In China, Meiji, Japan’s largest dairy company, is making an all-round attack with an unprecedented posture. Xiaoshidai noticed today that Meiji Holding Co., Ltd. (hereinafter referred to as Meiji group) recently held a press conference to introduce China’s food business separately. At present, the company has two subsidiaries, namely Meiji Co., Ltd. (hereinafter referred to as Meiji) and Meiji Pharmaceutical Co., Ltd., which focus on food.
It was mentioned at the meeting that in order to support the expansion, Meiji has launched a new organizational structure in China since January this year, from the original independent operation of regional companies to the mode of establishing multiple business units under Meiji China. What is more striking is that tamostu Matsui, its general manager, disclosed that after the withdrawal of infant milk powder from Chinese Mainland for many years, the company is promoting the resumption of this business and hopes to return as soon as possible. Let’s have a look.
Largest overseas market
Since entering Chinese Mainland in the last century, Meiji has established a number of businesses here, including milk and yogurt, candy, ice cream, nutrition and catering products. Among them, candy and ice cream are “the oldest”, which were founded in 1993 and 1994 respectively. Milk, yogurt and nutrition were established in 2013 and 2020 respectively. According to the performance data of fiscal year 2022 (Note: the year ended March 31, 2022) released by Meiji holdings last week, the net sales of Meiji China in fiscal year 2022 was 21.8 billion yen (now about 1.149 billion yuan), up 19.1% year-on-year.
Specifically, Meiji China’s milk and yogurt sales declined in fiscal year 2022. In this regard, Meiji China said in its reply to the snack agent’s query today that the main reason is the sharp rise in milk demand in fiscal year 2021, resulting in a high sales base. Compared with fy2020 (Note: the year ended March 31, 2020), the company’s milk and yogurt still increased. In addition, Meiji China’s sales of catering products and ice cream increased. Among them, the growth of catering products benefited from the acquisition of new customers (Note: including Meiji milk, Meiji light cream, etc.). As for ice cream, it was found that the company revealed at the 2022 Meiji ice cream outlook and dealer appreciation meeting held at the end of last year that the sales of the business continued to maintain double-digit growth in 2021, including building explosive products, brand rejuvenation strategy, consolidating offline and expanding online channel strategy.
Xiaoshidai also noted that in fiscal year 2022, China has surpassed Europe and the United States to become the largest overseas market of Meiji. Meiji said at the press conference that China is its most important overseas market.
According to the information of the meeting, Meiji expects China’s sales to be 35 billion yen (about 1.852 billion yuan) by fiscal year 2023, accounting for nearly 43% of its overseas business. This proportion was 36% in fy2022.
So where does Meiji’s confidence in China come from? In response, the company said at the meeting that the scale of China’s market has great potential, not only because China’s population and GDP are expected to continue to grow. As far as Meiji’s industry is concerned, China’s market scale and growth rate are also more advantageous than other countries. Meiji also believes that the improvement of consumers’ loyalty and health awareness of their brands also brings opportunities.
In order to accelerate expansion in China, Meiji also made drastic structural adjustments. On the one hand, Meiji China has launched a new structure that is more streamlined and more collaborative. According to Meiji at the meeting, in the past, each subsidiary of Meiji China operated independently, including Meiji dairy (Suzhou) Co., Ltd., Guangzhou Meiji fruit Making Co., Ltd., Meiji ice cream (Guangzhou) Co., Ltd. and Meiji fruit making food industry (Shanghai) Co., Ltd.
Under the original structure, the four companies operate different businesses. Although the business overlap between them is not high, they all bear the same sales and marketing responsibilities. After the restructuring, Meiji China put the sales and marketing functions under the unified management of the group, and set up different business departments, including milk and yogurt, candy, ice cream, nutrition, catering products and e-commerce.
Meiji believes that this model can make more efficient use of management resources and create multi category synergy. On the other hand, Meiji also adopted a more localized model in the linkage between China and global headquarters. Meiji said it would transfer more power to Meiji China to speed up decision-making. Under the new model, Meiji China will have most of the “voice”, including planning, decision-making and implementation, whether it is a short-term annual plan or a three-year to five-year medium and long-term plan.
In addition, in order to quickly respond to market changes, Meiji also plans to change the practice of Innovation led by the Japanese headquarters and set up a separate product development center in Meiji China. The center will share new technologies with Japan headquarters to support product development.
Substantial increase in production
In addition to localization, Meiji China is also increasing its capacity layout. It is reported that the company is building new factories in Tianjin, Guangzhou and Shanghai at the same time, with a total investment of 2.47 billion yuan. All three plants are planned to be put into operation in 2023. Among them, Tianjin factory produces milk and yogurt to support Meiji to open the North China market. “For us, the biggest challenge in the future comes from North China. Meiji brand has not fully penetrated there. Therefore, we decided to build a milk and yogurt factory in North China first.” Matsui said at the meeting that due to the high consumption frequency of milk and yogurt, these two types of products are the best choice to improve Meiji penetration. The other two factories have undertaken the task of supplementing the existing production capacity and expanding market share. Matsui revealed at the meeting that Meiji China’s ice cream and candy factories have been fully produced.
