Recently, Yili's public relations team has been busy promoting the brand on various related and unrelated public accounts. However, the annual report that people have been concerned about has not been released yet, especially since in 2017, Yili had already published its annual report on March 31.

Ill-fated Year In 2018, the "rumors" came earlier than in previous years, and Yili has rich experience in handling rumors. Since the incident of Mengniu's An Yong's black PR, Yili's basic attitude towards rumors has been to "arrest and be done with it," making an example of one to warn a hundred.

Just one month after the Lunar New Year, when all FMCG companies were busy wrapping up the "Spring Festival battle," Yili was targeted by rumors. Guangxiang Finance published an article under the pseudonym An Guo about Yili's president Pan Gang being out of contact, which was widely reposted by financial media. In the afternoon, Yili refuted the rumor, calling it an organized and premeditated "rumor-mongering." Before the rumor appeared, Yili had already arrested several suspects.

Subsequently, six suspects including Zou from Guangxiang Finance were all brought to justice. Whether intentionally or not, people learned online that Pan Gang would attend the Boao Forum. Yili's executive director Zhang Jianqiu directly pointed to the "rumormonger" as former president Zheng Junhuai, bringing attention back to the "Three Heroes of Yili" incident.

△ Zheng Junhuai (current chairman of Hongxing Group)

Before 1999, the dairy industry was not optimistic, and the leading brand was Guangming. Yili was just a local brand in a corner.

In 1999, Niu Gensheng left Yili due to irreconcilable conflicts with Zheng Junhuai and founded Mengniu. From then on, Mengniu, with a series of ultra-high marketing strategies, stirred up a dairy industry whirlwind. Mengniu's speed surprised China and the world. Stories like changing all the flags in Hohhot to Mengniu's logo overnight, and the ice cream truck overturning with free ice cream, brought unprecedented attention to Mengniu and accelerated the dairy industry's development.

At that time, China's space industry was also developing alongside Mengniu. In 2003, China's Shenzhou V became the first manned spacecraft, with Yang Liwei as the first Chinese astronaut. Mengniu seized this opportunity to brand itself as the "special milk for astronauts." Leveraging strong national pride, Mengniu not only left Yili behind but also made the former leader look up to it.

During those years of rapid Mengniu development, Yili not only grew slowly but also fell into Zheng Junhuai's one-man rule. Yili's development strategies and marketing methods lagged far behind Mengniu. After Mengniu sponsored Shenzhou V, Yili's chairman Zheng Junhuai was embroiled in corruption scandals and imprisoned.

Taking over from Zheng Junhuai was Pan Gang, who would later lead Yili back to the top of the dairy industry. That year, Pan Gang was only 37 years old. Although he was also a vice general manager appointed by Zheng Junhuai, his position was not easy. Zheng Junhuai had appointed eight vice general managers, and none lasted long, including Niu Gensheng.

△ Pan Gang

Moreover, during his tenure at Yili, Pan Gang launched a mineral water product that ended in failure. This does not represent Pan Gang's ability; it was absurd for a dairy company to sell mineral water. Consumers always said the milk seemed watered down, and then you start a mineral water company, which clearly tells consumers their suspicions were correct.

Such a company should not exist. Selling water is very different from selling houses (Evergrande) or milk (Yili), so how could such cross-industry success be possible?

Amid doubts, Pan Gang took over Yili. Meanwhile, his old friend Niu Gensheng continued his expansion. In 2005, Mengniu sponsored the hottest reality show "Super Girl," pioneering the trend of FMCG companies sponsoring variety shows. In the following years, Yili and Mengniu were the biggest sponsors of Chinese variety shows.

But young Pan Gang was not intimidated. Instead, he led Yili steadily, and at the 2008 Olympics, Yili avoided Coca-Cola's restrictions to become the sole designated dairy sponsor for the Beijing Olympics, associating Yili with sports. That was the first time Yili competed with Mengniu in marketing.

Later, Mengniu hit a low point. Yili, with its strong background and strategy of sharing hardships with distributors, saw countless distributors switch to Yili after that incident. Since then, Yili has been dominating.

