Vertical Brand Extension at Vinamilk, Vietnam

Abstract

This case study illustrates the role of marketing instruments on the success of a vertical brand extension executed by a leading dairy company in Vietnam — Vinamilk. In 2011, the company launched a fortified liquid milk line as a step-down vertical brand extension from its previous and more premium line — 100% fresh milk. The key issue in the study is to understand how Vinamilk used marketing communication and distancing techniques (or differentiation tactics) to influence the performance of the vertical brand extension. The case findings show that despite quite serious cannibalization on the core brand, the vertical brand extension at Vinamilk was deemed a successful launch. The success was attributable to marketing communication that was rooted in profound consumer understanding — the right product offered to the right target at the right price supported with heavy consumer pull and trade push marketing. Vinamilk’s strong umbrella brand and wide distribution network also contributed to the successful launch. The most serious challenge was cannibalization on the previous premium product line — Vinamilk 100% fresh milk. As Vietnamese consumers grew wealthier and more sophisticated, non-reconstituted, fresh milk would likely become the biggest seller in the future, a sector Vinamilk could not afford to lose. Competition in this premium market was already heating up, requiring the company to strengthen this product line. For longer term strategy, Vinamilk had been forced to revisit its liquid milk product portfolio. A more clearly defined role for each product line along with effective differentiation would be required.