Center

Mengniu options to stay on top

By Jonathan Yang (China Daily)
Updated: 2006-04-11 08:57

China Mengniu Dairy Co Ltd will try to stave off the mainland's milk market competition by developing new products, further investing in dairy farms and upping its production this year.

The mainland's leading dairy products producer in terms of market share said yesterday it would increase its production capacity to 4 million tons this year, up from last year's 3 million tons.

Mengniu occupied 28.6 per cent of the mainland's liquid milk market by the end of 2005 in terms of sales, 6.6 percentage points up from the previous year, according to marketing information firm ACNielsen.

China Mengniu Dairy's  CEO Yao Tongshan drinks a packet of milk during a news conference in Hong Kong April 10, 2006.

The mainland's dairy sector is expected to grow by 20 per cent in 2006, said CEO Yao Tongshan.

Mengniu saw its 2005 net profits jump by 43 per cent to reach 456.8 million yuan (US$57.1 million). "It was a marvelous year," said Niu Gensheng, Mengniu's chief executive officer.

The Inner Mongolia-based company recorded 10.8 billion yuan (US$1.35 billion) in revenue last year, up 50.1 per cent from 2004.

Liquid milk, Mengniu's leading business segment and major revenue source, contributed 86 per cent or 9.3 billion yuan (US$1.16 billion) to the company's total revenue, increasing 52.8 per cent year-on-year.

Yao said the company would cope with the intense competition in the mainland's milk market by developing and introducing new dairy products into the market this year.

These include new milk beverages, flavored milk geared for children, low-temperature yoghurts and new value-added dairy products, Yao said. The 2005 revenue from the company's milk beverages skyrocketed by 134.7 per cent to reach 2.1 billion yuan (US$262.5 million).

Mengniu's "effective product differentiation and marketing campaign increased its market share," said Paul Chan, a senior analyst with Hong Kong-based securities house CSC Securities.

This type of campaign "leads to high revenue growth," Chan said.

Yao also told reporters that to ensure that the company has the stable milk sources to meet its expansion needs, the company will continue investing in dairy farms directly or through co-operation with overseas partners.