Today: 16/10/2021 19:22:38 (GMT+7)

How will the dairy industry fare in 2021?

The Covid-19 pandemic will cause a divergence in dairy consumption in 2021 with low-income people buying less than last year and middle- and high- income buying more, analysts forecast.

Though milk is considered an essential commodity, the dairy sector is expected to make only a K-shaped recovery with some companies seeing growth and the rest remaining in a slump, brokerage SSI Securities Corporation said in its latest industry report.

How will the dairy industry fare in 2021?

Milk products on display at a supermarket in the central city of Da Nang.

Demand from low-income and price-sensitive consumers is likely to continue falling, since the pandemic has affected the income of this group the most.

Some companies like Vinamilk and Vinasoy shifted their production toward low-cost goods in 2020.

According to the General Statistics Office, the average monthly income of workers last year was VND5.5 million ($240), down around 2.4 percent from the previous year.

But the impact on informal and rural workers was likely to have been more severe, SSI said.

On the other hand, mid- and high-priced dairy products will see consumption rise since higher-income consumer groups are less affected, though the process of premiumization of dairy products could slow down this year, the report added.

Vietnam's total consumption is expected to grow by 7 percent next year in SSI’s baseline scenario, which assumes that the pandemic will be controlled by mid-year and there will be no further social distancing.

According to market research company Euromonitor, the revenues of Vietnam's dairy industry last year were worth VND135 trillion, an increase of more than 8 percent from 2019, thanks to the rapid growth of the yogurt and fresh milk segments.

The dairy industry is expected to see rapid consolidation this year after a number of major M&A deals involving leading companies took place last year such as Vinamilk's acquisition of a controlling stake in Moc Chau Milk and the acquisition of IDP by investment consultant Blue Point and asset management firm VietCapital.

Both acquired companies saw profits skyrocket after the deal. Moc Chau's net profit grew by 68 percent year-on-year in the first nine months of 2020 and IDP’s was up nearly 34 percent.

But competition is intensifying with new players entering the market.

Food conglomerate Masan Group recently launched new dairy products, while Vitadairy has been expanding rapidly in the milk powder segment, the report said.

Vinamilk has the highest market share with over 45 percent following the Moc Chau acquisition.

In second place is Dutch company FrieslandCampina, whose Dutch Lady brand has been popular in Vietnam for over a decade, with 15.8 percent.

Others have less than 10 percent each.

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Source: VnExpress

How will the dairy industry fare in 2021?
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