Vinamilk’s strange move: Low revenue growth, but drastically cut trillions of advertising dollars after 2 years
13/04/2022During the period 2016-2019, Vinamilk spent about 2,000 billion VND/year on advertising, but this expenditure suddenly decreased sharply in 2 covid years.

In 2021, Vinamilk’s business results, the company’s revenue reached VND 60,919 billion, reaching 98% of the whole year business plan. VNM’s gross profit reached VND 12,727 billion, down 6% compared to 2020. VNM’s gross profit margin in 2021 reached 42.5%, a sharp decrease compared to 46.4% of 2020. 2016-2019, VNM’s average gross profit margin is 47.3%.
VNM’s business activities abroad have a better growth rate than domestic, but still decelerate compared to the previous years. VNM’s overseas gross profit margin in 2021 is only 43.5%, while in 2020 and 2019 it is 47.4% and 47.2%, respectively.

In 2021, VNM will also be negatively affected due to high input material prices. According to a report by VCBS, “the price of powdered milk and sugar has increased by ~35% over the same period. In the coming years, the price of input milk powder as whole milk (WMP) and skim milk (SMP) will still remain unchanged. Sugar prices are also in a strong uptrend due to Vietnam’s imposition of anti-dumping tax on sugar originating from Thailand.”

Gross profit margin and input milk powder price of VNM. Source: Report of VCBS
To improve profit margin, VNM has reduced advertising costs for the first time after many years of strong spending. In the period 2016-2019, the company spent about VND 2,000 billion per year on advertising costs, but this expenditure suddenly decreased in 2 covid years. In 2020, VNM cut advertising for the first time, despite low revenue growth, the company spent VND 1,440 billion on advertising, down more than 30% compared to the 2016-2019 period. In 2021, the company continues to reduce spending on advertising, VNM only spends 1,233 billion VND, this expenditure is down by nearly 50% compared to the time before the epidemic and down by 6.67% compared to 2020.

VCBS estimates that the domestic fresh milk market will gradually stabilize in 2022, VNM will not have much room for growth in the next 2-3 years. Instead, the expansion of other businesses such as beef will boost VNM’s double-digit growth from 2023-2024 onwards. Estimated revenue from beef in the first 2 years is expected to reach 2,000 billion.
In December 2021, VNM was approved for the project of Hung Yen super dairy factory, expected to operate in 2024. This super factory is expected to help Moc Chau Milk and Vinamilk increase their milk market share in the North. Along with that, VNM’s dairy farm in Xiengkhouang in Laos will supply raw milk from 1H.2022 to help reduce transportation costs and ensure the quality of raw milk.
by Cafebiz
Must Read

F&B business actively enter the METAVERSE


The three big trends of retail in 2023


Vietnam hotel market will transform in 2022

PRODUCTS EXHIBITION
You may be interested in


The company recommended not imposing a separate consumption tax on sugary beverages.

The ambition of Mr. Dang Le Nguyen Vu: Building a themed city for Buon Ma Thuot, making Vietnamese milk coffee a UNESCO heritage, and making global coffee social media

Having spent over 270 million USD to acquire Phuc Long, Masan only gained a meager profit of 38 billion VND from it.

Vietnam Airlines resumes cooperation with Air France from March 26th

Fruit, vegetable exports rise 17.8%

Sky-rocket growth of the Vua Cua after Shark Tank show: More popular than Kichi Kichi, The Alley; aims to penetrate more than 8,000 German supermarkets

Opportunities to boost export of processed foodstuff to Asia -Pacific, African markets

Kido establishes a subsidiary to produce fish sauce, wants every kitchen shelf to have more seasoning powder, soy sauce, fish sauce from Kido
