In 2017, Yili proposed a strategic goal of 100 billion yuan: it plans to enter the “top five global dairy industry rankings” and “revenue to exceed 100 billion yuan” in 2020. Last year, Yili had not achieved this 100 billion goal, but in the first quarter of this year, its revenue reached 96.88 billion yuan, which is only a small step away from the 100 billion yuan.
And its goal of “Top 5 Global Dairy Industry” has been achieved. In 2020, Rabobank announced the “Top 20 Global Dairy Industry” list. Yili ranked among the top 5 dairy industries in the world and created the history of dairy industry in China and even Asia. Ranked No. 1 in the Asian dairy industry for seven consecutive years.
At the same time, the company has formulated a new strategic goal: to advance to the “Top Three in the Global Dairy Industry” in 2025, and to move steadily to the “No.
So, how does Yili realize the dream of “the top three in the global dairy industry”? How does Yili master the source of high-quality milk under the “milk-grabbing battle”?
The magic and reality of the “Top 5 Global Dairy Industry”: the founders went to jail for stock trading, and the successors broke the situation later.
Behind the success of every brand, there is a core figure -the founder. Similarly, Yili, a well-known brand, is also inseparable from Zheng Junhuai, the founder of the “Godfather of Dairy Industry”.
In 1991, Zheng Junhuai took the lead in implementing the operating contract responsibility system, leading Yili’s predecessor, the “Huhichi Huimin Dairy Food Processing Factory” to counterattack, developing from a close-down workshop state to a medium-sized enterprise with annual profits of one million; then in 1993, the processing factory was restructured. , Yili Group was formally established by means of targeted fundraising, and the company was officially renamed “Inner Mongolia Yili Industrial Co., Ltd.” in June of the same year.
After founding Yili, Zheng Junhuai set the strategic goal to cover the whole country. In 1994, he established an ice cream project and quickly made the company the largest cold drink manufacturer in North China at that time, with an annual profit of more than 5 million yuan.
Relying on this strong development momentum, Yili was successfully listed on the Shanghai Stock Exchange in 1996, becoming the first A-share listed company in the national dairy industry.
However, Zheng Junhuai did not accompany Yili until now. In 2004, Zheng Junhuai was sentenced to 6 years in prison on suspicion of embezzlement of public funds.
However, Yili has ushered in another leader-Pan Gang, the current chairman.
Pan Gang joined the Hohhot Huimin Dairy Food Factory in 1992. He was appreciated by Zheng Junhuai because he graduated from Inner Mongolia Agricultural University with a high degree of education and a young and capable person. , The general manager of the business department until the successor chairman.
It is worth noting that in 1999, Pan Gang established the Yili Liquid Milk Business Unit, and extended the milk shelf life to 6-9 months through ultra-high temperature instantaneous sterilization (UHT) technology, which really solved the problem of southerners’ difficulty in drinking milk at that time. Started the era of liquid milk nationwide.
In addition, liquid milk also helped Yili’s revenue to leap from tens of millions to hundreds of millions. Statistics show that before the establishment of the liquid milk business unit, Yili’s liquid milk revenue was only 60 million yuan. Under Pan Gang’s leadership, in 2000, Yili’s liquid milk business achieved 500 million yuan in revenue. In addition, the growth of liquid milk has promoted the rapid development of other product businesses (cold drinks, milk powder) of Yili Enterprise, making the company a well-known brand.
In 2002, Pan Gang was appointed as the president and director of Yili Group; immediately after Zheng Junhuai was arrested in 2004, Pan Gang formally became the chairman of the board and started his own brilliant life.
He also led Yili through the low period of being overtaken by Mengniu .
Mengniu was founded in 1999, but the founder is the former vice president of Yili Group. He has the genes for being a dairy industry and then uses a series of marketing actions, including sponsoring Super Girls, and China’s aerospace industry continues to go out of the circle to increase sales. In the past eight years, Mengniu’s sales surpassed Yili for the first time in 2007.
