Vinamilk: Comprehensive Macro-Environment Analysis Report

This report provides a comprehensive macro-environmental analysis of Vinamilk, a leading dairy company in Vietnam. It examines the impact of political factors, such as government stability and anti-corruption efforts, on the company's business operations and investment attraction. The analysis also explores economic factors, including GDP growth, consumer behavior, and the effects of WTO membership on the dairy industry's competitiveness. Furthermore, the report delves into social factors like population demographics and consumer health concerns, as well as technological advancements in dairy farming and processing. Finally, it considers environmental factors, focusing on water pollution and climate impacts on the industry. The report highlights Vinamilk's strategies to navigate these challenges, including product innovation, market expansion, and technological adoption, to maintain its market share and achieve sustainable development.

1. Introduction
Vinamilk was established on the basis of taking over 3 dairy factories left by the old regime in
1976. In 1985, Vinamilk was honored to get the Third-Class Labor Medal. Their industry is
beverage. Their products are fresh milk, sweetened condensed milk, milk powder or yogurt.
2. Analysis of macro environment
2.1. Political factors:
Vietnam’s political stability is highly valued compared to other countries in the region. Over the
past decade, Vietnam has become the center of FDI attraction with a steady growth over the
years at 10,4% from 2013 to 2019 (reached 16.2 billion USD in 2019- an increase of 81%)
(baotintuc, 2020). Therefore, stable political background positively affects Vinamilk’s business,
attract investors and bring sustainable development to Vinamilk.
According to data released by Transparency International, the Corruption Perception Index of
Vietnam in recent years has increased, showing a positive trend with the anti-corruption efforts
of the party and government. Specifically, Vietnam reached 33/100 points, ranked 117/180
globally in 2018 and increased 4 points in 2019 compared to 2018, ranked 96/100 globally (tcnn,
2020). Accompany with the government against corruption, Vinamilk always focuses on
complying with the law and this is mentioned in the Code of Conduct and internal regulations of
the company. They have a fraud control system, compliance committee, legal department or
internal declaration control to prevent and deal with corruption. Anti-corruption rules in
Vinamilk are clearly set out and are communicated to all employees in different ways: directly
through management, superior or send email to staffs. They also have prevention activities such

as conflict of interest declaration, awareness training, integration training for new employees,
fraud investigation and periodic reporting (Sustainable development report, 2019).
Vietnam is a mixed economy which private freedoms are restricted and controlled the economy
by the government; therefore, government plays a crucial role in economy. The government also
offers many taxes policies to assist the milk industry in general and Vinamilk in particular.
2.2. Economic factors:
GDP has rose in Vietnam. Specifically, GDP in 2019 achieved impressive results, with 7,02%
exceeding the target set by National Assembly. This is the second consecutive year that
Vietnam’s economic growth has reached over 7% since 2011 (baoquocte,2019). Vietnam’s fast-
growing economy has impact positively on domestic purchase and Vinamilk in particular.
“Brand Footprint” is always a prestigious ranking because it reflects consumer behavior when
built on a “Consumer Reach Points” (CRP). This is a measure of the household in the study
choosing to buy a brand and how they often buy. According to the report in 2020, Vinamilk’s
CRP are at the top of the chart and help them become the brand that Vietnamese consumers
choose to buy most in eight years. In 2020, despite the Covid pandemic, thanks to Vinamilk
building a strong foundation in the domestic market, the first quarter business results, revenue
growth of 7,3% compared to the same period in 2019, reached 14.153 billion VND (nhandan.vn,
2020). To meet the shopping needs of consumers, the company always improves labor
productivity, product quality and bring to the market high-end products such as baby milk
powder Organic or drinking yogurt. The company regularly updates the changes of the economic
environment, assesses and analyzes the effects then takes appropriate action for the company’s
goals.

Since Vietnam officially joined WTO in 2006, the economy has increasingly integrated with the
region and the world and promoted economic growth. Vietnam’s economy still maintains an
average growth rate of nearly 7% per year and in 2018 reached the highest level in a decade-
7,08% (tapchitaichinh, 2019). After 13 years of joining, Vietnam has gained many important
achievements and raised the country’s status in the world. However, joining WTO also put the
dairy processing industry into more fierce competition, including Vinamilk. The main reason is
that many countries in the organization WTO are producing milk with very low prices, low
production costs but the quality of the product is still guaranteed. This also has negative impact
on economy of Vinamilk. Nevertheless, they are trying to develop product groups suitable for
domestic consumption to maintain market share. Vinamilk implements a series of customer care
programs, supports farmers to develop dairy herds and establishes concentrated cow breeding
areas for high productivity to reduce production costs for farmers and preserve in industrial
direction to processing high value products.
According to calculations by the Ministry of Finance, the inflation index for 2019 is estimated to
increase 2,73% but lower than in previous year.The main reason for the increase in inflation is
due to the increase in prices of some goods according to the annual regulations such as consumer
goods (baoquocte,2019). Vinamilk is also calculating plans to try to keep the market price
unchanged, not to increase prices to cause unpleasant psychology to consumers.
The overall unemployment rate for the whole country in 2019 was 1,98%, of which the
unemployment rate in urban areas was 2,93% and rural areas was 1,51%. The underemployment
rate of workers in the age group in 2019 was estimated at 1,26%, in urban areas was 0,67% and
in agriculture at 1,57% (voh.com.vn, 2019). Vinamilk is the best workplace in Vietnam and
helps Vietnam reduce unemployment rate. Vinamilk has more than 10,000 staff members

