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Hong Kong company reporting season

China’s Mengniu Dairy teams up with e-commerce giant Alibaba to tap tech-savvy consumers

PUBLISHED : Wednesday, 30 August, 2017, 11:31pm
UPDATED : Thursday, 31 August, 2017, 5:18pm

China Mengniu Dairy, the country’s second largest dairy, plans to team up with e-commerce giant Alibaba Group to serve the online buying demands of young, tech-savvy customers.

The company unveiled its digital development plan at a results briefing on Thursday where it said profits for the first half of the year increased 4.7 per cent year on year thanks to rapid growth in its top brands.

Chief executive Jeffery Lu Mingfang said it will closely cooperate with Alibaba’s Hemaxiansheng supermarket and ele.me delivery platform on the selling of fresh products.

“We will also make good use of both parties’ big data to conduct accurate marketing,” Lu said.

Mengniu ranks No 1 in terms of dairy product sales on e-commerce platforms such as Tmall, Suning.com and Womai.com. This year it aims to achieve a 50 per cent revenue growth rate on

existing e-commerce channels.

China Mengniu sells bonds to pay its debts

Lu said its revenue growth target from overseas distributors was 30 per cent, adding that the company will further develop its overseas sales, particularly in Southeast Asia.

Mengniu said its 1 billion yuan (US$150 million) in capital expenditure was mainly used for brand promotion as well as investments in automation and environmental and safety protection.

The dairy reported profits of 1.13 billion yuan for the six months to the end of June, up from 1.08 billion in the first half of 2016, in line with Bloomberg’s consensus estimates.

Gross profit rose 14.4 per cent to 10.5 billion yuan on factors such as low raw milk prices, optimised product mix and improvements in cost control, according to Lu.

“Benefiting from product innovation, an optimised business structure and active marketing efforts, the group recorded sales growth, with revenue amounting to 29.47 billion yuan, up 8.1 per cent,” Lu said.

Top brands such as Milk Deluxe and Just Yogurt were the biggest contributors to revenue growth of the group. Just Yogurt joined with Hollywood blockbuster Transformers: The Last Knight to launch special edition packaging to boost sales via online promotions tied to the movie.

The company cooperated with Shanghai Disney Resort to launch limited edition themed packaging for its Future Star Kid Growth Milk product.

“Sales growth of Fruit Milk Drink was 20 per cent while Just Yogurt was as high as 30 per cent,” said Mengniu vice president Gao Fei.

Mengniu Dairy looks to yoghurt beverages, acquisitions and a growing Chinese consumer appetite

Profits were derived primarily from Mengniu’s core activities of liquid milk and ice cream products, which helped compensate for losses at its milk powder subsidiary Yashili, the company said in filing to the Hong Kong stock exchange.

The net profit growth marks a turnaround from the first half of last year when Mengniu’s earnings fell 19.5 per cent as the company fought for market share in China’s highly competitive dairy sector.

At the time Lu, who was the company’s new chief executive, said profitability would be “top of his agenda”.

Mengniu also moved into the top 10 of the “Global Dairy Top 20” list published this year by the Netherland-based research firm Rabobank.

Alibaba Group owns the South China Morning Post.

Mengniu’s shares closed up 1.6 per cent to HK$18.28 on Thursday.

Additional reporting by Alun John

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