
standards: "No genetic modification, no growth hormone, no antibiotics." This creates
confidence for consumers, thereby affecting their demand, increasing revenue and profit
for the firm.
3.2) Non-price competition forms are adopted by the company.
By trading items that have the same features as many companies, so as to disseminate
product images, to survive and develop, the company must invest large expenses for nonprice competition forms such as: advertising on mass media, promotional costs, product
packaging costs, etc. One of Vinamilk's great successes is in the advertising market. It
can be said that in all of Vinamilk advertisements, TVC producers successfully convey
what they want to tell customers and all information has a strong influence on consumers'
shopping habits. Typically we can see that the milk cow family's song focuses on two
main factors for babies that are bright and tall. Among them, there are advertisements that
show that drinking milk brings joy with the image of a smiling cow head, or 100% pure
fresh milk that brings health to everyone, ... all outstanding benefits that Vinamilk
products bring to its customers are conveyed very skillfully.

II) VINAMILK DIARY GOODS MARKET
1) Demand of Vinamilk dairy products in Vietnam
1.1)

Overview of Vinamilk's demand in Vietnam

Formed in 1976, Vietnam Dairy Company (VINAMILK) has grown and become the
leading enterprise of the dairy processing industry, currently accounting for 75% of the
dairy market share in Vietnam. According to the Brand Footprint report of Kantar
WorldPanel recently, Vinamilk continues to hold the position as the brand that consumers
choose to buy the most in 4 main cities and rural areas of Vietnam in the group of fast
moving consumer goods (FMCG ).
1.2)

Determinants of demand

1.2.1) Prices of related goods
Prices of other related goods are an important factor affecting demand for goods in the
market. There are two types of related goods: complementary goods and substitute goods.
Here, Vinamilk milk is a substitute. For the dairy product line for children, Vinamilk's
target customers are children who are in the development stage with products that have
been reputed in Vietnam market such as fresh milk, powdered milk, cheese. . In the


current competitive environment, Vinamilk has many competitors who choose the same
target customers as Dutch Lady, TH true milk,... . This product targets at children whose
parents decide to consume products. And using foreign food is deeply ingrained of
Vietnamese and they think that imported milk are reputable in the world while Vinamilk
is a domestic brand that has no brand in the world.
Moreover, the majority of parents are willing to transfer the decision to buy other types of

milk when there is a price drop of these dairy companies. Thus, it will directly affect
Vinamilk's demand, reducing the demand of products, greatly affecting the revenue of
enterprise.
1.2.2) Consumer income
Income is a determinant of the ability of consumers to buy. Therefore, when income
changes, purchasing ability changes, making demand for goods and services change.
From the impact of income on consumption of goods, German statisticians divided goods
into two groups of normal goods and inferior goods. For subjects who are students who
have average income , income is a factor affecting their ability to consume dairy
products. However, at the present time, Vinamilk milk still belongs to the kind of normal
goods. So when income increases, demand for Vinamilk milk will increase.
1.2.3) Tastes and Preferences of consumers
Taste is a factor that represents a consumer's desire to buy, which helps determine the
type of goods consumers want to buy. Therefore, when tastes change, consumer demand
also changes. Therefore, taste is a very important factor that is often concerned by
businesses when they produce and do business. Picking up or creating consumer tastes,
increasing demand (or increasing demand at all prices) will make businesses much more
profitable than usual.
Understanding the importance of taste of consumers in general and for Vietnamese
students in particular, Vinamilk has been developing its dairy product lines to meet the
needs and meet the tastes of consumers also increase the company's demand.
For Vinamilk, the company is always a pioneer in innovation and new product
development, meeting the most rigorous international standards. In particular, Vinamilk
fresh milk products are 100% premium organic (the first European standard organic fresh
milk in Vietnam); Walnut nut soy milk has just launched in the second quarter of 2018;
Vinamilk Optimum Gold infant formula (No. 1 brand for children).