But the turning point was the melamine incident that broke out in 2008, and both Yili and Mengniu were affected. However, the two companies had different results due to the different handling methods of the helms. Yili chose to bear all the losses, including the distributors, while Mengniu took half. After that, many distributors turned to Goyili. Since then, Yili has dominated the domestic dairy market.
Until now, Yili has ranked first in the Asian dairy industry and ranked among the top five in the world, and it is one step closer to its dream of 100 billion in revenue. But how does it do it?
How did Yili manage to be No. 1 in the Asian dairy industry for seven consecutive years?
Some people say, “The domestic two-star dairy brand battle is a marketing battle”, but which industry is not? The perfect diary and Huaxizi in the beauty industry , the New Oriental and the bright future of online education, etc. Yili’s success depends not only on good marketing, but also on the supply chain, product brand matrix and channels.
(1) Marketing: Compete for the naming rights of hot variety shows
The domestic dairy industry can be regarded as an early start of the marketing war.
In 2003, Mengniu became the first milk sponsor of China’s aerospace industry; in 2004, it seized the phenomenal program “Super Girl”; up to now, Mengniu has also sponsored popular variety shows such as “The Son of Tomorrow” and “Youth Have You”. .
Yili is more hindsight, after experiencing the turning point of 2008, it began to exert its efforts in marketing. But because of Mengniu’s lagging behind, Yili has an opportunity to take advantage of the launch of QQ Star, Golden Classic, and An Muxi respectively named “Where Are You Going, Dad 3”, “Most Powerful Brain 2”, “Running Brother 2”, etc. variety show.
Up to now, both Amushi and Golden Classic are phenomenal marketing products. According to the company’s disclosure data, in 2014, Anmxi sold 700 million yuan in the first year of listing; at the end of December 2019, the market share was as high as 60%, and sales exceeded 20 billion yuan. Similarly, Golden Classic is another tens of billions of Yili products, with sales exceeding 10 billion in 2018.
Up to now, Mengniu and Yili have also taken care of almost all the hot variety shows, but the difference is that Yili has surpassed and maintained its first position in the domestic dairy market through Mengniu’s efforts at a trough period.
(2) Supply chain: global self-built base
Yili’s ability to be No. 1 in Asia is not only relying on marketing to promote product sales, but also relying on a solid supply chain foundation.
In the supply chain, Yili started to enter overseas high-quality milk sources in the early stage when it won the domestic high-quality supply side. In 2011, one of the world’s largest integrated dairy bases, the “Yili Oceania Production Base”, was built in New Zealand, and the Indonesian factory that completed the main construction in 2020.
In the global self-built dairy industry base, on the one hand, the cost of overseas milk sources is lower, and on the other hand, it is convenient to enter overseas markets. Pan Gang once proposed the internationalization strategy of “global web weaving”, aiming to build a global resource system covering Asia, Europe, America, Oceania and other developed dairy regions, and promote Yili to become a global brand.
As we all know, a company must be strong, not just local business, but overseas business. Similarly, Yili is like this. The company disclosed that Yili’s annual sales growth rate in the Thai market reached 68%, and its subsidiary Amoxi occupies the Southeast Asian high-end yogurt market, and its brand ranks first in the large yogurt category.
(3) Brand strategy: continuously upgrade products and build a brand matrix
The enrichment of supply chain resources also allows Yili products to be continuously upgraded. Not only liquid milk, but also low-temperature milk, soothing milk, sparkling water, beneficial acid bacteria and other drinks.
According to financial report data, in the first half of 2020, Yili’s market share of low-temperature liquid milk reached 15.3%, and reached a record high of 16% at the end of June; in addition, revenue from milk powder and dairy products also increased by 51.5% year-on-year, and revenue from cold drink product series increased year-on-year. 13.2%.
It can be seen that Yili’s overall product sales have maintained high growth.
It is worth noting that the recent Erie are constantly introduced new products and product upgrades, Anmu Xi Chi Shi Bobo ball room temperature yogurt, cold milk in Golden, QQ star children child into a long formula and the new Iraqi natural milk mineral sparkling water; The sales of new products also accounted for 15.35% in the first quarter of this year.
