Dairy players enjoy healthy profits

Yili, Mengniu finances in good shape due to innovation, economic recovery 

Chinese dairy major players have enhanced their market presence by focusing on innovation, with China Mengniu Dairy and Inner Mongolia Yili Industrial Group Co Ltd exceeding market expectations in their half-year report of 2017. 

Inner Mongolia Yili Industrial Group reported that its revenue increased 11.32 percent to 33.94 billion yuan ($5.14 billion) compared with the same period of last year. Its net profit has reached 3.37 billion yuan, up 4.52 percent, according to its half-year financial reports released on Wednesday. 

Its major products - high-end brand Satine, Yogurt Ambrosial and Chang Qing and Joy Day - have grown nearly 31 percent in terms of revenue in the first six months of this year. 

Yili's new product sales have taken up 7 percent of total revenue. 

China Mengniu Dairy reported an 8.1 percent year-on-year revenue increase to 29.47 billion yuan in the first half of this year. 

Lu Minfang, chief executive of Mengniu, said at a news conference in Hong Kong that the Chinese mainland's dairy industry had gained great support from the country's recovery in consumption. 

"This is a structural recovery, not seasonal recovery," he said. 

Mengniu's wholly owned subsidiary Yashili International remained in the red, losing 121.9 million yuan in the first six months of this year, but the loss narrowed from 335.3 million yuan in the second half of last year. 

Zhang Chopin, chief executive of Yashili, said the company is going through a series of transformation to cut losses. He is upbeat about operating conditions after the government implemented its second-child policy. 

Responding to the gap between its biggest domestic rival Yili Group, Lu said in terms of liquid-milk business, the two players are neck and neck, and that "it is in milk-powder and ice-cream business we are falling behind". 

Song Liang, a leading dairy analyst, said with the progress in Yili and Mengniu's core business, innovations on new products development and ways to market their products have boosted their performance. 

For example, Yili has turned over its declining formula milk business with the early registration of formula. Mengniu's continuous collaboration with Danone on low temperature yogurt has also achieved positive market responses. 

The low price of raw materials - domestic milk and internationally sourced big packages of milk powder - have also helped the two companies' profitability, he said.