Record high input material prices are putting strain on Vietnam's dairy industry
Aside from the fall in domestic milk market business, the global price of raw milk is rising by 60%, causing domestic firms to suffer, forcing them to raise prices and find ways to balance expenses. According to the in-depth analysis, the price of dairy components in Europe hit new highs of 5,100 euros/ton twice in the first quarter of the year, while in South America, the price hit new highs of 4,300 USD/ton. Vietnam is importing more raw milk from the United States this year compared to the same time last year. As for raw materials imported from New Zealand, the main import source of the Vietnamese dairy market, the impact of Covid-19 has led to a decrease in output, leading to a shortage of labour in Vietnam. This has added to the growth in the cost of raw materials used by businesses in the domestic dairy industry.
Many domestic dairy market brands have had to adjust their prices due to rising input material costs. Yoghurt, liquid milk, and powdered milk have all been modified to increase by 5-10% in the first months of the year, as stated in the detailed report.
According to economists, there is a favourable signal that milk powder prices will cool down in the second half of 2023 due to reduced import demand from China and weak demand in the global milk market in the short term. Since the cost of raw materials is expected to decrease by 2023, this bodes well for the dairy industry's gross profit margins. The price of milk powder (USD/ton), a raw material used in the manufacturing of milk, has also decreased. As of March 21, 2023, milk powder prices have declined by 29.8% over the same period and are 32.1% lower than the peak in the same period in March 2022.
As a result of weakening global milk consumption demand and decreased import demand in China, milk powder prices are anticipated to continue to decline through the end of 2023. Conversely, milk powder production is projected to increase in 2023.
Possible revitalization and growth of Vietnam's dairy market in 2023
Each year, about 1,000,000 babies are born in Vietnam, making it the country with the highest per capita consumption of dairy products during infancy. The Vietnamese dairy market can expect an increase in demand as the country's population rises. During the forecast period (2023-2028), the size of the dairy market is projected to increase from $613.96 billion USD in 2023 to $840 billion USD in 2028, representing a CAGR of 6.47 percent. Experts' predictions for the 2023 milk market include a drop in milk powder prices as a result of weaker import demand from China and a possible slowdown in global milk consumption demand. As a result, the pressure from raw material costs will ease in 2023, allowing dairy producers to recover their gross profit margins.
The Vietnamese dairy market must undergo a shift towards modernization in order to withstand the global raw material price storm. This transformation must be accompanied by the development of sustainable and diversified green trend products.
Intention to challenge the expanding dairy industry's giants
Numerous forecasters predict that the Vietnamese dairy industry will continue to struggle this year, as domestic channel consumption falls further in light of the country's deteriorating economic position. Meanwhile, it does not seem that growth in export markets can make up for an inadequate domestic market. Macroeconomic issues might lead milk consumption demand to increase slowly, hence causing income to grow slowly. Vinamilk has determined that rivals in the dairy sector are undertaking actions that pose a gradual threat to Vinamilk's market dominance in specific product areas, and the business is thus considering raising pricing.
Meanwhile, another industry leader, TH Milk, is forging forward with innovative green initiatives. Adopting initiatives and innovation in transformation, as well as the application of modern green technology in energy management, are the cornerstones of the approach TH Group sets for achieving its aim of lowering greenhouse gas emissions. efficiency at TH's manufacturing facilities while harnessing green power...
According to General Director Richard Kiger of FrieslandCampina Vietnam (FCV), Dutch Lady, a prestigious fresh milk brand owned by this firm, is oriented towards sustainable development as its competitive advantage factors that distinguish the Dutch Lady.
The Covid-19 epidemic may have had a significant negative influence on the world economy, even causing deaths, yet it has caused people to reflect on all activities and to appreciate them more. As a result, at this challenging times for Dutch Lady, sustainable development is the most suitable and opportune route.
This approach aligns with the global nutrition company Royal FrieslandCampina's vision of "Nourishment from Nature," which includes promises to provide high-quality nutritious goods to customers globally while decreasing environmental impact. In Vietnam, the strategy focuses on four primary goals: reducing the effect of climate change, utilising ecologically friendly packaging, improving farmers' livelihoods, and supplying customers with high-quality nutritious food.
Source: Vietnam Food Processing Industry Report - VIRAC