---
title: "Guangming, Sanyuan, Junlebao: The Chaotic Battle for the Third Pole in China's Dairy Industry"
description: "Local dairy companies are struggling to challenge the dominance of Mengniu and Yili in China's dairy market. Despite the growing popularity of pasteurized milk, these regional players face significant obstacles such as lack of brand recognition, limited milk sources, and unclear industry standards."
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published: "2022-03-20"
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# Guangming, Sanyuan, Junlebao: The Chaotic Battle for the Third Pole in China's Dairy Industry

> Local dairy companies are struggling to challenge the dominance of Mengniu and Yili in China's dairy market. Despite the growing popularity of pasteurized milk, these regional players face significant obstacles such as lack of brand recognition, limited milk sources, and unclear industry standards.

Where is the future of local dairy enterprises?
On a lazy weekend evening, strolling through a supermarket with a couple of friends, watching the bustling crowd of customers coming and going, the atmosphere is filled with the warmth of everyday life.
In the dairy section of the supermarket, there are several interesting scenes. A salesperson is enthusiastically recommending discounted boxed milk from Mengniu and Yili to passing customers, gesturing wildly.
In the refrigerated section, various salespeople dressed in brand uniforms are vigorously promoting their tasting samples. In this area, Mengniu and Yili are far less prominent in offline marketing compared to local brands.
On the other hand, online, thanks to the immense popularity of the Winter Olympics, the leading dairy brands' new wave of sports marketing has been widely praised.
Despite the emergence of new players in recent years, when it comes to dairy brands, most consumers still blurt out Mengniu and Yili, the "two old masters."
As for newer players like Guangming, Sanyuan, and even Junlebao and New Hope Dairy, can the gradual warming of the pasteurized milk market allow local dairy companies to upgrade and challenge the two giants?
To address this question, this article will explore the following three aspects:
**1. How much advantage do Mengniu and Yili still hold in the dairy market?**
**2. Can pasteurized milk, which has been hot for over a year, help local dairy companies turn the tables?**
**3. Case studies of typical low-temperature dairy companies: New Hope Dairy and Guangming.**

**The Disappearing "Third Place"**
"Come take a look, buy two boxes and get a discount," a Yili salesperson at a supermarket in Wuhan enthusiastically introduces the current discounts on Yili's ambient milk to every passing customer.
On the other side, Mengniu also has promotions that are just as attractive. However, surprisingly, not many customers stop because of the shouting.
People seem to have become accustomed to a state where mentioning dairy products inevitably brings up Mengniu and Yili. This habit also leads consumers to show great interest in new things.
This is also evident in the refrigerated section nearby. Junlebao, Jane, Daily Fresh, and the locally famous Youzhiyou all have tasting samples set up in front of their counters, and passing customers are willing to ask how their products differ from Mengniu and Yili.
At this moment, the answers from the salespeople of different new brands can all be summarized as: "Ours is pasteurized milk, which has a better taste."
In the entire refrigerated dairy section, only Mengniu and Yili do not have salespeople promoting their products, so naturally, they attract less foot traffic compared to other brands.
**Of course, in terms of daily overall sales, no brand has yet truly shaken the dominance of Yili and Mengniu in the dairy market.**
According to the dairy sales introduction at Carrefour (Optics Valley store), although major local brands are willing to invest heavily in hiring salespeople for promotion (Wuhan local brand Youzhiyou regularly recruits salespeople at this supermarket), the actual effect on increasing customer purchase intention is still limited.
"The brand presence of Mengniu and Yili is the best promotion, let alone the fact that more than half of the products in the entire dairy section are theirs," a salesperson at Wushang Liangfan explained when asked about the sales of new brands.
New brands are emerging one after another, their product strength seems to be getting stronger, and they have found differentiated tracks to focus on, but it is difficult to break out a brand that can truly compete with Yili and Mengniu. This may be the current state of the dairy industry.
