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China's dairy giant looks to expand into further SEA, global markets

2019-07-30 16:06 Tuesday

China Mengniu Dairy Co, the country's leading dairy producer in terms of revenue, is putting more emphasis on innovation over the next few years to help realize its global ambitions, according to interview with a top official from the company.


"Innovation is inherent in our DNA and will be our calling card in the global markets," "As the first Chinese dairy firm to go overseas, globalization is taken as one of our top priorities." Mengniu CEO Lu Minfang relayed the comments during the World Economic Forum's New Champions 2019 annual meeting, known as the Summer Davos. The event took place in Dalian, Liaoning province, in July.

Mengniu began life in 1999 in the Inner Mongolia autonomous region. It sells liquid milk, milk beverages, yogurt, ice cream and other dairy products. In the past two decades, Mengniu has grown from a small enterprise in North China into one of the 2 biggest dairy product companies in the country. Its main rival is the Yili Group.

In the latest example of their international appetite, Mengniu announced a strategic cooperation initiative with leading Uruguayan dairy producer Conaprole, and said the two companies will work together in trading similar dairy products in the future.

Lu said: "The cooperation with Conaprole is part of our goal to leverage international resources to better serve customers both in China and abroad. With this transformation, we are now eyeing the global market to produce dairy products that can rival top ones in the foreign markets."

Expert insiders said the move marks an important step for Mengniu's overseas expansion efforts, given that Uruguay is the 9th-largest exporter of dairy in the world.

In Hong Kong, shares of Mengniu rose steadily after the news, touching a 1-year high at HK$32.25 (US$4.13).

Lu commented that Mengniu has expanded its business to over ten countries and regions such as SE Asia and Oceania, with many markets actively taking part in the Belt and Road initiative.

“The Belt and Road initiative has offered us unprecedented opportunities and it will be one of our key business focuses in the years ahead," Lu explained. "While beefing up in the SE Asian markets, we want to encourage a healthy way of eating food in the region," said Lu.

Citizens around the globe, especially youth, are paying more attention to their health, watching the food they eat and trying to adopt healthier lifestyles. To meet such demand, Mengniu opened a new factory in the Cikarang industrial zone in West Java, Indonesia, in November last year, its first big factory in the territory. The company said it has started to sell its liquid yogurt, YoyiC, in Indonesia, which has a population of more than 200 million people.

Mengniu also already has a presence in countries such as Malaysia, Australia, Cambodia, Singapore and Myanmar. Analysts said the efforts by Chinese companies to expand overseas is also due in part to increasingly fierce competition at home.

"As the bar for the food and beverage industry is relatively lower compared with other segments, the number of such companies is increasing at a fast pace, making the domestic competition even fiercer," said one report.

To give it a competitive advantage in such markets, Lu said the company is focusing its resources onto innovation. "Last year, we poured a total of 160 million yuan (US$23.3 million) into R&D, which was 20% more than the previous year," he explained.

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