The recently-concluded Trans Pacific Partnership (TPP) deal has paved the way for Vietnamese dairy companies to explore business outside the Asia Pacific region
The deal, which was finalised in October 2015, allows enhanced economic growth for members by promoting home-grown products. For Vietnam’s dairy sector atleast, this development could probably threaten the growth of local firms, due to the presence of a quickly growing market and their inability to cater to the demand, eventually paving the way for foreign companies to sell their products at lower rates.
Preparing for a deluge by other companies, Vietnam’s local dairy firms are now looking outside for better business. TH Group vice-president Hoang Cong Trang said, “TPP is definitely a challenge – right from big investors entering the market to tariffs being cut. But, we’ve been preparing for five years.”
The market has potential, feel several dairy owners. VPBank Securities has stated that the Vietnam market was worth around US$4.1bn last year alone. Major companies such as Vinamilk and Hoang Anh Gia Lai are looking abroad. Vinamilk is likely to invest about US$30mn in USA, New Zealand and Cambodia, and around US$3mn in Poland, with a bigger plan to use it as a EU trade gateway.
Meanwhile, TH Group recently announced an investment of US$2.7bn into cow farms, milk plants and distribution channels in Russia, which has a dairy shortage and is restricted by the EU sanctions following its military intervention in Ukraine. This is in addition to TH Group investing around US$1.2bn in domestic projects.
Hoang Anh Gia Lai has listed a US$1.1bn agribusiness unit and is planning for its cows to deliver about half the group’s 2015 revenue.
With fears that the TPP could lead to the closure of smaller firms, dairy companies are hoping to capitalise on other markets going forward this year.
