The group already has a Vietnamese subsidiary that produces beverages and operates labeling and packaging activities.

The new Vietnam Hi-tech Dairy Holding Company will produce fresh milk under the Milky US trademark from the firm's factory in the southern Long An province. Other shareholders include the Tan Tao Company, the Tan Duc Company, and the Tan Long Phat Company.

The factory is designed to process 30 million litres of milk annually, and may also produce yoghurt, powdered milk, soy milk and fruit juices.

Gannon has seen good sales with its imported products and already sells Milky US through a network of 30 major distributors from central Da Nang city southwards.

The US company expects Vietnam to be its second fastest growing market after China, with strong potential from those under 20, who make up 60 per cent of the country's 80 million people.

Since 1990 milk consumption in the country has grown from just 0.47kg per person each year to 7.50kg per person in 2001. In response to this rise in demand the national dairy industry has also grown significantly, to an output of 64,000 tons in 2001.

The milk production rate of the national industry is still relatively small, with analysts estimating that the national industry only manages to meet around 10 per cent of total demand. This creates strong demand for imported products.