[Vnbiz] the milk crisis in VN [SEC=UNCLASSIFIED]
Tran Dinh Hoanh
tdhoanh at gmail.com
Thu Oct 12 07:53:23 PDT 2006
Dear Dzung & CACC,
Thanks for the note, Dzung. We don't have conclude that the problem is with
Vinamilk, but we have to be able to guess logically where the problem is in
order to do an investigation.
The fresh milk market is obviously not working properly. Milk companies buy
fresh milk at the price lower than any place in the world and selling it out
at the price highest in the world. Who would be able to do that in a
market? Only a monopolist can do that. The guy who has all the purchasing
and selling power. I say "milk companies" but in deed it should be "milk
company," the de facto monopolist in this market. You don't have to be an
economist to know. Just walk around the street on any city, you will know
who is the real player. All other companies mean very little. Vinamilk
sets the tone of the market. Other companies either follow its tone or
collude with it outright.
Any who are other companies anyway? Vinacafe is not in the same market
(although the tow markets may overlap here and there). Dutch Lady is no
where compared to Vinamilk. That is two. Who else? Even two or three is
still too few for a market.
We have serious competition issue in this market. Keep in mind that
Vinamilk is state-owned with tremendous advantages over the years till now.
Don't count on its soaring stock as a benefit for the country.
Monopolies ALWAYS have soaring stock, because they have the power to
squeeze the market to death, to reap incredible profits. When an oil
monopoly has soaring stock, it means ALL drivers have to pay up their nose
to finance the monopoly's stock profit.
If I am the anti-trust chief, I would definitely ask my lawyers and
economists to open an investigation into the fresh milk market with the
potential theory of conspiracy (or unilateral monopolistic behavior)
to keep domestic fresh milk out of the market.
(Several years ago, there were talks that Vinamilk encouraged farmers to
raise milk cows, and many farmers were doing that, but then Vinamlik backed
out of its promise to buy, and a lots of farmers lost their shirt then.
That was the beginning of a new strategy of ignoring domestic fresh milk).
While I point out Vinamilk as the number-one target of investigation (if
someone cares to open an investigation), the issue is much deeper. It is
the apparent distortion of the market that has given too much protection and
power to its state-owned monopoly. If you like to make profit on Vinamilk's
stock, fine. But if you care about the country, you want to ask: Do we
have great market distortions in this fresh-milk market? Why?
Anh here is another thing for the people who don't care about farmers and
the country and only care about some quick bucks from Vinamilk stock: WTO
may change the entire scene. I am not sure that ice cream and dairy related
products may be considered "agriculture products" which tend to give Vietnam
some protection from international competition. But if they are open for
all out war, Vinamilk will be in serious trouble. American and Australian
ice cream, with much better taste than Vinamilk products because they are
made with fresh milk, may be able to come in Vietnam at a price that will
send Vinamilk to its sickbay.
I realize that Vinamilk has its intensive network of distribution. By then,
its strategy could be using its dominant leverage in its distribution
network to distort the market, by telling retailers: "If you sell our
products you cannot sell any product of any of our competitors." Then it
could be another serious antitrust issue. (If you are not monopolist you
can require your retailer to sell only your products. But when you have the
monopoly power, saying that could be an unfair-competition violation).
I am spelling out all the potential issues, potential culprits and potential
market maneuvers for whoever cares to examine these major issues. Or you
guys can just sit there and will see them later, when everything unfolds a
couple of years from now.
Have a great day, Dzung and all.
Hoanh
On 10/12/06, Dzung Nguyen <dnguyen.lse at gmail.com> wrote:
>
>
> [Vietnam Business Forum]
>
>
>
>
>
>
> Dear CACC
> First we cannot conclude that's the problem with Vinamilk. We have
> Hanoimilk, Dutch lady, Netscafe etc all around as well. No articles have
> concluded that it's purely to do with Vinamilk.
>
> But this story is seen as 'positive' to me. This indicates that the stock
> market is functioning well and the privatization has worked in favour of
> consumers. Look, without VNM being listed (and getting so hot!), noone will
> go a great length to dig up such issue; without VNM being privatized, such
> articles may die out before it gets to you. This problem must have existed
> for ages, why have we never heard of?
>
> There's nothing to be ashamed of, in fact, I'm rather pleased. When you
> see problems of corporation all over place, that means competition has done
> its job and we're heading toward the better.
>
> For the time being, if it turns out to be Vinamilk only, buy foreign fresh
> milk or anything you trust more (like New Zealand UHT milk) and see the Q4
> profit of Vinamilk drops severely, and see the share price drops and the
> management shakes up, see the shareholders demand the corporation to solve
> its issue properly. Hanoimilk is being listed and now, let wait to see the
> same thing. Those are the things I want to see and to feel pleased that
> finally, stock market and privatisation certainly add value to our society.
