China’s Mengniu sets sight on global industry
A little over 10 years on from the tainted milk scandal that rocked the Chinese dairy industry, Mengniu has rebuilt. It is now buying up dairy companies in Asia as it embarks on a strategy to dominate the global dairy market. Just recently it has acquired two Australian companies – Bellamy Organic in a AUD$1.5 billion deal, and Lion Drinks and Dairy (LD&D) for AUD$600 million.
The instant milk formula (IMF) category was among the hardest hit by the scandal, but over the past year, the efforts of local companies such as Mengniu to regain consumer trust has paid off: sales growth of domestic IMF brands is now outpacing that of imported brands.
With the domestic market shored up, the goal of Chinese dairy majors is to take on the international dairy market. The first step in this plan is Southeast Asia where Mengniu exports its dairy products to Myanmar, Singapore and Malaysia. In Indonesia, Mengniu has built a dedicated dairy production facility and started selling dairy products under the YoyiC brand at the end of 2018.
Access to sources of high quality milk are necessary to fuel this expansion, and this is a key motivator for the recent Australian acquisitions. Another benefit of the LD&D deal for Mengniu is that its newly acquired brands, such as Farmers Union and Berri, already have a long history in Southeast Asia. Mengniu can build upon consumer familiarity with these brands to further enrich the product lineup in the region.
Mengniu can also transform itself into a more dynamic and diverse company that can cater to changing consumer tastes and preferences – not just in dairy, but also in other trending categories such as LD&D’s ready-to-drink (RTD) coffee and juice. In China, Mengniu is diversifying its products beyond dairy and made an entry into RTD coffee with the launch of Shiny Meadow Cold Brew Coffee Latte in September 2019.
Finally, while Mengniu is gradually expanding its reach globally via South East Asia, its ultimate goal is to become a truly international company. Reflecting this strategy, and how long term their vision is, in June 2019, Mengniu Dairy partnered with Coca-Cola and signed a US$3billion deal to sponsor the Olympic Games until to 2032.