---
title: "After Acquiring Modern Farming, Is Mengniu's Next Move Aimed at Huishan?"
description: "Huishan's low-temperature dairy layout and high-quality milk sources remain attractive, but for Mengniu, which already owns Modern Farming, could this lead to homogenization? Huishan Dairy, currently in crisis, may have found a new buyer. According to 21st Century Business Herald, Huishan Dairy is in talks with COFCO Group, which intends to acquire a stake in Huishan. COFCO is the largest shareholder of Mengniu Dairy (holding 23.92%). In response, Jiemian News sought confirmation from COFCO, receiving the reply, \"Currently unclear; it's likely Mengniu, a COFCO subsidiary, is handling the acquisition.\""
author: "赵晓娟"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-04-01"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/9ieNbTlju9PSknMI3C3F-A"
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# After Acquiring Modern Farming, Is Mengniu's Next Move Aimed at Huishan?

> Huishan's low-temperature dairy layout and high-quality milk sources remain attractive, but for Mengniu, which already owns Modern Farming, could this lead to homogenization? Huishan Dairy, currently in crisis, may have found a new buyer. According to 21st Century Business Herald, Huishan Dairy is in talks with COFCO Group, which intends to acquire a stake in Huishan. COFCO is the largest shareholder of Mengniu Dairy (holding 23.92%). In response, Jiemian News sought confirmation from COFCO, receiving the reply, "Currently unclear; it's likely Mengniu, a COFCO subsidiary, is handling the acquisition."

Huishan's low-temperature dairy layout and high-quality milk sources remain attractive, but for Mengniu, which already owns Modern Farming, could this lead to homogenization?
Huishan Dairy, currently in crisis, may have found a new buyer.
According to 21st Century Business Herald, Huishan Dairy is in talks with COFCO Group, which intends to acquire a stake in Huishan. COFCO is the largest shareholder of Mengniu Dairy (holding 23.92%).
In response, Jiemian News sought confirmation from COFCO, receiving the reply, "Currently unclear; it's likely Mengniu, a COFCO subsidiary, is handling the acquisition." Huishan Dairy declined to comment.
Ji Xiaodong, head of Mengniu's public affairs department, told Jiemian News, "Any increase in shareholding or acquisition by Mengniu must be based on strategic considerations. If there is a strategic need in the future, we will pay attention to domestic dairy companies." This statement aligns with what Mengniu President Lu Minfang said at yesterday's results briefing.
According to this statement, whether Huishan has "nutrients" that meet Mengniu's strategic needs becomes key. Huishan's layout in the low-temperature segment and its high-quality upstream milk sources may be the "nutrients" that fit.
After taking office, Mengniu's new president Lu Minfang quickly adjusted the company's organizational structure and established a low-temperature business unit. At the results meeting, he also clearly stated that the company would "deeply focus on the low-temperature segment," indicating that Mengniu, which previously focused on ambient milk, is likely to make moves in the pasteurized low-temperature milk market, which was previously a blank area. According to Mengniu's latest financial report, among liquid milk products, which account for nearly 90% of Mengniu's revenue, UHT milk (represented by Telunsu and Future Star) accounts for more than half of liquid milk revenue, while yogurt products such as Purezen, Guanyirou, and Biyou account for 31% of liquid milk revenue.
Huishan Dairy, on the other hand, excels in low-temperature product layout. In Northeast China, Huishan's market share exceeds 20%, ranking first in the local market, with a 33% share in low-temperature yogurt and a 39.5% share in pasteurized milk.
This is also evident from its performance report. Among liquid milk, which accounts for 70% of Huishan's revenue, low-temperature dairy products such as yogurt and fresh milk account for more than half, while UHT milk (ambient milk) is not particularly prominent. Huishan has also stated that with the advancement of its full industry chain model in Yancheng, Jiangsu, it will increase its low-temperature milk market layout in East China. Last September, Huishan attempted to expand into the pasteurized milk market in East China and produced a customized milk brand "Mouke" for Hema Fresh.
If successfully acquired by Mengniu, it would greatly help Huishan's category expansion and channels. Historically, Huishan's downstream market has been mainly in Northeast China, and only in the past two years has it gradually opened up northern markets such as Hebei and Shanxi, but the entire North China market has not been fully opened. With Mengniu as a backer, Huishan could directly leverage Mengniu's channels to reach the national market.
However, dairy analyst Song Liang told Jiemian News that if Mengniu had not acquired Modern Farming, the possibility of Mengniu acquiring Huishan would be very high. But now that Mengniu has just become the major shareholder of Modern Farming, it is hard to say whether it can digest Huishan Dairy.
On March 7, Mengniu Dairy and Modern Farming jointly announced that Mengniu would make a tender offer to acquire 1.235 billion shares of Modern Farming. Upon completion, Mengniu and its concert parties would hold a total of 57.9% of Modern Farming's shares. Through multiple increases in shareholding, Mengniu finally became the absolute controlling shareholder of Modern Farming.
Modern Farming is China's largest dairy cattle farming company, currently operating 26 pastures in Heilongjiang, Inner Mongolia, Hebei, Shandong, Anhui, Hubei, Sichuan, and other places, with nearly 230,000 dairy cows. Its pasture layout is adjacent to major dairy consumption areas, giving it certain geographical advantages.
Mengniu has repeatedly stated that the acquisition of Modern Farming aims to strengthen milk source control and lay out the high-end dairy market.
However, Huishan's dairy farming is mainly concentrated in Shenyang, Jinzhou, Fuxin, Fushun, and Tieling in Liaoning Province, with nearly 200,000 dairy cows and 81 large-scale self-operated pastures. On Huishan Dairy's official website, these self-operated pastures, "located between 40-47 degrees north latitude," are on the internationally recognized high-quality dairy cattle breeding belt in the mid-latitude monsoon climate.
Geographically, Huishan and Modern Farming's pastures do not conflict.
But Song Liang worries that the product lines of Mengniu and Huishan are highly homogenized, and the overall milk source prices are high (both Modern Farming and Huishan Dairy are large-scale farms with high-quality milk sources), which puts Mengniu at a disadvantage in competition with Yili. This is also one of the reasons why Yili's profits are higher than Mengniu's. In addition, in terms of milk powder products, Huishan's milk powder business is just starting, while Mengniu's milk powder business is mainly dominated by Yashili, which has been dragging down performance.
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