Besides, each customer has the right products.
- For children under 6 years of age, there is 110ml canned milk, children aged 6 and older

and adults have boxes of 180ml, 200ml
- Malnourished or elderly people use calcium-rich pasteurized milk. People with diabetes
and obesity use low-fat, unsweetened milk, without sugar sterilization.
- There are many ways to pack such as paper boxes, paper bags for convenience when
traveling, carrying easily.
- Ordinary people can use many types such as sugar free, strawberry flavored milk,
chocolate,…
However, the target customers of Vinamilk liquid milk aiming at it are children and the
average market.
1.2.4) Expectations
For students with an average monthly income, it can be confirmed that they expect the
price of goods to decrease in the future so that they can buy milk in larger quantities with
the same amount of money.
In addition, consumers' expectations about future income also affect current demand. The
prospect of students' income increase in the future (maybe income from part-time jobs,
subsidies of parents, ...) along with the need to use milk will also make consumption
increase, the demand for Vinamilk milk increases at all prices.
1.2.5) Market size
The more consumers of Vinamilk milk products are, the more demand for these products
at each price will increase, bringing more profits for businesses. Therefore, Vinamilk
mart branches are often distributed in big cities and urban areas where people's living
standards are high.
In addition to continuously expanding and dominating the domestic market, Vinamilk
also strengthens the expansion of the world market. Currently Vinamilk products are
present in more than 40 countries, in many continents and regions such as the US,
Europe, Africa, South - Southeast Asia and the Middle East. Southeast Asia, Myanmar
and Thailand,with increasing demand for milk, are considered to be important potential
markets in the company's strategy to expand internationally in general and ASEAN
region in particular.

2) Supply of Vinamilk dairy products in Vietnam
2.1) Current situation of Vinamilk milk market in Vietnam:


Vinamilk has a strong position in the industry with 50% market share. Vinamilk owns a
strong brand and a wide distribution system with more than 224,000 retail points. Thanks
to the extensive distribution system, 70% of Vinamilk's domestic revenue comes from
rural areas and 70% comes from big cities.
2.2) Determinants of supply
2.2.1) Input cost
Vinamilk's input materials for milk powder are mainly 80% imported from abroad; 100%
fresh milk and sugar are domestic ingredients. Vinamilk is promoting the construction of
stable power supply systems. The company has been having projects to directly raise
dairy cows, in addition to supporting dairy farmers.
The price of production factors directly affects the cost of production and thus affects the
amount of goods that producers want to sell. Typically, on February 12, 2010, Vinamilk
raised milk prices as input materials such as powdered milk increased by about 50%, to
USD 3,750 / ton compared to September 2009 price, the sugar price of this company use
for production also increased to 100%.This has led to a sharp increase in input costs of
enterprises, which forced Vinamilk to raise milk prices.
2.2.2) Technology
Science and technology not only ensure the development but also create a competitive
advantage for businesses. Vinamilk has invested a lot in the world advanced methods and
technologies to improve the quality and quantity of its products such as UHT high
temperature sterilization, industrial fermentation yogurt, condensed milk vacuum,
vacuum packaging industry, dried milk powder ... Most of this is an advanced
technological line of Denmark and Sweden, with synchronous, automatic control,
meeting all requirements. food safety and hygiene as well as expected labor productivity.
2.2.3) Government policies
In addition to the prices of production and technology factors, government policies also

have a strong impact on supply. In 2014, the Government imposed a ceiling price for
milk for children under 6 years of age, which made Vinamilk milk prices fall.
On February 4, 2016, Vietnam officially signed the Trans-Pacific Partnership Agreement
(TPP) in Auckland, New Zealand. After signing the TPP Agreement, the taxes of many
foreign dairy products are much reduced and by 2018, when New Zealand and Australian
dairy products enter the market with zero tax rates will certainly affect the dairy and
business markets. Domestic dairy industry in general and Vinamilk's challenge in
particular, when many Vietnamese consumers carry “ Foreign-goods psychology”


