Vietnam dairy sector heats up with eye on exports

15-Jan-2018 - Last updated on 15-Jan-2018 at 15:17 GMT

Vietnam's dairy sector continues to target outside markets such as China to increase its exports. ©GettyImages/pixinoo

The Vietnam Ministry of Agriculture and Rural Development is targeting an increase in exports of 3% in 2018 to reach $40bn, roughly half of which will come from “cultivated products” such as dairy.

The Ministry of Agriculture and Rural Development said it will encourage the development of high-tech organic agriculture while restructuring state-owned enterprises, reshuffling agro-forestry companies and submitting a project on developing 15,000 agricultural cooperative alliances by 2020.

In a similar effort, the Department of Livestock Production (under the Ministry of Agriculture and Rural Development) aims to increase its production of milk by 14.1%.

Currently, China represents Vietnam’s most immediate dairy export opportunity as demand for dairy products is expected to surge by 37% to more than $40bn in the next five years, surpassing the US as the largest dairy consumption market, according to Euromonitor.

Last year, Vietnam’s largest dairy company Vinamilk signed a memorandum of understanding (MoU) on cooperation in supplying dairy products to the Chinese market, a prerequisite for the official export of Vinamilk products to China.

China’s per capita milk consumption remains relatively low compared to other markets, signaling potential for dairy sales growth, general director of Vinamilk Mai Kieu Lien said.

Recent investment in Vietnam dairy sector

Vietnam has been a hotbed of investment especially within the dairy sector with Vinamilk maintaining its dominance in the market, representing 80% of total value dairy sales in 2017, which has attracted foreign investors and led to the construction of new dairy processing facilities.

In November 2017, Singapore-based Jardine Matheson paid $616m for a 5.5% stake in Vinamilk.

“Vinamilk possesses many competitive advantages including a good reputation, strong financial ability, active new product developments backed by good marketing and promotional activities, a diverse product portfolio and a nationwide distribution network,” Euromonitor said.

Vietnam’s TH Group, producers of TH True Milk brand, recently sent 1,100 dairy cows from the US to the company’s $2.7bn dairy farm complex in the Moskva Province of Russia. The dairy farm is TH Group’s first dairy project outside of Vietnam and it is considering additional investments in Russia.

TH Group has also started construction of a dairy farm and processing facility in south-central Vietnam.