Dairy producers like Vinamilk gain more market share during the pandemic

According to SSI Research dairy industry update report, domestic demand for dairy products is less affected by the COVID-19 outbreak. Meanwhile, milk consumption accounted for 12% of FMCG consumption in Vietnam in the first 6 months of 2020, unchanged from 2019, according to Nielsen.
Vinamilk and Moc Chau Milk achieved domestic sales growth of 2.5% and 9.7% during the review period, outperforming the overall industry and its peers. SSI Research believes that Vinamilk has gained more market share during the pandemic, and is projected to achieve 8% growth in revenue for the whole of 2020, thanks to its diversified product range and extensive distribution network.
Although milk is an essential product, demand from low-income consumers could still be affected by the negative impact of the COVID-19 pandemic. According to the General Statistics Office, employees’ income decreased by 5.1% in the 2nd quarter compared with the same period last year. However, research suggested that the impact on rural areas will be more severe.
Vietnamese consumers is expected be more price sensitive between 2020 and 2021. Premiumisation is also likely to slow down.
In terms of raw milk prices, USDA forecast milk prices to drop by 8.5% in 2021. Rabobank estimates Australia’s whole milk powder and skim milk powder prices to continue to decline quarterly from 1st quarter 2020 to 3rd quarter 2021, causing average milk prices to decrease by 10-11% in 2021.
Milk is also one of the top products bought over e-commerce platforms during the pandemic. Although domestic brands dominate the market, competition from foreign brands is still present.
Meanwhile, the EVFTA free trade agreement is expected to eliminate the 5-20% tariffs on European dairy products within the next 3 to 5 years. Domestic dairy producers like Vinamilk, TH True Milk and Moc Chau Milk have also benefited from obtaining the green light to export to China.