Vinamilk pins hope on Philippine market

The Vietnam Dairy Products Joint Stock Company (Vinamilk) has flexibly adapted to difficulties caused by the COVID-19 pandemic by applying advanced technology into production, negotiating raw material purchase contracts with suppliers, and boosting export of the products. Particularly, forming a joint venture to gain a bigger share in the Philippine markets is expected to bring about the high expectation for the company.

A production line of Vinamilk. (Photo: VNA)
A production line of Vinamilk. (Photo: VNA)

In the first six months of this year, the company earned VND28.9 trillion (US$1.26 billion) worth of net revenue and VND5.5 trillion (US$232 million) worth of after-tax profit. The figures decreased by 3% and 7.3% compared with the same period last year.

The decline was attributed to lower demand and a surge in the price of raw materials.

Nevertheless, the company posted a record high in net revenue of VND15.71 trillion (US$682.57 million) in the second quarter of this year, a year-on-year rise of 1%, according to its financial report.

Its after-tax profit exceeded VND2.86 trillion in the period, a year-on-year decline of 6.8% but up 10% against the first quarter.

The company’s net revenue also surged 18.5% against the previous quarter.

However, in the coming months, it will be difficult for Vinamilk to maintain its domestic revenue at the same growth rate as July this year, due to the impact of social distancing measures on people's income, according to Ho Chi Minh Securities Corporation (HSC).

New opportunity

Vinamilk said on August 17 that it has forged an alliance with Del Monte Philippines Inc (DMPI), a subsidiary of Del Monte Pacific Limited.

Total investment capital for the first phase is US$6 million, in which, Vinamilk and its partners contribute 50% each.

DMPI is a producer and distributor of healthy food and beverages including ready-to-drink pineapple juice. It has been operating for more than 95 years in the Philippines.

The joint venture will import dairy products from Vinamilk, and market and distribute them in the Philippines through DMPI. It will use the co-brand Del Monte-Vinamilk for its products and promote the brand strength of both businesses. The joint venture will take advantage of Vinamilk’s strength in production and Del Monte in distribution.

For many years, Vinamilk has been an original equipment manufacturer (OEM) for several dairy companies in the Philippines. Last year, export revenue of processed goods to the Philippines reached US$7 million, equivalent to 3% of Vinamilk's export revenue.

The HSC said a joint venture with DMPI did not affect Vinamilk's export of processed goods to the Philippines but brought about a new source of income.

The first-year revenue of the joint venture is estimated at US$8.8 million and the potential for compound growth is around 50% per year in the medium term. Accordingly, the joint venture will contribute 0.4% to Vinamilk's net revenue growth in the first year of operation and 0.5% in the following year.

This is positive news for Vinamilk. Joint ventures with leading large enterprises are creating expected growth thanks to expanding market and businesses lines. Enterprises also focus on developing modern channels and taking advantage of the sales capacity of partners to optimise selling costs and business management.

In fact, Vinamilk is effectively exploiting export markets. Its export revenue reached VND2.7 trillion in the first half of this year, up 13.1% over the same period last year and contributing 9.6% of the company's total net revenue.

According to Vinamilk, the increase mainly came from the Middle East market, accounting for 70-80% of export revenue and new orders from the US and Europe which showed signs of recovery in consumer demand in the world.

Business results of overseas subsidiaries also gradually recovered.

Driftwood - a subsidiary of Vinamilk with its head office in California, the United States, has double digit growth in the second quarter of this year, after experiencing a deep decline of 20% in the first quarter thanks to reopening of schools in the US after more than a year of closure due to COVID-19.

Angkormilk, another Vinamilk's subsidiary in Cambodia, also enjoy a year-on-year increase of 3% in the second quarter of 2021.