HCM CITY — Milk consumption is expected to increase by 7 per cent this year, analysts at SSI Securities Corporation have said.
They said it is based on a baseline scenario that assumes the pandemic would be controlled by mid-year and there would be no more social distancing.
They also forecast the prices of existing SKUs (stock keeping unit) would not increase this year.
But they admitted demand among low-income consumers could be impacted given the fact that COVID-19 has hurt them, and companies like Vinamilk and Vinasoys have seen downtrading in the first nine months of last year.
In contrast, premiumisation would continue as middle- and high-income groups are less impacted, and are more open to consuming higher quality dairy products, they said.
“We assume dairy raw material prices will increase by 4 per cent in 2021. Also, higher oil prices in 2021 are likely to affect packaging and shipping costs.”
The study also found that investors are paying more attention to environmental, social and governance criteria when investing in dairy companies.
As a result, the sector has begun to diversify its products, including shifting to plant-based beverages.
According to market research company Euromonitor, the dairy industry was worth VNĐ135 trillion (US$5.84 billion) last year, an increase of 8.3 per cent from 2019, thanks to the rapid growth in the yogurt and fresh milk segments.
Currently, modern distribution channels only account for 10-15 per cent of dairy sales, but analysts expect it to outpace traditional channels.
Recognising the trend, companies are now focusing on the former, they said.
But according to SSI, it would mean lower profit margins due to the fierce competition between a multiplicity of brands.
The dairy industry is expected to see more M&A deals this year after a number of them involving leading companies took place last year, such as Vinamilk's acquisition of a controlling stake in Mộc Châu 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.
Mộc Châu's net profit grew by 68 percent year-on-year in the first nine months of 2020 and IDP’s was up nearly 34 per cent.
There is fierce competition in the market with the appearance of new players, the SSI report said, adding that Masan Group has recently launched new dairy products, B’fast cereal milk, while Vitadairy has been expanding rapidly in the powder milk segment. — VNS