>
>
> For the time being, Vietnam's still Vietnam. Good things don't come your
> way easily. Work on it and make it happen. That's my motto though.
>
> Don't you think so?
>
> Great day,
>
> Dzung
>
> On 10/12/06, QuangAnh.Nguyen at dfat.gov.au <QuangAnh.Nguyen at dfat.gov.au >
> wrote:
> >
> >
> > [Vietnam Business Forum]
> >
> >
> >
> >
> >
> >
> >
> > Dear brother Hoanh
> >
> > Thanks so much for your analysis.
> >
> > I would like to have only one another comment on this matter: it's
> > really
> > ashamed.
> >
> > Especially given that VNM share became one of the hottest, most
> > profitable
> > one on the Vietnamese premature stock market.
> >
> > All the best
> > ----------------------------------------------
> > Nguyen Quang ANH
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > "Tran Dinh
> > Hoanh"
> > <tdhoanh at gmail
> > To
> > .com> vnbiz at vietlinks.net
> > Sent by:
> > cc
> > vnbiz-bounces@
> > mail.saigon.co
> > Subject
> > m Re: [Vnbiz] the milk crisis in VN
> > Topic
> >
> >
> > 12/10/2006
> > 11:50 AM
> >
> >
> > Please respond
> > to TRIM File
> > Ref
> > vnbiz at vietlink
> > s.net
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > [Vietnam Business Forum]
> >
> >
> >
> >
> >
> > Dear Brother Quang Anh & CACC,
> >
> > The mild crisis is actually much more than the deceptive practice of
> > using
> > powder milk for "fresh" milk. Probably you realize that the media has
> > recently reported that the milk-cow flock of Vietnam is disappearing and
> > many farmers have lost their shirts for raising milk cows.
> >
> > I think the real problem is in Vinamilk. This company, praised as the
> > most
> > successful company in Vietnam, has killed the milk-cow flocks. Vinamilk
> > does not want to use fresh milk from Vietnamese farmers. It uses powder
> > milk in many of its products and do not support farmers to produce fresh
> > milk. Please note, Vinamilk was (and probably is, even after going
> > public
> > with its stocks,) a state-owned company with an almost monopoly over the
> >
> > dairy-product market, such as milk, ice cream, etc.
> >
> > Normally, fresh milk can survive only when a large company contracts
> > thefarmers to raise cows and produce milk, and the companybuys the milk
> > from farmers. It is a kind of guarantee-buying contract. That is how
> > farmers can survive and the company can have a sure source of supply.
> > But
> > Vinamilk has no long-term vision. Its doesn't care. It has no serious
> > competition from anyone. It only wants to rely on its monopolistic power
> >
> > to gain short-term profits.--using cheap products whenever it can, to
> > gain
> > quick money. It doesn't want to invest time and effort in training and
> > supporting farmers, and money in investing in fresh-milk facilities.
> >
> > This fresh milk issue is a huge failure of the government's agriculture
> > (un)planning.
> >
> > Have a great day, brother Quang Anh and all!
> >
> > Hoanh
> >
> >
> >
> > On 10/11/06, QuangAnh.Nguyen at dfat.gov.au <QuangAnh.Nguyen at dfat.gov.au >
> > wrote:
> > [Vietnam Business Forum]
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > Dear CACC
> >
> > Please see attached an interesting article on the current milk quality
> > crisis in Vietnam. In short, as you may see in some other news recently,
> > the Government has started an inspection on quality of so-called "fresh
> > milk" produced by domestic milk companies (including both foreign
> > invested
> > and local invested companies). It is said that a large proportion of the
> > "fresh milk" selling in Vietnam market are made from powdered milk...Of
> > course, the mill companies can make a lot of $$$ from this intransparent
> >
> > process.
> >
> > This scandal reflect a very unfair relation between the two side:
> > producers
> > and consumers. The consumer protection legal framework is there, but
> > enforcement is quite poor (I remember this issue has been mentioned some
> >
> > time ago on our forum).
> >
> > Regards
> >
> > ----------------------------------------------
> > Nguyen Quang ANH
> >
> > (See attached file: Nghich ly cua sua.pdf)
> >
> >
> > --
> > Tran Dinh Hoanh, LLB, JD
> > Attorney of Law
> > Washington DC
> > _______________________________________________
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--
Tran Dinh Hoanh, LLB, JD
Attorney of Law
Washington DC
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