China Mengniu Dairy sees bigger things ahead in its partnership with global milk giant Danone

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“To improve profitability, Mengniu plans to focus on branding, marketing, as well as operating and channel efficiency. Photo: Reuters

Published: 8:31pm, 3 Oct 2016Updated: 10:03pm, 3 Oct 2016

China Mengniu Dairy, the country’s second largest dairy firm, is likely to make a “big breakthrough” in its partnership with the world’s No 1 milk producer Danone, following a high-profile boardroom exodus last month that saw a sudden reshuffle of its chief executive.

Speaking to media for the first time since taking up the role, new chief executive Lu Minfang told the Post that profitability was top of his agenda, while he eyed more cooperation with the dairy giant’s French strategic investor to reinvigorate its ailing infant formula offshoot.

“Mengniu has forged good ties with Danone in R&D and supply chain operation of its baby formula and pasteurised milk businesses, and these collaborations are tipped to be taken further,” said Lu in an email. He is also a high-ranking veteran of France’s Danone, Mengniu’s second largest shareholder after state-owned food conglomerate Cofco.

We are likely to make a big breakthrough in our collaboration with Danone

Lu Minfang, chief executive, Mengniu Dairy

His appointment to replace Sun Yiping took place at a critical time after a 20 per cent decline in first-half earnings had made it harder for the Inner Mongolia-based company to make up ground on its rival Inner Mongolia Yili.

Mengniu’s infant formula unit Yashili International, headed by Lu for more than a year, also suffered a brutal 86 per cent plunge in net profit for the same period.

Lu said he aimed to “turn around” Mengniu’s beleaguered formula business, and achieve “rapid growth” of its UHT (ultra high temperature) and pasteurised milk sales as he outlined the three segments of Mengniu’s strategic focus.

“To improve profitability, we plan to focus our efforts on branding, marketing, as well as on our operating and channel efficiency,” he said. “Cofco and strategic investors Danone and Arla Foods are all offering support, including investment into the three segments.”

He said the dairy firm proposed to set up a world-class research centre with backing from its three biggest shareholders.