According to the Q2 2021 financial reports, in the first half of 2021, Yili's revenue was 56.506 billion yuan, and Mengniu's was 45.905 billion yuan. The third-ranked Guangming was only 14.264 billion yuan, a gap of more than 30 billion yuan from Mengniu. Smaller local dairy companies like Sanyuan and New Hope Dairy had revenues below 5 billion yuan.
Data source: Financial reports of major dairy companies; Chart by Qu Xiaofei
**According to Euromonitor data, in the 2020 dairy market, the two giants Yili and Mengniu still had obvious advantages, with market shares of 26.4% and 21.6%, respectively. In contrast, the combined share of four local dairy companies—Guangming, Junlebao, New Hope Dairy, and Sanyuan—was only 10.6%.**
Even in online sales channels, Yili and Mengniu have dominated the top two spots in dairy sales rankings during Double 11 and other important events for many consecutive years. The only one that can compete with them is the online-focused brand "Adopt a Cow."
A clear perception is that during the recent Winter Olympics, Yili, which obtained exclusive sponsorship rights for dairy products, gained a lot of attention with its overwhelming marketing campaigns. Mengniu also frequently trended on social media thanks to the outstanding performances of its spokesperson Gu Ailing and the Chinese women's football team.
In contrast, local dairy companies like Junlebao can only "ride the wave" through strategic cooperation with the China Ice and Snow Conference and sponsoring Winter Olympics-themed TV dramas, which have slightly less traffic. Guangming, apart from its relatively impressive sports marketing in volleyball, has made no other moves.
"For local dairy companies like Junlebao and New Hope Dairy, the place where consumers can perceive them the most is probably the advertisements in residential elevator lobbies," a friend who frequently buys dairy products pointed out the helplessness of local dairy companies.
Unconsciously, Mengniu and Yili have occupied the top positions in the dairy industry for nearly twenty years. Constrained by milk source deficiencies, local dairy companies like Guangming, Sanyuan, and Junlebao can only hunker down in their respective territories, nibbling away at the remaining market share.
Now, with the pasteurized milk (low-temperature milk) market having been hot for over a year, will a third pole emerge?

**The "Chaotic Battle" with Undefined Standards**
Twenty years ago, at its peak, Guangming, under the leadership of Wang Jiafen, achieved annual revenue of 5.02 billion yuan, surpassing Mengniu and Yili, and successfully expanded beyond Shanghai.
Subsequently, the equity dispute with Danone and institutional issues caused Guangming to fall from its pedestal, followed by the long-term dominance of Mengniu and Yili over the dairy industry.
Before 2002, pasteurized milk once accounted for 90% of China's liquid milk market. However, with the rise of Yili and Mengniu, ambient milk began to suppress pasteurized milk and became the mainstream choice for consumers. It was not until around 2015 that pasteurized milk brands slowly began to make a comeback.
**The health-conscious and differentiated consumption philosophy has led to pasteurized milk products, which have a shorter shelf life but better taste and richer nutritional content, gradually gaining market attention.**
According to Euromonitor International data, from 2014 to 2019, sales of pasteurized milk in China increased from 22.1 billion yuan to 34.3 billion yuan, with a compound annual growth rate of 9.2%, and the growth rate in 2019 exceeded 11%. The market share also rose by 6 percentage points to 26.7%.
In contrast, during the same period, the compound annual growth rate of ambient milk was only 3.3%. At the same time, its market share fell from 78.4% to 73.3%. It can be said that a considerable portion of ambient milk consumers have shifted to the pasteurized milk market.
This segment, which has seen a second spring, is far from reaching its ceiling. According to statistics, in Japan, Europe, and the United States, pasteurized milk accounts for an astonishing 98% of the liquid milk market.
Of course, the low concentration also means that so far, no dominant dairy company has emerged in the market. According to Euromonitor International data, in 2018, the top three companies in the pasteurized milk market were the three local dairy companies: Guangming, Sanyuan, and New Hope Dairy (hereinafter referred to as New Hope Dairy), with market shares of 11.5%, 9.2%, and 5.9%, respectively.
A fragmented market naturally leads to more intense competition centered on innovation.
