Vinamilk Sees Revenue Doubling in Overseas Expansion Push

Vinamilk Sees Revenue Doubling in Overseas Expansion Push

Vietnam Dairy Products Joint-Stock Co., the nation’s largest dairy producer, is building a milk factory in Cambodia as it plans a global expansion to more than double annual revenue to $3 billion by 2017. The company known as Vinamilk is opening a plant in the capital of Phnom Penh and will expand into other overseas markets over the next five years, Chairwoman and General Director Mai Kieu Lien said in an e-mailed statement yesterday.“We will focus on expanding the domestic market as well as speeding up exporting to other markets,” Lien said. Vinamilk may export products to the U.S. after receiving permission from the Food and Drug Administration, she said.

Vinamilk’s second factory outside Vietnam after New Zealand will allow the Ho Chi Minh City-based company to tap surging demand for milk, yogurt and ice cream from Southeast Asia’s growing middle class. The region’s dairy industry is set to outpace the global market growth, according to Michael Harvey, a Melbourne-based analyst at Rabobank International.

“The Southeast Asia dairy markets are already very competitive,” Harvey said. “Most have a strong presence from local companies. There is also a strong presence from international companies from Europe, Australia and New Zealand.”

International competitors to Vinamilk include Nestle SA (NESN), Fonterra Cooperative Group Ltd. and Danone SA.

Vinamilk, Vietnam’s second-biggest listed company by market value, has rallied 60 percent this year in Ho Chi Minh City, outpacing the 19 percent gain in the benchmark VN Index. (VNINDEX)

Top 50

“Everyone is aware of the growth potential and naturally they want a piece of the action,” John Droppert, an analyst at Dairy Australia, said in an e-mail.

Reaching the revenue target in 2017 would make Vinamilk one of the top 50 milk producers in the world, according to Lien. The company’s revenue was 26.6 trillion dong ($1.26 billion) last year, more than double the 10.6 trillion dong achieved in 2009, according to data compiled by Bloomberg.

Construction of the Cambodian factory is set to begin in the second quarter of next year and the production start is scheduled for July 2015, the company said.

Vinamilk will hold a 51 percent stake in the plant through a joint venture with a Cambodian partner, according to Lien. The 2.7-hectare factory would produce condensed milk, yoghurt and milk sterilized at ultra-high temperatures. Vinamilk is awaiting approval from Cambodian authorities to start construction.

More Fridges

Vinamilk will have the first-mover advantage in Cambodia as that market expands, said Droppert. In the next five years, Vinamilk, which already exports products to Cambodia and the Middle East, wants to expand to markets overseas to boost annual sales growth 15 percent to 20 percent, said Lien.

The company recorded “impressive” sales growth in the past three years, according to Giang Trung Kien, Hanoi-based head of research at FPT Securities Co.

Vinamilk opened a 2.4 trillion dong milk factory in Vietnam’s southern province of Binh Duong last month. It expects to meet its revenue target of 32.5 trillion dong and pretax profit of 7.8 trillion dong this year, according to the e-mailed response.

The increase in the number of homes with refrigerators, the rise of Western-style supermarkets stocked with dairy goods and an appetite for Western food is creating new opportunities for dairy companies in Southeast Asia, said Stephen Scott, head of research at Ord Minnett Group Ltd. in Sydney.

“If moms return to work earlier, which tends to happen as economies develop, children are looked after by grandparents,” Scott said. “They tend to use more infant formula.”

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net; John Boudreau in Hanoi at jboudreau3@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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