Dairy deep dive: Yili talks to DR about rankings and plans

By Jim Cornall contact

- Last updated on GMT

In a wide-ranging interview, Yili talks about innovation, sustainability and sales. Pic: Yili
In a wide-ranging interview, Yili talks about innovation, sustainability and sales. Pic: Yili

Related tags: Yili, Dairy, Rabobank

Last month saw two annual rankings of dairy companies: The Brand Finance Food & Drink report and the Rabobank Global Dairy Top 20.

In the Brand Finance Food & Drink 2021 report’s dairy category, Yili recorded 11% brand value growth, widening the gap to second-placed Danone. In the Rabobank Top 20, Yili retained its fifth spot.

In addition, the Chinese dairy giant also published its first half financial report, and Dairy Reporter had the opportunity to hear about the reports, and the financial statements, from Dr Zhanyou Yun, assistant president of Yili Group.

How important are global ranking announcements such as this new listing from Rabobank and the Brand Finance Food & Drink 2021 to Yili?

Both Rabobank and Brand Finance are the world’s leading organizations that provide key indicators for global industry players. Through their annual rankings, Yili is able to have a more accurate understanding of its global achievements and have even greater motivation moving forward.

How does Yili maintain its prominent position in such rankings?

The Rabobank Global Dairy Top 20 list is based on each company’s annual revenue as main indicators, while Brand Finance is based on brand value as evaluation criterion.

Last year, the global dairy industry faced major challenges due to the Covid-19 pandemic. However, Yili successfully overcame these challenges by leveraging the competitive advantages of its operations and management, achieving high growth amid the global economic downturn with total revenue of RMB 96.886bn ($15.3bn) in 2020. Yili has once again claimed the top spot this year on the list of the Top 10 Most Valuable Dairy Brands and has also been ranked as the global dairy leader in terms of brand potential for four consecutive years.

These rankings also reflected Yili’s continuous and longstanding efforts in innovation. Always putting consumers first, Yili gathers together the strengths of a global health ecosystem, leveraging talent, technology, capital and other resources, to develop many feasible solutions around healthy food and tackles key challenges for the future. Such efforts have also paid off by winning favor from global consumers.

How does the company balance growth and responsibilities around sustainability?

The importance of pursuing sustainable development has become the consensus of the whole world. In terms of the sustainable development of companies, our work should focus on balancing short-term interests and long-term goals, spurring business growth and safeguarding the environment, with the aim of achieving not only Yili’s success but also prosperity of the dairy industry. This will help to create business wealth and social value, while contributing to the well-being of humankind and helping people to enjoy good lifestyles.

Our CSR system is closely intertwined with daily business operations at the strategic level, where the goals of sustainability and business development are both very important. To date, Yili has incorporated nine goals from the UN SDGs into our overall development strategy and formulated our 2025 Sustainability Agenda.

Yili has also established a three-layer system, including a company-level sustainable development committee, a secretariat under the committee and sustainable development liaisons covering all departments and business units. At the same time, Yili has cooperated with upstream and downstream industry partners, including dairy farming, planting, livestock breeding, processing, logistics, and consumer service sectors in order to push towards sustainable development together.

You recently launched a new Westland product. How important is innovation to the company, and are there any targets with respect to product launches?

Mr Pan Gang, the chairman of Yili Group, has always stressed the concept of “No Innovation, No Future.” The reason behind Yili’s growth into an international brand is largely due to its innovation and long-term investments in R&D. Focusing on key areas of R&D, Yili has integrated R&D resources both at home and abroad and weaved together a global cooperation network for innovation covering world’s leading R&D organizations from Asia, Europe, Oceania and America. Yili’s total number of applications for global patents and inventions ranked third globally among the world’s top 10 dairy companies by the end of 2020.

A new product from Westland, Yili Pro UHT Whipping Cream, will be available to Chinese consumers this October. The whipping cream favoured by Chinese bakers is usually produced with grains-fed milk, which has more consistent properties but is less nutritious than grass-fed milk. The two-year collaboration between Yili and Westland teams managed to overcome the inherent variability of grass-fed milk and produced a cream suitable for Chinese bakers. This new product produced through such cooperative innovation is the best embodiment of Yili’s philosophy of “global mindset meets local needs.” We are very confident that this product will be best choice for Chinese bakers and help Westland continue to grow and make breakthroughs in New Zealand and Asian markets.

What kind of research does the company do to plan launches in the countries in which it has products?