working in 30 units, meeting good career prospects and recruiting regardless of region, age or
religion. Vinamilk has remuneration policies to ensure employees’ salaries and bonuses to attract
employees. Employees are always respected, listened to and shared, always ready to receive and
acknowledge their achievements.
2.3. Social factors:
Vietnam’s population grows at a decreasing rate. According to statistics, Vietnam’s population
growth rate is 3,03% in 1960. Then by 2017, the population growth rate was only 1,03% and this
causes the population of Vietnam to change from a young demographic structure to an aging
population (thoibaonganhang, 2018). The dairy industry is facing major obstacles because the
development of this industry is proportional to the proportion of adolescents in the population
structure and it also has negative impact on Vinamilk. To consolidate their position, Vinamilk
has continuously increased brand awareness through marketing strategies, launching new dairy
products and thanks to their efforts, they gained 2% market share in the dairy industry and to
58% in 2017. They also strengthen the distribution system, set reasonable prices for consumers
and expand export markets such as the Middle East, Africa or Japan.
According to the statistics done by The Conference Board Global Consumer Confidence
cooperate with Nielsen, a global business performance metrics company has shown that health is
of prime concern for Vietnamese consumers. In the second quarter in 2019, Vietnamese
consumers health concerns are at the top (phapluat, 2019). Therefore, the need to improve their
health increase so that they need a product that can satisfy them like milk. In particular, Vinamilk
is trusted by domestic consumer thanks to advertising and media activities emphasizing
nutritional value and constantly launching many new products to the new market to meet the

demand of consumer. In 2019, Vinamilk launched nearly 20 new products to attract household,
capturing advanced, high-end nutritional trends and healthy products such as the Organic Gold
product line, Zori rice milk, Happy milk tea, nut milk. They apply HMO nutrients to product
formulas that bring consumers international standard and premium quality nutritional product in
Vietnam.
2.4. Technology factors:
According to milk association president, technology in Vietnam is modern than some other
advanced countries. The reason is that our dairy market is booming and manufacturers are
constantly investing in equipment, upgrading and using advanced technology like Tetra Pak to
meet consumer demand. Vinamilk applies to Tetra Plant Master Automation, allowing the whole
factory to be connected from raw materials to finished products. This system also provides all the
necessary data to help improve production and maintain operations. They also have LGV
automatic robot to transfer pallets of finished products to smart warehouses and transport
packing materials to the filling machine.
In the production of powdered milk in Vietnam, the dairy industry has made innovations in
technology in the drying and extraction of cans such as spray drying technology from air
blowing technology or hydrogen gas in the packaging process to limit oxygen in the production.
Vinamilk also produces powdered milk with modern equipment, product research and
development. The factory has a highly qualified product quality control team, all stages of
processing are strictly inspected. Vinamilk uses the UHT sterilization system to treat heat and
pasteurize quickly, but still retain the natural flavor and nutritional ingredients. The factory has
the leading drying system in Asia, ensuring food safety and keeping enough nutrients.

The dairy industry is encouraged to develop high technology in dairy farming and the production
of fresh milk is the only way to promote sustainable use in this industry in Vietnam. Vietnam has
a hot and humid tropical climate and can be unfavorable for dairy farming and the application of
modern technology helps to solve many problems and is a prerequisite for the development of
the dairy industry in Vietnam (vir.com.vn, 2013). Vinamilk plays an important role in
technology incentives, promoting the farm as the nucleus, gradually developing the dairy herd
for farmers, providing technical support and breeding technology. Vinamilk ensures procurement
from farmers and supports them, as a pioneer in incentive the use of technology in farming.
2.5. Environment factors:
The problem of water pollution in Vietnam is becoming more and more serious. The status of
planning for urban areas has not been linked to the problem of waste treatment, wastewater
treatment still remains in big cities, industrial zones, causing pollution to an alarming level. Out
of the total of 183 industrial zones in Vietnam, over 60% of this area do not have wastewater
treatment systems (socongthuong.tuyenquang.gov,2018). It also affects the processes of
companies and factories like the dairy industry. Milk processing plant wastewater is generally
the dilution of milk and dairy products due to processing spillages or the leakage of
technological equipment. At dairy farms in Vinamilk, the waste treatment to protect the
environment is always on top priority. They have self-control and continually monitor the
wastewater and waste treatment system, and invest in modern technology for the treatment.
There is always and inspection from state agencies and continuously improving the management
system. They continue to learn, research and apply environmental treatment solutions: fertilizer
reversing system-split drying after separation or biogas generation and etc.

Vietnam’s climate is humid tropical monsoon so it will have an impact on the dairy industry. If
not handled in time, milk will spoil or be degraded. This will adversely affect the quality of the
milk. It also places high demands on milk preservation and the production of high-quality
products. Vinamilk stores milk in cold storage to help remove harmful bacteria and microbial
spores. They also produced on a closed technology line, sterilizes heat and ensures safety and
hygiene.