The first is the **"time war."** In March 2021, Weigang Dairy released new products claiming that it takes only 5 hours from factory production to shelf placement. Similarly, in December 2021, New Hope Dairy's new products directly included the words "24 hours."
Of course, with the popularization of pasteurized milk products, this emphasis on "time" seems more like a gimmick. According to dairy experts, the global shelf life standard for low-temperature milk is 7 days, and products with a shorter shelf life do not significantly change the taste.
**The competition around "temperature" is even more intense.** In February 2020, the State Administration for Market Regulation issued a new version of the Food Production License Catalog, for the first time listing "high-temperature pasteurized milk (ultra-pasteurized milk products)" as a new milk category.
Technically, "ultra-pasteurized milk" is based on the pasteurization process (sterilization temperature: 67°-85°C, sterilization time 15 seconds), but with increased temperature, which improves transportation convenience but sacrifices some taste.
At the same time, it is precisely this improvement in convenience that has given national dairy companies like Yili and Mengniu the idea to enter the market. Since 2017, Mengniu has been the first to start laying out the pasteurized milk market, launching as many as 17 pasteurized and ultra-pasteurized milk products. Yili is not to be outdone, launching "Yili Daole" to promote its three pasteurized milk products.
Qu Xiaofei (quxiaofeiba) visited supermarkets such as Yuehuoli and Wushang Liangfan in Wuhan and found that the shelf life of Mengniu and Yili's ambient milk is relatively uniform, ranging from six months to one year. In the refrigerated section, the wide variety of products is dazzling.
Photo by Qu Xiaofei
Mengniu's "Modern Ranch" product type is labeled as pasteurized milk, but with a 15-day shelf life, it is equivalent to twice that of ordinary pasteurized milk products. Similarly, Yili's fresh milk in the refrigerated section is also labeled as pasteurized milk, with a shelf life of 15 days.
In addition, brands like Junlebao, Guangming, and the local Wuhan dairy company Youzhiyou all sell products with a longer shelf life than ordinary pasteurized milk. Among them, Junlebao's "Yuexianhuo" sterilized milk product has a shelf life of up to 19 days.
In terms of price, these new ultra-pasteurized milk products, which are "dressed in the skin" of pasteurized milk, are also about twice as expensive as ordinary pasteurized milk products. Taking Guangming as an example, its traditional pasteurized milk product has a capacity of 920 ml and sells for 12.9 yuan. In contrast, an ultra-pasteurized milk product advertised with "ultra-instant sterilization technology" sells for as much as 25 yuan for the same capacity.
In the absence of a unified national standard to clearly define the difference between ultra-pasteurized milk and pasteurized milk, and without requiring dairy companies to clearly indicate sterilization temperature and time on product packaging, pasteurized milk brands like Guangming and Junlebao have already lost the moat that local dairy companies once had.
The market standards are chaotic, and even ambient milk giants like Yili and Mengniu want to get a piece of the pie. Without milk source channels and brand advantages, it is still extremely difficult for local dairy companies to truly turn the tables with pasteurized milk.

**Taking Guangming and New Hope Dairy as Examples**
In 2019, Guangming Dairy twice attempted to unite several major pasteurized milk dairy companies to establish a new pasteurized milk standard based on active substances (lactulose and furosine).
In March 2021, Guangming Dairy announced a plan to increase capital by 1.93 billion yuan for investment and mergers and acquisitions of upstream pastures.
**These actions all reflect the anxiety of this long-established brand about the current state of the pasteurized milk market.**
According to Guangming's latest financial report, in the first three quarters of 2021, Guangming Dairy's revenue was 22.057 billion yuan, while Yili's revenue during the same period was 85.007 billion yuan, nearly four times that of Guangming. It can be said that Guangming, as the industry's third place, is getting further and further away from the top spot.
In 2020, Guangming Dairy's gross margin was 25.81%, a decrease of nearly 13% from the high of 38.68% in 2016. According to company disclosures, Guangming's gross margin for pasteurized milk products is about 42%, and the net margin is about 10%, both far above the company's average.