Behind the support of the new products in the market is the consumer’s recognition of the Yili brand. Erie, liquid milk from a single line of business, has developed into Golden, An Muxi, QQ Star each category of drinks and clever music hereby cold drinks and other brands like Matrix.
The battle for “grabbing milk” is about to start. Is Yili’s “milk trough” really full?
The domestic dairy market is still a market with great potential.
Nielsen Zero Research data shows that in 2020, the retail sales of domestic organic dairy products, normal temperature milk, and low temperature milk segment markets will increase by 21.9%, 11.5%, and 21.7% respectively over the same period of the previous year. However, according to the Frost & Sullivan report, my country’s raw milk market has been undersupply for many years, and the supply gap is expected to reach about 19.2 million tons by 2024, which will further promote the growth of demand for high-quality raw milk.
This has led to many dairy brands starting to absorb more small and medium-sized pastures through mergers and acquisitions, thereby expanding the number of dairy cows and raw milk production. The battle of “grabbing milk” around Yili and Mengniu has already begun.
Not long ago, Yili and Mengniu around “Qingtongxia City, Hong Sing on animal husbandry limited liability company” raw milk suppliers’ milk grab “event for the industry outcry, Mengniu would be contrary to the agreement and to sell at high prices of raw milk Erie Kang Shengmu industry sued The court.
Therefore, the supply chain of high-quality raw milk is crucial in the future. Has Yili grasped this fate?
Public information shows that in China, Yili, Mengniu, Guangming and New Hope together account for 44% of the country’s milk sources, and Yili ranks first. Not only that, Yili also continues to harvest high-quality overseas milk sources through acquisitions and global base-building strategies.
As mentioned above, in 2010, Yili launched the “global web weaving” strategy, and currently has Yili European Innovation Center, Oceania Dairy Base, Indonesia Factory and other major dairy bases.
It can be seen that Yili, which has strong domestic supply chain capabilities and continues to expand overseas supply chain markets, can support future development.
But it is worth noting that the increase in the cost of raw milk will definitely affect the company’s gross profit margin.
According to statistics from the Ministry of Agriculture and Rural Affairs on June 23, the average domestic raw milk price was 4.28 yuan/kg, up 0.5% from the previous month.
According to financial report data, Yili’s gross profit margin in 2020 is 35.97%, which has remained at around 35% since 2014; Mengniu has maintained around 5% throughout the year; but compared to other brands in the fast-moving category, Fuling mustard ‘s gross margin in 2020 The interest rate is 58.26% and the net interest rate is 34.19%.
It can be seen that the gross profit margin of dairy brands has always been low due to the cost of raw materials. Now, as the cost of raw milk rises, the gross profit margin of enterprises may be further under pressure.
Therefore, at this time, it may be necessary to rely on digital construction, cold chain transportation and other methods to improve the transportation efficiency of raw milk and create channel advantages to reduce cost performance.
The national “14th Five-Year Plan” clearly states that it is necessary to ensure the safety of dairy supply, vigorously develop modern and smart dairy industries, promote industrial digital transformation, strengthen dairy product safety supervision, and promote sinking market consumption.
What can be done at this time is to actively promote the digital transformation of the dairy industry base and introduce emerging technologies such as “5G + Industrial Internet” into production to improve the level of factory automation and intelligence.
On the other hand, the digitization of the dairy industry base plays a positive role in product line research and development and avoiding homogeneity.
Yili once said, “Introducing the ‘5G+Industrial Internet’ technology into traditional food manufacturing, we are committed to improving the production capacity layout of high-end liquid milk, infant formula and health drinks with high growth potential and high value-added products, and optimizing the company’s product structure. To further enhance the company’s profitability.”
It is foreseeable that the implementation of digitalization in the dairy industry is also the general trend, and the improvement of efficiency will further enhance the company’s profitability, which is reflected in the gross profit margin.
The increase in the cost of raw milk will affect the company’s profits to a certain extent, but it will also accelerate the industry’s integration period. “Small companies are eliminated, large companies stabilize the market, and the Matthew effect gradually appears.”
Author of this article: Ye Xiaoan
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