Case of Vinamilk in F&B industry in Vietnam

1. Introduction to Vinamilk operations
Vinamilk was founded in 1976 and has since become the leading company in
Vietnam in the processing and supply of dairy products, ranking among the Top 10
strong brands in Vietnam. Operating under the subsidy mechanism for more than ten
years, Vinamilk, like many other enterprises, only produced according to plan, but
when entering the market economy, Vinamilk quickly seized opportunities, constantly
innovated technology, invested in infrastructure, and diversified products to prepare
for a new journey. Vinamilk has constantly built a distribution system to create a
premise for development from three factories specializing in milk production, namely
Thong Nhat, Truong Tho, and Dialect.Constantly expanding production and
constructing new factories across the country. Vinamilk has also established a broad
and deep distribution network, which it sees as the foundation of its long-term
business strategy. Currently, the company has over 180 distributors and over 80,000
retail locations across the country (Vinamilk, 2021).
1.1 Introduction key products
Vinamilk is constantly introducing new products to the market to gradually develop
products with high profit margins and offer a diverse product portfolio to meet the
needs of a wide range of dairy industry customer segments Vinamilk's key products
include:
Condensed milk: Longevity Milk, Southern Star.
Liquid milk: Vinamilk 100% Flex, ADM.
Yogurt, ice-cream, cheese: Vinamilk yogurt – ice-cream – cheese; Susu, Probi, and
ProBeauty yogurt.
Soy milk and beverage: GoldSoy soy milk, Vfresh, Icy.
(Vinamilk - Vươn cao Việt Nam - Vinamilk, 2021)
1.2 Vinamilk key operation
Vinamilk always focuses on investing and renewing equipment and technology to
improve productivity and efficiency of business operations. Vinamilk milk production
technology is modern when producting with many proccesses below:
Fresh milk at the factory, after being checked for quality and through measuring and
filtering equipment, will be entered into the cold storage system (150m3/tank).

From the cold storage tank, raw milk will go through the processing stages:
Centrifugation, homogenization, pasteurization, cooling down to 4 degrees Celsius
and transfer to the tank ready for UHT sterilization processing.
UHT Sterilization: The advanced pasteurization system heats milk up to 140 degrees
Celsius, then it is quickly cooled down to 25 degrees Celsius, preserving its natural
flavor, nutritional components, vitamins and minerals Products. Milk is transferred to
a sterilized tank waiting for aseptic filling into sterilized packaging.
Thanks to the combination of factors: Advanced processing technology, UHT
sterilization technology and aseptic filling technology, the product can keep its fresh
taste for 6 months without preservatives. .
At the factory, there are automatically operated LGV robots that will transfer finished
pallets to the smart warehouse area. In addition, LGV transports packaging rolls and
packaging materials to the machines automatically. The LGV robot system can charge
its own battery without human intervention.
(Công nghệ sản xuất sữa của vinamilk diễn ra như thế nào?, 2021)
Figure 1: Vinamilk’s milk Production
Source: sangiaodichcongnghe.com

2. External environment impacts on VNM operations
2.1 Macro environment
Global
The COVID-19 pandemic is sweeping the world, wreaking havoc on the global
economy in unprecedented ways. The supply chain is disrupted, affecting global trade
and investment activities and, as a result, slowing global economic growth in general
and in many countries and regions in particular (Tác động kinh tế - xã hội của đại dịch
COVID-19 tại Việt Nam, 2021). COVID-19 has had a significant impact on Vietnam,
particularly on the economy, making it difficult for businesses to do business and
export. In particular, Vinamilk is waiting for a license to export milk to China, but due
to the Covid-19 epidemic, the approval of the license will likely be delayed, this
affecting the export growth plan in the future (Thế giới di động, PNJ, Vinamilk,
Masan sẽ bị ảnh hưởng như thế nào do dịch virus corona?, 2021).
Threat
The COVID-19 pandemic has posed serious challenges to the economy, and the dairy
industry has also suffered significant losses. To overcome these challenges, Vinamilk
must be flexible in its business strategy to stabilize production and increase exports.
Moreover, Vinamilk must develop timely response plans to achieve the dual goal of

