Mengniu has become the focus of the recent topics, such as the withdrawal of miaokerando and the termination of its acquisition of lion-dairy & drinks Pty Ltd (hereinafter referred to as LDD), the second largest dairy company in Australia.
At the 2020 performance investor meeting held today, Mengniu President Lu Minfang and other high-level officials responded to a series of hot issues for the first time, and talked about milk powder sales objectives, merger and acquisition planning and performance prospects for the second half of the year. Now, let’s take a look at them one by one.
Lu Minfang, President of Mengniu
On three hot spots
Xiaoshidai noted that Mengniu responded to the withdrawal of miaokelando for the first time today. “The withdrawal of SEO is mainly due to some changes in policy, but Mengniu’s whole cheese strategy has not changed.” Lu Minfang said at the meeting.
He said part of the reason for the initial investment was to expand production capacity to support the development of Mengniu cheese. “In fact, our retail cheese (the first half of the year) has a triple-digit growth, but this (increase) is actually limited by our production capacity. Investment in miaokelando has a collaborative OEM support, which will speed up the replenishment of our domestic capacity.
Lu Minfang also said that Mengniu was very confident in the cheese business and would “develop simultaneously with imported cheese and domestic cheese” in the future.
In fact, Mengniu, which intends to walk on two legs, has already found a “small partner” for the cheese business. Last month, snacks agency first introduced that Mengniu would inject its cheese business into a new joint venture with Arla. The two sides will build a cheese focused brand, and thus complete the “cooperation and integration from production and processing to terminal sales”.
At the meeting, Lu Minfang also revealed the latest progress of this cooperation: “our Wuhan factory has been started and will be put into production soon.”
Xiaoshidai noted that Lu Minfang also talked about the specific reasons for the termination of LDD acquisition for the first time.
“LDD has a local brand business, and the main effect of [Termination of acquisition] is that this part of the business will not be run by us.” He said it was a pity that the acquisition had not been reached, but it would not affect the whole supply chain layout of Mengniu in Australia and New Zealand and its business operation.
“It’s a pity. Since it’s going out to sea, it’s certain that there will be storms sometimes, so we have psychological preparation.” Lu Minfang said that Mengniu will continue to promote the international layout of Southeast Asia, Indonesia and Australia New Zealand markets.
Although the series of investment acquisition changes due to some force majeure, Mengniu will not give up looking for good acquisition targets.
Xiaoshidai noted that in response to the question of whether it would promote the growth of low-temperature yoghurt through M & A, Zhang Ping, chief financial officer of Mengniu, said that the development of this business was mainly to promote endogenous growth, but it also did not rule out that good merger opportunities would be investigated in the future. “What are good opportunities? For example, we can have complementary and collaborative targets with us. ” He said.
Milk powder “10 billion in three years”
Following the recent proposal that Mengniu milk powder should be the top three in China within three years, Lu Minfang also gave more specific sales objectives and trading ideas today.
“To be honest, we can’t get into the top three without 10 billion, so the goal of (milk powder) must be to make 10 billion. At present, Yashili and Bellamy have set a target of 10 billion in three years. ” Lu Minfang said that the top three companies in the industry have an average market share of about 10%.
Three years to achieve the goal of 10 billion also means that Mengniu milk powder needs to “rush”. The snack generation looked through the Mengniu conference materials and found that Bellamy’s income in the first half of the year was 646 million yuan. In addition, according to Yashili’s semi annual report, the company’s income from milk powder and other dairy products during the period was 1.515 billion yuan.
In fact, Mengniu has also made a lot of preparations for “galloping”. Xiaoshidai introduced that after being acquired by Mengniu, Bellamy successively launched super high-end organic A2 milk powder and organic sheep milk powder in the first half of the year.
At present, high-end is a “powerful weapon” to promote the growth of milk powder. Looking at the previous forecast data of frost Sullivan today, the retail sales value of infant formula market in China is estimated to be about 342.7 billion yuan in 2023, one of the main driving forces is the growth of high-end market. It is estimated that the average price of milk powder per kilogram will reach 486 yuan by then, compared with 421.7 yuan in 2018.
In addition, ruibu’en, which is regarded as the key brand of Yashili, has also carried out brand renewal and is expected to launch new upgraded products in the future.
So, as Mengniu milk powder business “two big generals”, how to do in the future?
