An old-guard leader broke Vinamilk free of state confines and widened Vietnam's dairy case.
Foreign investors used to chuckle that one blue chip on the Vietnam stock exchange had a cow-chip connection. But Vietnam Dairy Products, known as Vinamilk, is no laughing matter. It is the sector leader in a young and rapidly growing market of 86 million people. With revenues doubled and net profit up fourfold in the last four years, it is the most successful of the country's privatized state-owned enterprises.
Vietnam's dairy products market, estimated at $1.5 billion in 2009, is expected to grow 25% this year. Holding a one-third market share, Vinamilk had net profit jump 67% to $90 million and revenue climb by half to $389 million through the first half of 2010. "Vinamilk has been successful in the competition with foreign brands. It has created a very strong Vietnamese brand, a solid footing in the local market, and it has been able to tap into the rising demand for nutrition products," said Trinh Hoai Giang, chief operating official of HSC Securities, one of Vietnam's three biggest brokerage houses.
Vinamilk is Vietnam's first entry on the Best Under A Billion list and not surprisingly outside the usual mold. It is still 48% government-held, and the state's share is represented by its chairwoman, 57-year-old Mai Kieu Lien. But Lien, in guiding the Ho Chi Minh City company since 1993, has established her own credentials.
Born in France to physician parents who heeded Uncle Ho's call to return, she was raised in Hanoi and sent off to learn meat and dairy processing in Moscow. She returned in 1976, joining the Southern Milk & Café Co., a state collective of dairy factories from the prewar south. Later she got economics training at Leningrad University and was made general director of the operation, now called Vinamilk. Her moment to shine came as Vietnam began its "equitization" process of state firms a decade ago.
For many years Vinamilk mostly produced condensed milk, cookies and candies. It was not considered a cash cow when the government decided to privatize it in 2003. (The government let go companies considered not important or not profitable.) Many Vinamilk employees didn't buy shares then. Lien took only a 0.12% stake but used her new authority to hire a professional branding and marketing team, at multinational-level salaries. Also, Vinamilk broadened its product offerings to include yogurt, powdered milk and baby formula. It had a domestic competitor, Dutch Lady (the parent is FrieslandCampina in the Netherlands), but Vinamilk got the jump on its rival with fresh milk in 2007.
The management team, led by Tran Bao Minh, has aimed at higher margins. And indeed Vinamilk's operating margin has increased to 20% from 10% in 2006. Its wares no longer suffer by comparison with imports. "We have been pursuing a strategy of brand development, distribution renovation and expansion, as well as controlling and enhancing product quality," Lien told FORBES ASIA in a prepared statement.
Success has brought challenges: Minh and his team left Vinamilk suddenly last year amid talk that their pay demands had become a rub. He joined a new rival, TH Milk, also captained by a woman, Thai Huong, chairman of North Asia, a Vietnamese bank. TH Milk's ramp-up calls for importing 28,000 cows, with fresh-milk production to start next year. (Vinamilk mostly still relies on imports from New Zealand.) According to Minh, import costs are 15% lower than using fresh milk, but he maintains that with demand soaring, "If we don't raise cows in Asia, we won't have milk."
Vinamilk is responding. In August it started on a $120 million dairy plant near Ho Chi Minh City that is expected to be the biggest in Southeast Asia. Vinamilk owns five farms in Vietnam but is also looking to invest in more overseas sourcing. "Competition and material sources are the main challenge," says Lien.
Foreign investors don't appear spooked. They hold their maximum allowable 49% stake under Vietnamese law, but Vinamilk shares rarely trade. According to HSC Securities, these holders seldom want to sell. The departed Minh pays tribute to Lien: "She is very sharp, very decisive and determined. If she left the company, the leadership crisis would be a significant blow."