ensuring growth and stabilizing production and business activities while adhering to
epidemic prevention and control regulations.
Agreement
Việt Nam tham gia ký kết Hiệp định EVFTA là bước tiến lớn để đưa nư ớc ta từ m ột
nước đi sau, lần đầu tiên vươn lên thu ộc nhóm nư ớc đi đầu trong khu vực trong tiến
trình chủ động hội nhập kinh t ế quốc t ế. Điều này sẽ giúp các doanh nghiệp Việt Nam
cũng như Vinamilk tham gia sâu vào chuỗi giá trị khu vự c, nâng cao năng lự c sản
xuất, xuất khẩu và cạnh tranh cũng như có điều kiện để phát triể n hoạt động sản xuất
kinh doanh và khẳng định vị thế mới của mình trên trường quố c tế (Tác động của
Hiệp định Thương mại tự do Việt Nam - Liên minh châu Âu (EVFTA) đến hoạt động
xuất nhậ p khẩu, định hướng cho doanh nghiệp Việt Nam, 2021).
Opportunities: Việt Nam ký kết Hiệp định EVFTA là cơ hội cho Vinamilk có điều
kiện thâm nhậ p, khai thác các thị trường mới. Cụ thể , Trong 3 tháng đầ u năm 2020,
xuất khẩu chính của Vinamilk là UAE (chiếm 75% doanh thu xuất khẩu). Ngoài các thị
trường Philippines, Campuchia, Vinamilk đã xuất khẩu sữa tươi 100% organic theo tiêu
chuẩn châu Âu sang thị trường Singapore và được đó n nhậ n tích cự c – thị trường vố n
nổi tiếng khó tính. Tính riêng tại thị trường Trung Quố c đến hết năm 2019, sản phẩm
của Vinamilk đã có mặt tại 8 tỉnh thành quố c gia này và hiện diện tại các chuỗi siêu thị
lớn như Hema của Alibaba (ONLINE, 2021).
Source: VIRAC

Threat: Đây cũng là thách thức mà Vinamilk phải đố i mặt vì trước khi EVFTA chính
thức được thự c thi, sữa nhậ p khẩu từ châu Âu chịu thuế suất 5% - 15%. Nhưng kể từ
đầ u tháng 8-2020, mức thuế sữa nhậ p khẩu từ thị trường này vào Việt Nam sẽ giảm
còn 3,5% rồi đến 0% theo lộ trình 3 năm. Điều này đã dấy lên mố i lo ngại về việc
cạnh tranh giữa sữa nhậ p khẩu và sữa sản xuất trong nước (Giảm thuế nhậ p khẩu sữa
bột tăng áp lự c cạnh tranh, 2021).
Economic
GDP
Tốc độ tăng trưởng GDP
Năm 2017, tăng trưởng GDP của Việt Nam đạt 6,81%, cao nhất trong10 năm trở
lại đây và vượt chỉ tiêu 6,7% Quốc hội đề ra hồi đầu năm. Không những vậy, thu
nhập bình quân đầu người (GDP/người) cũngđược cải thiện đáng kể với con số
2.385 USD/người, tăng 170 USD so với năm trước
Với tốc độ tăng trưởng GDP như trên, dẫn đến nhu cầu sử dụng hàng hóa dịch
vụ cũng như yêu cầu chất lượng sản phẩm cũng tăng lên.Vì vậy, các doanh
nghiệp cần điều chỉnh quy mô sản xuất, chất lượng và các thay đổi sản phẩm cho
phù hợp với thị trường về kinh tế.
Social
Tỉ lệ người VN uống sữa theo độ tuổi
Nhu cầ u đố i với các sản phẩm sữa có giá trị cao cũng được dự báo sẽ tăng mạnh do
dân số trẻ và số lượng người thuộc tầ ng lớp trung lưu ở các đô thị tăng. Những đố i
tượng khách hàng này thường có nhu cầ u trải nghiệm những sản phẩm mới, đặc biệt
là các sản phẩm hữu cơ, xu hướng sử dụng sản phẩm sữa hạt và các sản phẩm dinh
dưỡng y học. Nhu cầ u tiêu thụ bơ và phô mai sẽ tăng với tố c độ nhanh chó ng. Sữa đặc
và sữa chua cũng là những mặt hàng sữa được cho là sẽ có lượng tiêu thụ cao.
 Hiện nay dân số Việt Nam đang trên đà phát triể n. Năm 2017, với tổng dân số
trên 91 triệu dân, có nghĩa là số lượng trẻ em ngày càng nhiều. Đây là điều kiện
thuậ n lợi cho ngành công nghiệp sữa và các sản phẩm được làm từ sữa. Việc dân
số tăng nhanh tác động rất mạnh đến tình hình sản xuất kinh doanh của Vinamilk.
Đây sẽ là cơ hội tố t để công ty thu hút thị trường và mở rộng thị phầ n.
 Khoảng 1/3 dân số Việt Nam là ở độ tuổi 16 đến 30. Ở nhó m tuổi này họ sẽ có xu
hướng sử dụng những loại nước uố ng dinh dưỡng đa dạng hơn. Theo dự báo của
VIRAC, sản lượng tiêu thụ sữacủa Việt Nam sẽ đạt trên 2,5 triệu lít vào năm
2020.

