Emerging Dairy Industry In Vietnam

October 1, 2020
Emerging Dairy Industry In Vietnam

The Southeast Asia region is seen by many analysts as among the most vital in the dairy world. While consumption of dairy is lower than developed western markets, the region’s importance lies in the speed of growth. Demand for dairy is on the rise across the region despite the Covid-19 pandemic. According to the U.S. Dairy Export Council, between April and July 2020, a major contributor of the growth of U.S. dairy export volumes came from increased shipments of nonfat dry milk/skim milk powder (NDM/SMP) to Southeast Asia.

The Vietnamese market is of particular interest as the government issued a new decree which took effect from July 10, 2020, which reduces the competitive disadvantage for U.S. dairy exporters. The decree unilaterally lowers tariffs by 50% or more on key dairy products and ingredients, including skim milk powder, whole milk powder, cheese, milk albumin and protein isolate. Iowa companies could take advantage of this and build up their presence in this rapidly growing market.

According to the Vietnam Dairy Association, revenues from the dairy sector were valued at $4.7 billion in 2018. Between 2010 and 2018, the sector grew by an average of 12.7% per year. The two main products behind the strong growth of the industry are powdered milk and liquid milk, accounting for nearly 75% of the value share. Vietnam’s dairy industry revenue is forecasted to reach $8 billion in 2020, driven by the following factors:

  • Compared with other countries, annual dairy consumption per capita in Vietnam’s 97 million population is still low at 26 liters per person, highlighting the potential for continued growth in the sector.
  • Rising dairy consumption of the elderly population. Based on current demographic trends, Vietnam’s elderly population will double from 7% to 14% of the total population in about 17 years, according to the World Bank.
  • Interestingly, Vietnam’s dairy exports are also growing rapidly, with modified whey powder, cream milk products, liquid yogurt, butter, cheese and curd, and concentrated cream and milk as the top exported dairy products. In 2019, Vietnam’s exports of milk and dairy products went past VND 10 trillion (USD 428 million), a 13% increase from the figures in 2018. China’s approval in February 2020 for dairy imports from Vietnam is projected to potentially add around a quarter billion U.S. dollars to Vietnam’s dairy export sales in the near term.

Within Asia, Vietnam is emerging as one of the countries with dynamic milk production and processing industries, especially in recent years. However, its production capacities are unable to keep up with the local demand and its growing exports of higher value dairy products.

Vietnam’s domestic dairy industry has a set a target to produce 1 billion liters of fresh milk in 2020, equivalent to around 38% of domestic demand. This is projected to further increase in the next five years to 1.4 billion liters, based on a development plan set by the local industry. According to the Department of Livestock Production under the Ministry of Agriculture and Rural Development, the cow herd in Vietnam is growing strongly as companies increase their investments in expanding production and turn to animal husbandry. Accelerated development of dairy farms in the country can be seen through the importation of cattle from countries like the U.S.

Given that Vietnam plans to increase it dairy cattle from 500,000 in 2020 to 700,000 cows by 2030, related sectors that are expected to see growth include animal nutrition and solutions that will prevent diseases, ensure livestock development, improve product value and provide safe dairy products for domestic consumption and export. Vietnam is not a traditional dairy farming country, and thus, technical knowledge in areas such as cattle digestion, feed management, forage production and storage have become of importance to dairy farmers in the country. Local companies can now be seen partnering with foreign experts to acquire knowledge and products that will provide suitable nutrition for their dairy cattle and increase their milk yield and quality.

Many enterprises in the dairy industry are also investing in modern equipment and updating advanced technology to produce high-quality dairy products, ensuring food safety and competitiveness in the domestic and foreign markets. Dairy companies in Vietnam have been seen renovating their facilities and production equipment as part of wide-ranging expansion projects. It is also worth noting that businesses in the dairy industry usually import technology, materials and equipment from overseas due to the limited domestic resources. Comprehensive production lines are also imported from countries that possess developed dairy equipment.

Vietnam’s growing dairy industry presents opportunities to Iowa companies that could provide solutions and technologies related to dairy cattle raising and management as well as dairy production. Orissa International can help you enter the Vietnamese market by connecting you with the right local partners.

Read the Fall 2020 issue of the International Update here.