In this regard, Lu Minfang said that Bellamy’s direct benchmarking is the brand of multinational companies and will promote the development of online and offline channels simultaneously in the future. He also revealed that the Chinese version of Bellamy’s formula registration has been launched recently, and the omni channel product layout has been completed.
“After the Chinese version of Bellamy’s offline comes into the market, the number of offline teams will increase, because there are almost no offline teams. So, in the first half of the year, we spent a lot of effort to build an offline team to do Bellamy. ” Lu Minfang said that Bellamy’s new products are expected to help the business expand more strongly in the second half of the year.
In addition, Lu Minfang also responded to the question of how to manage the price difference between the online and offline channels of Bellamy, and said that the overall price gradient of Bellamy is relatively clear and sustainable.
“First of all, at present, (Bellamy) Chinese version is one of the most high-end products in China’s organic formula milk powder, and its formula is better than the cross-border version. So this kind of price gradient is sustainable, which has been reflected in other companies which are similar to our business model. ” “Bellamy’s brand awareness and online popularity are very high now, so there won’t be a very large [publicity] investment in the short term,” Lu said. “
Unlike Bellamy, Lu Minfang said Yashili would “focus more on the development of Chinese brands.”. Therefore, Yashili will also adopt the same marketing approach as local milk powder brands.
Yan Zhiyuan, executive president of Yashili, said at today’s meeting that the current market competition of domestic milk powder presents the characteristics of “three high” investment, namely, high investment in channel, high investment in media and high investment in terminal.
“For us at present, it is obvious that we can not achieve the relatively large (regional high investment) well, so we will focus on some core areas.” Yan Zhiyuan said that through the “snowball” method, the direction is to go from the first brand in the region to the top two brands in the country to support the goal of “10 billion yuan in three years” of Mengniu milk powder.
According to Yan Zhiyuan, Yashili’s annual performance goal is to achieve low double-digit growth, “basically 20% – 25% growth in the second half of the year.”.
Maintain the guidelines for the second half of the year
Following the release of the semi annual report last night, Lu Minfang and other senior executives also interpreted the performance of the first half of the year today. According to the information of Mengniu meeting, the comparable business income increased by 9.4% in the first half of the year to 36.888 billion yuan, and the profit attributable to the owners of the company was 1.158 billion yuan, down 42.1% year on year.
This is better than Mengniu expected. In the previous earnings warning announcement, Mengniu had predicted that the profits of owners of comparable businesses in the first half of the year would drop by 45% to 60%. Regarding the “report card”, Lu Minfang said today that the rapid decision-making and firm implementation after the outbreak laid a good foundation for business recovery in the second quarter.
Looking back on the first half of the year, high-end products continue to provide momentum for Mengniu’s income growth. Under normal temperature, Lu Minfang said that the market share of high-end brands increased by 1.5 percentage points to 28.2%, which also promoted the market share of Mengniu liquid milk.
“In May, the organic milk of terenzo dreamcover was further upgraded, increasing the milk protein content from 3.6 g to 3.8 g, which grasped the demand of consumers for high-quality and high protein dairy products after the epidemic. Compared with the 25% growth of terenzo in 2019, the growth of terenzo in the second quarter of this year is more than 30%. ” He said.
As for the fresh milk sector, Lu Minfang disclosed that, including the Wuhan market where sales were seriously affected from February to April, the business still achieved nearly 100% year-on-year growth in the first half of the year, “our market share has leapt to the second place in the industry in June.”. In addition, the sales of high-end series “daily fresh language” accounted for more than 35% of Mengniu’s fresh milk, and the proportion is expected to continue to expand in the second half of the year.
He also talked about Mengniu’s development ideas of fresh milk business. “The way we think about fresh milk business is based on the city circle. In other words, we are built according to the scope of cold chain supply within 500 km. ” Lu Minfang said that from the perspective of industrial chain, Mengniu fresh milk is currently focused on North China, central China and East China, “in fact, we have entered many third and fourth tier cities in East China.”.
Based on the good momentum of business recovery, Lu Minfang said that Mengniu would maintain its original growth guideline for the second half of the year, that is, double-digit growth in revenue and an increase of 30-50 basis points in operating profit margin year-on-year. “Anyway, we now think that low double digits are guaranteed. Of course, it may be better if we do it well.”.