Thói quen uống sữa
Hiện nay, thó i quen uố ng sữa ngày càng trở nên phổ biến đố i với người Việt, đặc biệt
là đố i với trẻ em. Tuy nhiên, mức bình quân tiêu thụ sữa ở Việt Nam vẫn còn thấp,
năm 2020 mới chỉ đạt 26 lít/người/năm, trong khi Thái Lan là 35 lít/người/năm,
Singapore là 45 lít/người/năm và các nước châu Âu từ 80 – 100 lít/người/năm. Do
vậ y, Vinamilk cầ n có các chiến lược quảng bá nhằm khẳng định vai trò và chất lượng
của các sản phẩm sữa, tăng nhu cầ u tiêu dùng sữa ở mọi lứa tuổi.
Source:nhipsongdoanhnghiep.cuocsongantoan.vn
Income
Because of the improving socioeconomic situation in recent years, per capita income
has increased significantly by 2779 USD/person/year, and people's lives are becoming
increasingly better (Người Việt thu nhậ p bình quân 2.779 USD năm 2021). As a
result, they are beginning to pay more attention to their health and are willing to pay
increasingly higher prices for dairy products. In particular, dairy product revenue in
Vietnam reached VND 64.4 trillion in 2021, a 10.3% increase over the previous year
(Sữa và các sản phẩm sữa, 2021). With these positive forecasts, this will be an
opportunity for a number of dairy companies as well as Vinamilk to invest in building
factories and expanding capacity to meet market demand.
Opportunities: Recognizing the growing demand for customer purchasing power, as
well as the increasing demand for customer health and product quality, Vinsmilk has
built the system of 13 factories built by Vinamilk to connect with 13 dairy farms

across the country, combined with a "huge" distribution system, has really created a
great strength for Vinamilk in terms of supply chain. Vinamilk is currently able to
supply 5.1 million liters of liquid milk per day (equivalent to more than 28 million
milk cartons), meeting the needs of both domestic and export markets (Vinamilk,
2021).
Technology
The development of science and technology is also an advantage that helps Vinamilk
to improve the quality and quantity of its products. Specifically, Vinamilk has built a
model of Vinamilk Tay Ninh Dairy Farm - the largest dairy resort in Asia - which is
implemented by Vinamilk in the digital revolution 4.0 comprehensively from input to
output process according to US, Japanese technology, Europe in its entire breeding
and management model, in order to ensure good health, high milk yield, and the best
milk quality.
Opportunity: Vinamilk seized this opportunity and successfully utilized technology
in the production process to make Vinamilk the most modern factory in Vietnam and
maintain its leadership position in key dairy products for many years. Thus, Vinamilk
will have a lot of potential once it can establish its brand in the country and expand
into the international market.
Threat: Furthermore, this is a threat to Vinamilk as science and technology advance,
so do companies in the industry. Hence the issue is how to improve Vinamilk's
product quality, eye-catching packaging designs, highly competitive product prices
suitable for everyone, and win as many markets as possible.
Environment
Vietnam's climate is tropical and monsoonal in nature. This harms Vinamilk's raw
milk materials and cow's milk products, such as perishability and easy deformation if
not stored and handled properly, which directly affects the quality of Vinamilk's milk.
Despite the hot and humid climate, the natural conditions are generally favorable
for the development of the dairy industry, particularly in the provinces of Tuyen
Quang, Lam Dong, Ba Vi, Nghe An, Son La… Vinamilk has taken advantage of

