Consumer sovereignty in the framework of social justice, economic equality and environmental balance, within and across borders

Vietnam: A competitive market for infant formula products

Communist Party of Vietnam Online Newspaper, October 18, 2012

A research study on the competitive landscape of the market for infant formula products for babies under 12 months of age in Vietnam between 2009 – 2011 period was officially released on October 17 by the Central Institute of Economic Management.

The research which has been undertaken by the Consumer Unity & Trust Society (CUTS International) shows that strong competition in the market brings benefits to consumers in terms of both wide products ranges and price points that are available for consumers.

“The infant formula market in Vietnam is relatively small in terms of demand but quite large in terms of supply in comparison with other markets in the region. There are 28 companies with 50 different brands in product segment for infants between 0-6 months and 27 companies with 53 different brands in product segment for infants between 6-12 months”, report says.

It also showed that infant formula product prices in the nation are in line with similar products in other markets.

Contrary to public concern that infant formula was foreign-dominated, the report recorded that domestically-produced infant formula products have gradually increased their market shares in recent years, from 49.3% in 2009 to 56.3% in 2011 (by volume).

Dr. Vuong Ngoc Tuan, Deputy General Secretary of Vietnam Standards and Consumers Association said: “A healthy and competitive market is a good way to ensure that consumers’ have access to high-quality products at competitive prices. There should be a mechanism to make sure that product information could reach consumers in more convenient channels” to help promote informed consumer decisions based on product prices and quality”.

According to the report, the price of infant formula products depends on various factors, especially investment in research and development. Price fluctuations in Vietnam not only depend on prices of imported skimmed milk powder (SMP) but are also significantly affected by foreign exchange rates.

Additionally, high taxes (for example, import tariff of 10%) applied for this product segment are among the highest in the region. Furthermore, milk prices have also been influenced by high domestic inflation in recent years. In fact, the increase in prices of milk powder products in Vietnam has been lower than the price increase of most other packaged foods in 2009 -2011.

Ms. Pham Que Anh, CUTS International Director of Hanoi office shared: “In theory, a competitive market should bring a lot of benefits to consumers, such as competitive prices that are in line with product quality and freedom of choice for consumers among products that are continuously improved in terms of quality and designs. However, Vietnamese consumers have not been able to fully enjoy these benefits due to the lack of information about prices and product quality. The distribution system here is still fragmented and unorganized”.

Besides, the research offered a more objective view on the mechanism and competitive landscape of the infant formula market in Vietnam. Policy makers, basing on our findings, can develop more effective policies to correct market failures, ensuring a balance of various social interests, promoting stronger development of Vietnamese dairy industry, and ensuring that Vietnamese consumers benefit from the development of the market.