In order to better listen to the voices of our customers, we use new technology and tools to capture consumers’ new demands and trends and pay attention to the feedback and evaluation from different regions and consumer groups, to help optimize the quality of products and services.

Take our star product NOC (Nature of Cheerfulness) ice cream as an example. Through the intelligent semantic analysis, we discovered that consumers were discussing much more the “crust” of ice cream and that the carrot flavor was highly rated. We therefore set a marketing strategy for soft crust and optimized the production and distribution of the carrot flavor, and subsequently increased the sales of this product.

In Southeast Asia, we are also developing products that can cater to the diversified needs of local markets. For example, considering that Indonesian consumers like products which are rich in flavour, small in volume and high in cost efficiency, Yili's latest Mocha Coffee Ice Cream formula has been made more fragrant and sweeter following meticulous improvements, which has now been well-received by Indonesian consumers. In addition, Yili has rolled out new products with durian and mango flavors that are popular among local customers.

And where – if at all – do plant-based products feature in the company’s plans?

Yili has been widening its product portfolio to facilitate customers’ choices for healthy foods. Plant-based products is one of Yili’s interested areas.

In December 2017, Yili launched first plant-based beverage PLANT SELECTED soybean milk. This marked the first step of Yili’s entry into the plant-based market. Following three years’ worth of efforts, Yili has launched a series of plant-based products under the brand PLANT SELECTED. A soy milk with a protein content of 6.0g/100ml was launched in March 2020 and became the benchmark for Chinese plant-based milk products. The oat milk, which was launched in 2021, featured in high dietary fiber, low calories and rich nutrition.

In the R&D of plant-based products, researchers have improved the taste, flavor and nutrition through continuous innovation and optimization of processing technology and formulas, providing consumers with healthier and more diversified new choices. This has paved the way for Yili’s growth in the plant-based beverage market.

Clearly, Yili is already huge global player. Does the company have any intent to enter markets such as Europe and North America?

Over the years, Yili has maintained close cooperation with the world’s leading R&D institutions in Europe and North America to integrate global intelligence and expand its R&D capabilities. In 2014, Yili started to cooperate with Wageningen University to establish the Yili European R&D Center and upgraded it to the Yili European Innovation Center in 2018, one of the highest standard R&D institutions set up overseas by the Chinese dairy industry at present. In June 2021, Yili signed an agreement to partner up with StartLife, Europe's longest running and leading agrifoodtech accelerator. Yili is also joining the Open Innovation Forum, an industry network for food and FMCG companies at the Institute for Manufacturing (IfM), which is part of the University of Cambridge.

Yili is steadily promoting our overseas business development. Our star products, such as AMBPOMIAL yogurt, Joyday ice cream, Youngfun dairy beverage and Westgold butter, have been launched in 21 countries and regions, serving global consumers with high-quality offerings. At present, our overseas markets are mainly concentrated in the Asia-Pacific region. In the future, we will gradually expand into more international markets to serve even more consumers around the world.

What would you say about the most encouraging statistics from the recent financial statement?

During the reporting period, Yili exceeded market expectations with double-digit growth in revenue and net profit, with gross revenue rising 18.89% YoY to reach RMB 56.506bn ($8.74bn), and net profit attributable to the parent company jumping 42.48% YoY to reach RMB 5.322bn ($820m). The result sets another new high for the Asian dairy industry and makes Yili the first likely dairy company in Asia to exceed RMB 100bn ($15.5bn) in revenue.

In addition to the company’s main products, Yili is continuously extending and diversifying its product lines. For instance, the retail sales of cheese products more than doubled year over year, giving the company a head start in the segment with high growth potential. And the company’s low-temperature milk business also grew fast, with 5.7% increase in market share.

And what are the biggest challenges to Yili’s continued growth

During the Covid-19 pandemic, consumers’ understanding about dairy food on health improved, and needs for high quality, functional products increased, expectation on service heightened. In China’s consumption upgrade trend, consumer needs more diversified healthy foods. Yili will continue its “Putting Consumers First” strategy, improve on its big data platform to understand consumer trend deeper and quicker, so as to develop products and provide service with high quality. Beside dairy and plant-based products, Yili needs to try in new food and beverage areas to widen its portfolios. For example, Yili launched a new brand in mineral water - Inikin Yike live fountain, receiving great responses from the market.

At the same time, developing oversea markets is also a key strategy for growth. As different country has different standard, culture and thinking, business practices are also very diversified. To develop global market well, Yili will continue its “global mindset meets local needs” business model, try to improve its capability to provide better service and high quality products to local market, take social responsibility, and at last achieve business success and also social prosperity.

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