this advantage by signing milk sales contracts with Vinamilk's farms and farmers
with a total herd of cows to supply milk to the company 120,000 cows. Supplying
about 750 tons of raw fresh milk per day to produce fresh milk products. This
allows Vinamilk to produce enough raw materials while also lowering costs, but the
quality of the milk remains unchanged.
Opporutunities: The company will be able to easily obtain raw materials for
production needs such as raw milk, sugar, and so on, at a much lower cost than the
production of products that require the import of raw materials from abroad.
Furthermore, the ingredients are diverse and always fresh, avoiding the loss of
original nutrients that occurs when ordering from other sources.
Threat: The number of cows and the amount of milk in each region vary due to the
influence of weather and climatic conditions. Because of the extreme weather in many
places, the amount of milk is affected in terms of uniformity in quality and quantity
stability.
2.2 Micro environment
 Barganing power of suppliers
Vinamilk's main goal is to ensure a stable supply of raw materials that are not only
high quality but also high quality by developing long-term and sustainable
development goals for major strategic suppliers both at home and abroad. at a very
reasonable cost
Dairy farms are vital strategic partners for Vinamilk in providing the best products to
consumers. Milk purchased from farms must always meet the quality standards agreed
upon between Vinamilk and domestic dairy farms, thanks to Vinamilk's assistance as
well as these suppliers' capital and technical expenses.
b, Imported raw materials.
Name of Supplier Products Supplied
Fonterra (SEA) Pte Ltd Milk powder
Hoogwegt International BV Milk powder
Perstima Binh Duong Tins
Tetra Pak Indochina Carton packaging and packaging
machines

Figure 2: Vinamilk's major suppliers
Fonterra is the world's leading multinational group in the field of milk and dairy
products, accounting for one-third of the global trading volume. This is the primary
supplier of high-quality milk powder to many well-known companies around the
world, including the Vinamilk Company. Hoogwegt International is a major player in
the global dairy market, supplying milk powder to manufacturers and consumers in
Europe, in particular, and around the world in general.
 Vinamilk is highly dependent on and under pressure from suppliers because the
majority of its production materials are imported. Vinamilk's production costs
have risen in recent years due to the high cost of raw materials.
Bargaining power of buyers
Domestic
Vinamilk is the leading enterprise in Vietnam in the production of milk and dairy
products. Currently, Vinamilk accounts for about 40% of the national market.
Currently, the company has more than 240 distributors on Vinamilk's product
distribution system and over 300,000 points of sale nationwide. Sales through all
Supermarkets nationwide.
Vinamilk focuses on business performance mainly in the Vietnamese market, which
accounted for about 80% of revenue in the past 3 financial years.
 Therefore, the bargaining power of the customer is relatively low.
Export market
Vinamilk also exports products outside Vietnam to countries such as Australia,
Cambodia, Iraq, Kuwait, The Maldives, The Philippines, Suriname, UAE and the US.
The main markets by region are classified as follows:
Region Number of markets
ASEAN : 3 (Cambodia, Philippines and Vietnam)
Middle East : 3 (Iraq, Kuwait, UAE)
Rest : 4 (mainly Australia, Maldives, Suriname and USA)
Total : 10
Vinamilk is not a big brand in the export market, so in order to penetrate the export
market, Vinamilk can only participate in the distribution system of major distributors

and face a lot of competitive pressure from This customer, plus the fastidiousness and
high requirements of the foreign market, is also a great pressure for Vinamilk.
Threat of new entrants
For Vinamilk in particular and the dairy industry in general:
• The attractiveness of the industry: the profitability of dairy enterprises is quite high
and the market has a lot of potential.
• Barriers to enter the industry: Technical factors as well as capital or distribution are
considered to be not too difficult, so the barriers to entry are relatively low.
=> So the challenge of potential competitors in the future for Vinamilk is huge.
Threat of substitutes
Due to various reasons, many customers cannot use dairy products. So the
introduction of milk substitutes is an objective thing in society. The strong
development of science has helped us to create many effective milk substitutes.
Some alternative products can be mentioned are milk products made from grains such
as soybeans, rice, glutinous rice, corn, etc.
However, because milk is a specific, essential and important product for humans.
Therefore, the pressure from substitute products for Vinamilk's dairy products is not
much, but Vinamilk should also strengthen research work so that its dairy products
can best meet the needs of customers.
Degree of rivalry
Vinamilk and Dutch Lady are the two largest dairy companies in the country,
accounting for nearly 60% of the market share.
Foreign milk such as Mead Johnson, Abbott, Nestle... accounts for about 22% of the
market share, with the main products being powdered milk. Currently, domestic dairy
manufacturers are still under increasing competition pressure due to the reduction of
tax on imported milk.
The remaining 19% market share belongs to about 20 small-scale dairy companies
such as Nutifood, Hanoi Milk, Ba Vi…
Product line Competitors
Condensed milk Dutch Lady, Nestle
Milk and Yogurt drink Dutch Lady, Nutifood, Hanoi Milk, Lothamilk
Power milk Abbott, Mead Johnson, Enfa, Dutch Lady,

