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China Mengniu Dairy grows profits 4.7% with plans to partner with e-commerce giant Alibaba

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Mary Ellen Shoup

By Mary Ellen Shoup+

01-Sep-2017
Last updated on 04-Sep-2017 at 12:07 GMT2017-09-04T12:07:35Z

China's second largest dairy company, behind Yili, saw revenues grow by over 8% for H1 17.
China's second largest dairy company, behind Yili, saw revenues grow by over 8% for H1 17.

China Mengniu Dairy reported a 4.7% year-over-year jump in profits to $172m (1.13bn RMB) for the first half of 2017 and announced plans to partner with Alibaba to develop its e-commerce platform to further drive online sales.

The Chinese dairy company posted revenue of $4.5bn (29.5bn RMB) for the first six months of 2017, an 8.1% increase from $4.2bn (27.3bn RMB) for the first half of 2016.

Fluid milk sales account for 86% of Mengniu’s total revenue and increased 7% year-on-year. Ice cream sales, which account for nearly 7% of total revenue rose by 14% compared to the first six months of last year.

China Mengniu Dairy manufactures a range of dairy products under its core brand Mengniu, including UHT milk, milk beverages, yogurt, ice cream, formula, and other dairy products such as plant-based protein beverages and cheese. By the end of June 2017, the company’s annual production capacity reached 9m tons.

E-commerce focus

As consumers become increasingly interested in premium dairy products, especially millennials, their purchasing habits have shifted to online shopping, a platform Mengniu is looking to expand.

Mengniu CEO, Jeffrey Minfang Lu, said Mengniu will work closely with Alibaba’s Hemaxiansheng supermarket and ele.me delivery platform as part of its e-commerce business plan.

Mengniu currently has products listed on major e-commerce channels including Tmall, JD, Suning.com, and Womai.com and for the first half of 2017 it ranked first in terms of online dairy product sales, growing 50% in online revenue for the period.

Growing premium brands

The company has shifted its focus to the production of high-end dairy products to better meet premiumizing tastes of Chinese consumers.

“To satisfy Chinese consumers’ growing crave for higher-end and more nutritious products, Mengniu continued to focus on high-end product research and development and innovation,” Lu, said.

“During the period, breakthroughs were made in innovation of chilled and ice cream product categories and the market responded positively.”

Its ice cream segment now accounts for 6.7% of Mengniu’s total revenue as a result of increased emphasis on its premium ice cream brand, Deluxe, through upgraded the branding, products, packaging, and marketing. Mengniu also launched Mood for Green sticky rice red bean ice cream and a Russian milk ice cream.

The company has lowered its projected revenue for the 2017 to 2019 period as it expects decreased sales of its value-price items as it shifts focus to its premium dairy portfolio.

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