Vinamilk's Internationalization

1. Why should Viamilk expand its market overseas?

About 40 years mostly focused on domestic market, Vinamilk moved its business strategy overseas. Their first move to penetrate the global milk market was the investment in New Zealand-based Miraka Limited Company in 2010. Buying 19.3% stake of Miraka Ltc, which had built a high-class powder milk factory at the center of North Island in the country, it costed Vinamilk 121 million NZ dollars. Following that, in late 2013, Vinamilk invested US$ 7 millio to buy a 70% stake in Driftwood Dairy Holding in California, a company that specilises in providing butter, juices, ice cream and breads to schools, hostels, hospitals, retaurants. In the same years, Vinamilk contributed 100% capital to set up a subsidary in Poland and was licensed to invest $23-million in Cambodia’s Angkor Dairy Products Ltd Co.

 In 2015, Vinamilk had got a license to invest an additional nearly US$ 3.5 million in Miraka company, which raised Vinamilk’s stake there from 19.3% to 22.8%. In 2016, they own 100% stake in Driftwood Dairy Holding from the approval to invest an additional sum of US$3 million.

After a subsidiary at Poland, Vinamilk opened a branch in Russia at the beginning of 2016, pushing ahead with its move into Russia after Vietnam signed a free trade pact with Eurasian Economic Union last year.

The stastistic in 2015 shows that Vinamilk holds 53% of the domestic market for liquid milk, 84% for yogurt and 80% for condensed milk. The company has 100 sales offices, and does business with 212,000 small retailers and 650 supermarkets across the country.

Vinamilk's overseas sales rose 39% to 7.96 trillion dong last year, contributing 20% to its total revenue. Its earnings per share rose 28% to 5,837 dong.

Vinamilk is speeding up its international expansion through acquisitions and investments in local dairy plants. They are also strong in exporting the local products into international market. Today Vinamilk products have been exported to more than 40 countries worldwide, which include the SEA, the Middle East, Africa and other countries. Their key export products are power milk, cereal, condensed product, milk drink, beverage.

The investment in Miraka sastisfied the need of high-quality milk products in domestic market. To explain why Vinamilk imports their our products into local market, Vietnames have preference with imported products. They consider them as high-quality and standard.

The overseas investment can help with the supply and demand imbalances in domestic market as the demand for milk of Vietnamese has been growing rapidly but the domestic raw material can only meet about 30% of the market needs, the rest is imported. If Vinamilk had chosen to build other factories in Vietnam, it would have faced the limit of domestic technique, poor technology, quality of labor . New Zealand is the major supplier of the world dairy ingredients.It is famous for the best climate for cow, their advanced technology and high-skill labor. The investment in Miraka helped Vinamilk exploit benefits from the plentiful fresh, high quality raw material of New Zealand.

 Factory in Cambodia takes advantage of distance between Vietnam and Cambodia, which helps reducing transportation cost. The potential market in Cambodia as well as the other markets in SEA is considered as a incentive to invest here.

While the subsidiaries in Poland, US or Russia open chance to infiltrate to those difficult market. Commercial activities between Vinamilk and Europe sets up through subsidiary in Poland.

One of the key reasons to expand overseas is diversification. Although we live in a global economic society and cross-border economic slowdowns affect us all, different countries are at different stages of their economic development. Therefore, markets that are ultra competitive and mature in the U.S. may still be emerging, or do not yet even exist, in other countries. This offers firms an opportunity to become less dependent on their domestic economic situation.