Nutifood, Anlene
Yogurt Dutch Lady, Nestle
Coffee Nestle, Trung Nguyên
Figure 3: Major competitors of Vinamilk
=> Although Vinamilk is the leading dairy company in the country, but Vinamilk also
has to face a lot of competitive pressure from other competitors.
3. Operation management and leadership in VNM
3.1 Introduction to the interviewee
I had an interview with Ms Nguyễn Thị Thanh Hòa- Supply Chain Director of
Vinamilk. She has been the Managing Director of Vinamilk for more than 20 years
(1999-present). She has held many senior management positions at Vinamilk,
including Deputy General Director, Executive Director of Production and Product
Development, and currently is the Supply Chain Director (Hệ thố ng Quản trị |
Vinamilk Việt Nam - Vinamilk, 2021).
3.2 Roles and responsibilities of interviewee
Manage the entire operation of the supply chain
She manages all operations related to the supply chain, including purchasing and
inventory control of raw materials, natural resources, supplier selection, supply and

distribution of finished products. The supply chain director makes sure this process is
as efficient and cost-effective as possible.
She also focuses on safety, financial issues, and business growth. Due to the nature of
global business as well as the proliferation of lean manufacturing principles, the
duties and roles of this position are becoming increasingly important.
Data analysis
In the role of connecting suppliers and users, she analyzes available data collected
about products, services as well as old customers to understand consumer needs. use
and shape the future of products and services for businesses.
She needs to ensure the efficiency of getting a product from the supplier to the target
customer. She needs to understand what customers want and need, how to choose
suppliers, how to choose products to satisfy the requirements of all parties. She not
merely the distributor of the product, she must be the one to orient the consumer
trends.
Make a strategy and plan
This position is also responsible for setting specific strategies and goals. These
strategies and goals should serve and support the smooth functioning of the supply
chain.
From the analysis and predictions, She will come up with specific supply plans,
monitor business forecasts to identify any impact on the supply chain, implement
mitigation strategies for waste and develop supply chain management processes.
In addition, she will develop budgets, policies, and procedures to support the
functional infrastructure.
Connect with suppliers and users
She is also responsible for developing relationships (including communication and
negotiation) with product and service providers. She negotiates with suppliers to
minimize raw material costs, material transportation costs, and develop performance
tracking processes.

3.2Theories apply
She applied lean production, especially in minimizing waste pillars to help
Vinamilk minimize wastes.
Currently, Vinamilk is wasting transportation and inventory.
Transportation: According to the regulations on transporting milk, it is only allowed
to have a maximum of 8 boxes on top of each other, but many small Vinamilk milk
distribution agents load up to 15 boxes, and are not careful in transportation, this
greatly affects the product.
Inventory: Due to the increasing demand for milk of the people as well as to ensure
the continuous production process and limit fluctuations in supply, Vinamilk has
increasingly stocked an inventory of various types of milk. , raw materials, unfinished
products to meet consumer demand. Specifically, the number of Vinamilk's
inventories increased sharply because Vinamilk stepped up the storage of raw
materials in the context of high prices.
Specifically, the inventory target increased by nearly 32% compared to the beginning
of the year to VND 6,465 billion due to a sharp increase in on-the-go purchases and
raw materials. Vinamilk's inventories increased sharply in the first quarter amid the
unprecedented increase in raw material prices (Vinamilk: Accelerating the storage of
raw materials in the context of high prices, 2021). However, maintaining inventory
incurs storage costs, moreover, these items are all serving items such as food needs,
because food has a shelf life, so it is difficult to preserve it for a long time. Therefore,
the cost of preservation and the opportunity cost of investment will be very high.

Figure 4: Financial statements for the first quarter of 2021
Source: Notes to the consolidated financial statements for the first quarter of
2021.
3.3 What does the interview do to improve operation?
Transportation: The company should invest in infrastructure enough to meet the
needs of the business to avoid the situation of goods stacking, leading to the
preservation of damaged goods and reduced quality.
Inventory: It is necessary to have the most accurate forecasts of market demand to
reserve a reasonable amount of inventory and to be able to manage this item at the
most optimal level, the company needs to create a strict management policy. From
input selection, until goods are delivered to warehouse, it is necessary to control the
quantity and quality of raw materials and finished products in stock to ensure that
there is no loss, loss or quality reduction.
To solve this problem with inventory, she applied the EOQ model to calculate the
optimal order quantity of Vinamilk.
4. Evaluation of operation management in VNM (AD+DIS)
5. Recommendation