In addition, the Government also has policies to support cow raising to increase Vinamilk
milk.
2.2.4) Seller expectations
Expectations are the predictions and forecasts of producers about future market
developments which affect the current supply. In 2010, Vinamilk's Slogan, "Niềm tin Việt
Nam", expressed its expectation and aspirations for belief about the new generation of
Vietnam, bringing the best benefits to the Vietnamese people. After changing Slogan, in
2010 Vinamilk set revenue of 3602 billion after tax, revenue increased by 51% compared
to 2009, was voted as the best operating enterprise in Asia.
2.2.5) Number of sellers in the market
The number of sellers directly affects the number of goods sold in the market. . Vinamilk
has the following distribution channels:
- Export: Vinamilk sells products (mainly powdered milk and condensed milk) to South
East India, Middle East and Africa countries; Vinamilk's products are available in a
variety of countries such as Cambodia, Thailand, Korea, Japan, China, Turkey, Russia,
Canada, America, Australia ... The company is continuing to search. and expanding
markets to Europe, Africa, South America
- Domestic channel: Vinamilk uses traditional sales channels and modern sales channels.
• Traditional sales channels: This is the main distribution channel of the company.
Vinamilk distributes products to more than 266 agents, then 224,000 retail outlets

throughout the country. The dense distribution system is VNM's competitive advantage
with its current rivals. In addition to major cities, Vinamilk's products are distributed to
rural areas, beyond the reach of foreign dairy businesses.
• Modern sales channel: Vinamilk's products are sold in 600 supermarkets in
Vietnam, contributing 10% of domestic sales. In addition, Vinamilk has three sales
offices in Hanoi, Da Nang and Ho Chi Minh City. The company has established 60 more
stores to introduce Vinamilk products.

3) Growth expectation in the coming years
Currently, VNM's market share has accounted for about 58%. According to the
company's original plan every year the market share increased by 1%. However,
according to statistics, in 2017, the market share of the company has reached a growth
rate of up to 2%, doubling the expected target, so the market share of VNM Milk House


in the next 5 years is expected to be higher: 60% market share. These are positive and
encouraging numbers for many reasons:
Firstly, domestic demand in recent years has increased quite steadily, the aftershock
growth will still be extended in the coming time due to population structure, urbanization
process and increased income.
Secondly, Vinamilk has a strong advantage thanks to its distribution channel. Its products
are delivered to consumers by a system of 226 agents, 600 supermarkets and 224,000
retail points in the country, in addition to distribution points in foreign markets.
In addition, the company also possesses other advantages such as marketing capacity,
competitive pricing, positive volatility in stock prices, or increased competitiveness when
it receives its attention and investment.
In short, Vinamilk's growth is considered stable and quite satisfactory. However, if the
company can come up with strategic directions, maybe we have the opportunity to
witness long steps in the future.

C) CONCLUSIONS
I) CONCLUSIONS
By analyzing the supply-demand market for milk Vinamilk in Vietnam, we see that the
dairy market in Vietnam has great potential. Based on the analysis of demand-supply
analysis and Vinamilk's competitiveness in Vietnam's dairy market, we have the
following conclusions:
- With a long history of being present in the Vietnamese market, Vinamilk has the
ability to identify, understand consumer trends and tastes, which helps the company focus
efforts to develop diverse product categories. and strong, nationwide distribution and
sales network to meet the maximum demand of consumers
- As a strong brand with good quality products, Vinamilk also succeeds in advertising.
It can be said that in all of their advertisements, Vinamilk successfully conveys all
information that has a strong influence on consumer shopping habits.

II) RESOLUTIONS
Therefore, in order to grow stronger and prevail in the fierce competition in Vietnam's


dairy market, Vinamilk needs:
- Vinamilk's dairy products should continue to improve product quality, adding to the
product portfolio with new flavors to attract consumers.
- Improve the capacity of market research and marketing team: implement more
attractive advertising programs, better messages to bring products closer to consumers ...
Build brand positioning strategy for Vinamilk products.
- Implement programs to attract special customers as potential customers and maintain
the number of existing customers,...

THE END