According to data from China Industry Information Network, the penetration rate of pasteurized milk in Shanghai is 72%, significantly higher than the national average of 31%. Expanding into lower-tier markets would significantly improve Guangming's profitability. This is why Guangming is eager to establish unified standards and lay out more milk sources nationwide.
Another dairy company with a high proportion of low-temperature milk is New Hope Dairy (5.9%). Compared to Guangming, New Hope Dairy, founded in 2006 and listed on the Shenzhen Stock Exchange in 2019, has been in the low-temperature milk track for a shorter time.
In the first half of 2021, New Hope Dairy's operating revenue was 4.316 billion yuan, with net profit attributable to the parent company of 146 million yuan. Among this, the revenue from its liquid milk business reached 3.975 billion yuan, accounting for as high as 92.11% of total revenue. Low-temperature fresh milk is the largest growth driver for New Hope Dairy's profitability.
To capture nearly 6% market share in the fiercely competitive pasteurized milk market, New Hope Dairy relies more on acquisitions and mergers. According to company financial reports, as of the first half of 2021, the company owned 13 self-owned pastures and 16 dairy processing plants, which is a decent performance among local dairy companies.
In December 2021, the company was rumored to be acquiring Friso and Hongxing Group. Earlier, in 2019, New Hope Dairy, which had just been listed, completed the subscription of 595 million shares of Modern Farming (one of the largest breeding and raw milk enterprises in China). In the following year, it took control of Huanmei Dairy, a leading dairy brand in the northwest region, and acquired the popular offline chain brand "One Yogurt Cow."
As of the first half of 2021, New Hope Dairy had more than 50 subsidiaries. Unfortunately, compared to its aggressive mergers and acquisitions, New Hope Dairy's improvement in profitability has been relatively slow.
Data from the first half of 2021 shows that New Hope Dairy's profit margin was 3.38%, far lower than Yili's 9.42% and Mengniu's 6.42% during the same period, and also lower than Sanyuan's 3.65%. It is worth mentioning that in advertising expenses, New Hope Dairy spent 160 million yuan more than Sanyuan, which focuses on the Beijing area.
Data source: Financial reports of major dairy companies; Chart by Qu Xiaofei
More seriously, against the backdrop of frequent large-scale acquisitions, New Hope Dairy carries a debt-to-asset ratio of 67.71%, higher than the industry average. As of the first half of 2021, New Hope Dairy's cash and cash equivalents balance was only 476 million yuan, a year-on-year decrease of 7.1%.
Of course, in its own "comfort zone" of the southwest region, New Hope Dairy still has strong dominance. Data shows that its revenue from the southwest region accounts for as high as 39.87% of total revenue, and its market share can compete with head brands like Mengniu and Yili.
**In summary, whether it is the more established Guangming or the up-and-coming New Hope Dairy, in terms of hard strength in revenue and market share, it is difficult for them to pose a threat to Yili and Mengniu in the short term. Even due to their own shortcomings (Guangming's product strength and New Hope Dairy's debt-to-asset ratio), they may face the risk of being suppressed in competition with a host of pasteurized milk brands.**
This is also the common situation faced by brands surviving in the pasteurized milk market.

**Final Thoughts:**
Whether through offline visits or online analysis, the hot pasteurized milk market is not yet capable of nurturing a new dairy king brand.
**In other words, the dairy kingdom created by Yili and Mengniu is still unbreakable, and it is even possible that they will recreate the miracle of ambient milk in the pasteurized milk market.**
In this battle between old and new brands, consumers may be the first to benefit. The birth of more convenient ultra-pasteurized milk, the subsequent lowering of pasteurized milk prices, and the constant discount activities in the ambient milk section are all vivid examples.
Of course, from the perspective of a group of new dairy brands, the situation may not be so optimistic. According to analysis by relevant dairy market insiders, given the current pace of Yili and Mengniu's layout in the pasteurized milk market, it is expected that within three to five years, the combined market share of the two head companies in the pasteurized milk market will reach 40%.
Similar to other food and beverage industries, the advantage of milk sources has become the biggest obstacle preventing the emergence of a "third pole."
Source: Qu Xiaofei (ID: quxiaofeiba)
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