Stepping Up in Vietnam

In 2013, the value of U.S. dairy exports to Vietnam grew 72 percent compared to 2012.

Last year could not have been much better for U.S. dairy suppliers in Vietnam. U.S. dairy export value grew 72 percent to $240 million compared to 2012. The United States held dominant positions in three of four key ingredient markets, with a 66 percent share of lactose imports, 59 percent of SMP imports and 54 percent of whey protein imports.

“We have not only built strong positions, we have clear opportunities for future growth,” says Ross Christieson, USDEC senior vice president, market research and analysis, who guided a USDEC country analysis of Vietnam earlier this year.

Indeed, demand trends are in the United States’ favor. Analysts project 5-percent-plus annual economic growth in Vietnam through 2018. The World Bank estimates education and plentiful jobs will continue to draw rural dwellers to cities, expanding the nation’s middle class and exposing millions to dairy products at modern retail and foodservice outlets.

The national government is aggressively pushing dairy consumption as part of its National Nutrition Program (set to run through 2020), and the messages are getting through.

 “People are more aware of the benefits of dairy products than ever before—not only the young generation but the senior consumer as well,” says Phuong Dang, USDEC Vietnam office representative. “Milk, cheese and dairy equal calcium and good nutrition in the minds of consumers.”

Food industry blossoms

Concurrently, the country’s food and dairy industries are booming. Baked goods, biscuits, chocolate confec­tionery, yogurt, infant formula and recombined milk—all significant users of milk powder, whey and/or lactose— are growing anywhere from 15-25 percent annually.

Foodservice, the biggest user of imported cheese, is expanding annually at double-digit rates as well, fueled by rising incomes and a fast-growing middle class enamored with Western culture.

Growth is creating opportunities, but U.S. suppliers face challenges similar to those faced in other emerging markets. Buyers question U.S. commitment, citing some suppliers’ inability to meet tight SMP specifications and ingredient packaging that is easily torn.

“Some buyers have had difficulties with powders caking because of high heat and humidity, and some U.S. sup­pliers have responded poorly,” says Christieson. “Some buyers believe U.S. suppliers see the country as a place to unload ingredients of inconsistent quality.”

On the cheese side, many local buyers are simply unaware of U.S. cheese, and the United States is penalized for being late to the market.

“The EU, New Zealand and Australia have been in the market a long time and have set the benchmark for local perceptions,” says Dang. “So people who do know that the United States makes cheese, often say things like, ‘Your mozzarella is too white.’”

“The solution is reliable communication and customer care,” says Dang. “Visit the market, maintain busi­ness relationships, respond promptly to questions or requests, expand your product portfolio, pay attention to quality concerns, and provide technical support. Never assume Vietnamese importers and distributors are familiar with product specifications, applications, handling and storage.”

The government has ambitious plans to raise domestic milk production levels, but that shouldn’t deter imports.

Says Dang, “Production will grow, but demand will also grow and grow more quickly.”

(This article first appeared in the June 2014 edition of Export Profile.)

Image copyright: 123RF Stock Photo

The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.