Economic integration of Vietnam is expected to provide moreopportunities to the business community and investors in expanding markets, boosting trade and attracting investment and technology as well as management skill from abroad. Change in business environment is pushing up domestic companiesto invest more and adjust their production and business plans, in order to overcome the intrinsic limitations in the raw materials, machinery and equipment, technology, and finance. In fact, without new investment and innovation, domestic companies will face enormous risks of loosing market share and closing door when import tariffs are removed and Vietnam continue to open market sensitive sectors like retail, banking, insurance, telecommunications, energy, transport and agriculture.
Milk processing industry: investment effort from internal resources and pressure from "foreigners"
The market for milk and dairy products are considered as "magnet" in the industry of food processing. Despite psychology of preferring foreign products than domestic products of Vietnamese housewifes, dairy processing industry has witnessed a strong rise in recent years. A series of large-scale projects have been implemented to provide a large range of dairy products.
Early May, 2015, Vinamilk - the pioneer of Vietnam dairy industry invested 1.600 billion dongs on construction of thehightech farm in Thanh Hoa province to make milk processing raw materials and expanding active manufacturing operations. Earlier, Vinamilk has invested to build a "super" manufacturing plant of liquid and powdered milk in Binh Duongprovince with a total investment of 2.400 billion dongs, equaling to total capacity of nine existing dairies plants of Vinamilk. Nutifood Vietnam invested also 1.600 billion dongs to build the largest dairy plant in Ha Nam province. TH True Milk has invested continuosly in building material area andis holding 35,000 dairy herds and aims to account for 50% market share of fresh milk market in 2017. The Vietnam Hanco DFB (a member of DFB Hanco Nutrition.JSC) spent 700 billion dongs to build a factory producing milk and grains germinated GABA in Dong Nai province.
While strong companies can manage investments, many other businesses have to seek investment opportunities from outside. For example, NOVA Corporation (owned JSC Milk Anova) signed exclusively partnered contract with Kerry Group (Ireland) to produce canned infant formula entirely in Europe and then move it to Vietnam. TheInternational Dairy Corporation (IDP) plans to invest 45 million dollars in conjunction with foreign partners, the direct import of fresh milk (Australia, New Zealand ...) into Vietnam market. Other foreign companies also implemented a number of activities aimed at expanding market share. For example, FrieslandCampina Vietnam accelerate development of material resources through the establishment of farm-scale dairy farmers. Many multi-national corporations such as Nestle milk, Mead Johnson, Abbott ... have showed interest in buying shares of Vinamilk when the VietnamGovernment plan to divest from this company.
Beverage industry: Too attractive to "dodge" the wave of "foreign capital"
As a large drinks market in Asia, Vietnam beverage industry is changing due to new consumer trends of youth and witnessed the massive penetration of foreign beverage brands through activities joint ventures and acquisitions of domestic enterprises, investment in new plants.
It was suggested that, thanks to timely investment in domestic production, Vietnamese products are now enough competitive on the market and the tariff removal will impact only the segment of premium beer market. Currently in the country there are two large businesses includingSabeco and Habeco, holding around 75 percent of the market share. These companies have the advantage of a long tradition, the prestigious brand in the minds of consumers in the country. Moreover, Sabeco and Habeco has continuously invested in applying new technology, expanding distribution and increasing the capacity.
However, from investment trends, we can see that the story not so simple. In September, 2015, the General Company of Tobacco of Vietnam (VINATABA) officially announced the transfer of their entire 29% of share holding in Sapporo Vietnamto Japanese partners - theSapporo International Inc. Sapporo Vietnam is focusing on premium beer segment, its products are sold in 4,000 restaurants, clubs, beer, shop in Vietnam, accounting for 10% market share and the company aims to raise the figure to 7,000 restaurants in March, 2016. Other foreign brewers have quietly acquired more shares of the Vietnamese companies. Carlsberg (Denmark) holds stakes in breweries in Ba Ria - Vung Tau. Sabeco and Habeco are being targets of many major global brewers as Sab Miller, Kirin Brewery, Asahi Breweries, when MOIT planned to accelerate equitization in total two companies.
Animal feed industryand investment trends from local businesses outside the industry
In general, Vietnamese enterprises are less competitivethan foreign enterprises in the animal feed industry. However, in recent times, a large number of businesses outside industry such as Hoa Phat Group, Masan Group, JSC Hung Vuong Corporation and Guangming Group is eagerly moved into this industry, bringing the hope of changing power relationships in the industry for domestic companies. Specifically, Hoa Phat Group officially joined the feed market with the establishment of the Hoa Phat animal feed Trade and Production Ltd. with a charter capital of 300 billion dongs. The first plant has capacity of 300,000 tonnes/year. The company aims to have 10% market share in 10 years.
In conclusion, depending on the condition and characteristics of each industry, investment trends would favor expanding the distribution network or technology upgrades, internal or foreign capital, but it is very clear that, new waves of investment will gradually change the structure of each sector, and may be a new generation of integrated business will make shape in the near future.
