Dairy companies resume production of condensed milk

Dairy companies resume production of condensed milk

Dairy producers have stepped up production of condensed milk following a slowdown in growth from 2009 to 2014.

At its peak, about 312 million cans of condensed milk were being produced by domestic companies a year prior to the slowdown, while foreign-invested enterprises in Vietnam produced 92 million cans a year. The growth rate for production during this period was about 10 percent a year.

However, growth slowed in 2009-2014 to 3 percent per annum, the lowest growth rate among dairy products. The slower sales were attributed to changes in the taste of urbanites, who prefer fresh milk.

This trend was confirmed by a report from Habubank Securities that showed the sweetened condensed milk market was saturated with a low CAGR (compound annual growth rate) of 3 percent.

Such limited growth apparently dissuaded Vinamilk, which holds 79 percent of the market share, and Dutch Lady, with 21 percent of the market, from increasing investment in condensed milk.

Vinamilk, for example, did not include condensed milk as one of its eight dairy products in its promotion campaign.

So, it was quite a surprise when Vinamilk in January received a license to build a $24 million dairy factory in Cambodia under a cooperation contract with Cambodian Angkor Dairy Products Company Ltd.

Once the factory becomes operational, it will produce different kinds of dairy products, including 80 million cans of condensed milk.

Analysts believe that Vinamilk, which is striving to retain its existing market share, is also trying to expand its market as Friesland Campina Vietnam is investing less in the condensed milk market segment.

If there are only two main rivals in the market, Vinamilk believes that it can still make high profits from condensed milk products. In such a scenario, they would not have to spend much money on advertisements and marketing.

Distributors happy about sales

It is too early to say if the condensed milk market will prosper again. However, it is certain that the market will not die, as previously predicted.

New condensed milk brands have appeared on the market, including imports from Thailand, Malaysia, Singapore and the Netherlands, such as Nestlé Laitconcentrésucré 397g, Carrefour - Laitconcentresucre 397g, F&B and La Rosée.

There have been no official statistics about the sales of condensed milk products, but it is clear that a wide range of products has been available at the big retail chains like Co-op Mart, Metro and Big C.

While Hoa Sen Food Company has stopped importing and distributing Thai Dairy Industry’s products in Vietnam because of low profits, other distributors have jumped on the bandwagon.

Hung Dung Company Ltd, which has been distributing fast-moving consumer goods (FMCG) for five years, for example, has begun importing Singaporean F&B condensed milk for domestic sales.

Mavi International Company Ltd has also been importing sweetened condensed milk and trying to expand the domestic market. A representative of the company said La Rosée, a product of Thai Tea Pot, has been selling well in Buon Ma Thuot City, and in Khanh Hoa and Phu Yen Provinces.

vietnamnet