Building the Financials for Vinamilk
In the Consultancy Report, Vinamilk’s opportunities and risks in the current Business Model have been indicated. This Financial Report will propose a new Revenue Model and Pricing Strategies to support these opportunities and help to avoid risks.
II. MARKET ANALYSIS
2.1. Market Size (proposed transformation)
Total revenue: 56.400 billion VND (2019) (Reference 2)
Profit: 10.554 billion VND (2019) (Reference 2).
Highest market share in Vietnam with 61.3% in early 2020.
Dairy market growth: approximately 7.5% each year for the past 5 years.
- Economic: Government started the start-up support policy. This leads to the increase of new competitors.
- Social: Customers care more about their health. Products with organic origin, without any chemistry added are requested more than ever.
The dairy market is run based on customer focus products. Companies evaluate the market trend and develop their products to meet the customers’ needs.
Vinamilk has the advantage of 100% organic products, this helps to steady their Customer Relationship section of the Business Model Canvas (BMC). They should continue producing organic products and emphasise them on advertisements on social media.
Vinamilk’s customers are mostly Vietnamese average class with all ages and genders (Appendix 5). They care about their health and require affordable but quality dairy products every day (Appendix 1). They can pay for a higher cost if Vinamilk decides to increase the price (Appendix 2).
2.3. Competitor Analysis
The biggest competitor of Vinamilk in Vietnam is TH True Milk with 30% market share and their products are highly recommended by experts (Reference 3).They provide dairy products, and create customers gain better than Vinamilk as their fresh milk is bought more because they are more delicious even when the price is higher. Although TH True Milk’s current Google search ranking (Reference 4) and profit (Reference 1) is only half of Vinamilk, they are becoming the biggest threat of Vinamilk in this market.
TH True Milk’s positioning map
III. PROPOSED REVENUE MODEL
As Vinamilk sells products and gets money at once, their revenue type is transactional revenue and currently, the revenue model is physical goods.
Vinamilk has many nutritionists to study dairy products as their Key Activity (BMC), they can add the service revenue as their new revenue model (provide nutritious consulting). There are more people having concerns about their diet (Appendix 3), especially about suitable dairy products for themselves. Providing this service will help solve the customer’s pain of unhealthy diets and also a risk in the Consultancy Report of weak Customer Relationship (BMC).
The only invalidated assumption on the Lean Validation Board (LVB) was about the price of the service. After iterating to test and pivot, the solution hypothesis of providing cheaper service than consultancy offices was promoted. As Vinamilk is new to the field, this will help to attract customers and solve the problem hypothesis. This proposed revenue model is validated and ready for Vinamilk to promote. It will help Vinamilk to improve their Revenue Streams section (BMC), develop the Customer Relationship (BMC).
IV. PROPOSED PRICING STRATEGY
Vinamilk is using the cost-plus pricing strategy which helps them to avoid profit losses so they should continue doing this.
Vinamilk is the most popular dairy company in Vietnam. Using value-based pricing is a good way to emphasise their high-quality products. This pricing strategy is positive for Vinamilk’s Value Proposition (BMC) and also solves the risk of low milk powder market share mentioned in the Consultancy Report as customers believe expensive products are more quality (Appendix 6). Although the value-based pricing is beneficial, it still goes with jeopardies as the price may be too high and customers will stop buying from Vinamilk. The LVB validated this strategy, proving their customers’ high inelasticity of demand (Appendix 2) so there is no concern of processing this.
In addition, when service revenue is Vinamilk’s new revenue model, they can use the charge per hour pricing for this. Customers are willing to have this service (Appendix 4) so this pricing strategy will have no risks in processing.
One of Vinamilk’s opportunities for growth is exporting more as they have great foreign Key Partners (BMC) (Reference 5). As they enter a new market, penetration pricing is a suitable solution hypothesis to attract new customers by the lower cost, which was validated on the LVB through iterating research and pivot. Although this can make Vinamilk lose some profit, it is the best way to have new customers trying their products (Appendix 7).
By analysing the market and considering Vinamilk’s opportunities and risks in the current Business Model, there is a proposed revenue model and 3 new pricing strategies. These will help to expand the business and achieve their goals.
Appendix 5: Vinamilk customers
|Nguyen Minh Hung||Male||45||Average class|
|Cao Kim Hanh||Female||54||Average class|
|Nguyen Tra My||Female||13||Average class|
|Nguyen Manh Long||Male||21||Average class|
|Cao Kim Thoa||Female||37||Average class|
|Do Thu Thuy||Female||62||Average class|
|Nguyen Quang Loc||Male||58||Poor|
|Nguyen Huy Khang||Male||80||Average class|
|Phan Thanh Tu||Female||38||Average class|
|Tran Dieu Anh||Female||42||Rich|
|Vu Manh Trung||Male||16||Average class|
|Cao Duy Nang||Male||20||Average class|
|Ha Thanh Trang||Female||31||Average class|
|Nguyen Thanh Huyen||Female||27||Average class|
|Hoang Viet Linh||Male||46||Average class|
|Nguyen Duc Manh||Male||51||Average class|
|Nguyen Hoang||Male||15||Average class|
|Lai Vu Thu Giang||Female||23||Average class|
|Nguyen Hoang Hoang Dieu Ngan||Female||40||Average class|
|Customers||Do customers pay much to products if they believe they are high-quality?|
|Le Yen Nhi||Absolutely|
|Doan Trong Khanh||100%|
|Ha Duy Khanh||I will go with cheaper products|
|Hoang Le Anh Thu||I think so|
|Kieu Gia Linh||Of course|
|Ta Hong Anh||Yeah it is great|
|Vu Minh Hieu||Of course, I want high-quality products even though they are expensive|
|Nguyen Minh Trang||Absolutely|
|Phan Minh Tuan||I think it is worth it|
|Dao Xuan Tung||Yeah I do not mind|
|Ong Phuong Linh||Cheaper products are better|
|Hoang Mi Linh||I do not mind if they are of higher quality|
|Pham Duc Trung||Absolutely|
|Phan Thu Ha||Yeah I think so|
- baodauthau (2020) “TH True Milk: the vanguard of Vietnamese dairy products”. Available at: https://baodauthau.vn/doanh-nghiep/th-true-milk-organic-tien-phong-trong-nganh-sua-viet-nam-101426.html
- enternews.vn (2019), “Vinamilk makes the partnership with Europe companies”. Available at: https://enternews.vn/vinamilk-ky-ket-hop-tac-quoc-te-voi-cac-doi-tac-hang-dau-chau-au-61689.html
- leader talk (2020), “Profit of TH True Milk”. Available at: https://theleader.vn/doanh-thu-cua-tap-doan-th-vuot-7000-ty-dong-1547436694820.htm
- Vinamilk (2019) “Annual report 2019”. Available at: https://www.vinamilk.com.vn/static/uploads/bc_thuong_nien/1585291614-e5df6f54f1b460c71648e3b3974c13d41721ed54aaef4e256def7956f8cc7d38.pdf
- trends.google.com “Comparison of google search ranking of TH True Milk and Vinamilk”. Available at: https://trends.google.com/trends/explore?q=TH%20True%20Milk,Vinamilk