According to the meeting materials, Meiji Guangzhou new factory produces milk, yogurt and candy. “In South China, we have ice cream and candy factories before, and Meiji brand has developed very mature. What we can’t produce there is milk and yogurt.” Matsui said. Shanghai new factory is responsible for ice cream. Matsui said that about 20% of the sales in East China market now come from ice cream. Xiaoshidai introduced that this factory will become the second ice cream factory in Meiji China, which is responsible for supplying East and North China. At present, the company’s only ice cream factory is located in Guangzhou, mainly supplying South China. After these factories are put into operation, Meiji China’s production capacity will increase significantly. The company said that by the end of fiscal year 2023, its production capacity of milk, yogurt, candy and ice cream will be about four times, two times and two times that of fiscal year 2020.
In fact, Meiji has “suffered” because of limited production capacity. Matsui revealed at the meeting that in the refrigerated fresh milk market, the capacity bottleneck made Meiji “powerless” in the face of competition. “Since the establishment of the company, there has been no change in the milk product portfolio. In this case, other companies have also entered the refrigerated fresh milk and launched all products covering the range from low price to high price. But at this time, we failed to respond in time and improve the brand value, which is a great pity.” Matsui said. The business was robbed due to insufficient production capacity, which was also performed in the business for b-end businesses such as coffee, baking and tea.
According to Meiji China’s official website, its three catering milk and cream adopt roof packaging. Matsui revealed that Meiji suspended sales to catering businesses due to insufficient packaging capacity. “At first, Meiji dairy Suzhou had only one production line of 3000 boxes (output), which was later increased to 6000 boxes and then to 12000 boxes.” Matsui said that although packaging production continued to increase, it still couldn’t keep up with demand. “Therefore, since the launch of the project, we have been unable to update our products or actively promote them. During this period, other companies have been playing various tricks, but we were unable to respond in time.” In fiscal year 2020, the production of milk boxes will be increased from Songjing to Tianjin, but the production of milk boxes will also be increased from Meiji to Meiji in fiscal year 2020. “Therefore, we have taken measures such as product update and new products on the market in fiscal year 2022 to see how we can make a comeback.” He said.
Return to infant milk powder
At present, Meiji China also hopes to create a more complete business “Puzzle”. In order to meet the needs of consumers of all ages, the Japanese dairy tried to bring infant milk powder back to Chinese Mainland, although the industry has been “fighting” into a red sea, and Meiji has been repeatedly frustrated. The snack generation introduced that Meiji milk powder entered the Chinese Mainland market through agents in 1997. But then, due to the impact of foot-and-mouth disease in Japan and the secondary disaster of Fukushima nuclear radiation, Japanese milk powder encountered an import ban. In 2011, Meiji milk powder returned to Chinese Mainland, but the production place of all products was changed to Australia. The recall of 400000 cans of milk powder in Meiji factory in Japan was seriously affected a few months after it was announced.
In August 2013, Meiji was involved in the antitrust investigation of milk powder price. Although it was finally exempted from punishment, it also reduced the price across the board and “supplied China at a preferential price” within two years. After twists and turns, in October of the same year, Meiji announced that it would temporarily withdraw from the infant milk powder Market in Chinese Mainland, on the grounds of intensified competition and rising raw material costs. It is difficult to obtain stable income at this stage.
However, Meiji did not say anything at that time, and said that “we will still pay attention to the product development of milk powder in order to return to the market”. Now, this work has been put on the agenda. Matsui revealed at the meeting that Meiji China is steadily promoting the preparation of infant formula and believes that Meiji’s “brand image is still there”. “We hope to restore the demand for our infant formula in the Chinese Mainland market before the brand image disappears. We are working hard to think and moving forward with various ideas.” He said. In response to the possibility of resuming sales in the next oneortwo years, he said that the company was considering various ways to carry out business in Chinese Mainland as soon as possible, and the relevant regulations were very strict. “I can only say that we are promoting our work as soon as possible.”. Although Meiji did not disclose the specific method, it is certain that it is impossible for the company to import Nissan milk powder from China through general trade channels (Note: such as mother and baby stores, supermarkets, etc.). Today, the snack agent inquired about the registration list of imported dairy products overseas production enterprises of the General Administration of customs, and there was no Japanese infant milk powder enterprise. But it is worth mentioning that Meiji has Danone as a “friend” in the field of infant formula food. The latter owns brands such as altami and nuoyneng, and has become a “large” in formula quota and production capacity through the acquisition of Maigao Qingdao factory, Hunan obijia and Dumex China, which has yet to be delivered. Xiaoshidai introduced that in May 2020, Meiji announced that it had signed a memorandum of understanding with Danone specialty special nutrition, and the two sides planned to cooperate in the production of flake infant formula food for the European market.
According to the above memorandum, Meiji dairy will provide proprietary sheet production technology, and the relevant products will adopt the formula of Danone’s infant formula and be produced in Danone’s European factory. Xiaoshidai noted that the Atami flake milk powder cooperated by the two sides had been launched in the UK in March 2021 and planned to be promoted to other European countries after 2022, but did not mention China. As of press time, there is no indication that the formula products of the above cooperation will be introduced into the Chinese market. Previously, xiaoshidai also asked Suzhou Meiji Shanghai branch whether it would introduce foreign products. The company only said that “the problem involves the company’s future strategy, which is inconvenient to disclose temporarily”.