However, starting from 2017, first a distributor in Hebi exposed that Yili owed 18 million yuan, then a Yili distributor in Xuchang ran away, and even worse, a distributor in Linyi, Shandong, threatened to jump off a building to seek justice. More and more Yili distributors revealed that Yili had changed.

Pan Gang's attendance at the Boao Forum would have dispelled all rumors and doubts, but in reality, Pan Gang again missed the forum due to illness, and the delayed annual report made consumers increasingly pessimistic about Yili's prospects.

The Pain of Leadership Change

Now Yili says Pan Gang is ill and directing from afar in the United States. Although Yili still performs strongly, the undercurrents are unknown. In the future, who will lead Yili while Pan Gang is abroad? Even with Pan Gang's strength during the transition from Zheng Junhuai, Yili was still ground down by Mengniu.

Guangming has the most say on the pain of "leadership change." After all, how did the former industry leader gradually get overtaken by Yili and Mengniu? It all started with the change of leadership.

Compared to Yili and Mengniu, Guangming has the stale smell of an old state-owned enterprise. Arrogance, complacency, slow response, poor PR, corruption—these words are all associated with Guangming. As a place where a former national leader once served as factory director, Guangming's development truly disappoints Shanghai.

We say Yili and Mengniu have inherent advantages because consumers hear Inner Mongolia and think of "the sky is blue, the fields are vast, and the wind blows the grass to reveal cattle and sheep," making them feel that Inner Mongolian milk is truly good. Guangming, located in Shanghai, a city of steel and concrete, has all its milk transported over long distances at great cost. When consumers drink Guangming milk, they taste the city's hustle and bustle, unlike Yili and Mengniu, which taste of the grasslands.

We cannot deny consumers' long-term mindset and the impact of city impressions on products. After all, for FMCG, especially dairy products, everyone has certain expectations about the origin. This is why milk sources from New Zealand and Australia are so popular.

So when Guangming was exposed in 2005 for the "recycled milk" incident in Zhengzhou, consumer confidence in the brand plummeted. It was like saying, "See, I told you. Why is Shanghai's milk so cheap? Because it's all recycled milk from various places." Guangming's development was also entangled with Danone for a long time. From 2000 to 2007, the seven years of cooperation between Guangming and Danone coincided with the rapid development of China's dairy industry, but differences in business philosophy and power struggles between state-owned and foreign enterprises caused Guangming to lose seven years.

Later, Guangming finally produced a business genius like Guo Benheng, who launched Guangming's Mosilian yogurt, making it the number one yogurt brand in China. Under Guo's leadership, Guangming's low-temperature milk also began to go national. But in the end, Guo Benheng could not escape the sword of Damocles of corruption.

△ Guo Benheng

After that, Guangming returned to its old ways: no new products, no channels. Now Mosilian's market share is being eroded by Yili's Ambrosial and Mengniu's Pure Zhen.

Mengniu's Opportunity?

Some say this is Mengniu's opportunity. In fact, the two dairy giants have learned a lesson in recent years: only when domestic milk is strong can they counter international giants. Since the An Yong incident, Mengniu and Yili have not hyped negative news about each other. After Mengniu's Future Star was sued by Yili for copying Yili's QQ Star, Mengniu has increasingly kept its distance from Yili.

Mengniu's development was too fast, causing them to fall into a pit during rapid growth. The professional managers sent by COFCO later showed typical "the seat decides the mind." If the years before 2008 were Yili's lost nine years, then after 2008 were Mengniu's lost nine years. During these nine years, Mengniu went from peak to trough. The statement "Mengniu's milk exported to Hong Kong has no problems" made consumers question whether Mengniu looked down on its own people.

Consumers then brought up old grievances: Mengniu started as a shell company, sourcing milk through agreements with individual households for milk supply and cattle raising, which could not guarantee safety. And so on, a series of original sins were mentioned.

For nine whole years, the old Mengniu executives either retired or left, replaced by people from COFCO and Coca-Cola. It's not that they lacked the drive and spirit of the old Mengniu people, but they had never worked in this industry. Even Pan Gang failed selling mineral water, so how could Coca-Cola people selling milk possibly turn things around? In Mengniu's situation at the time, making fewer mistakes or no mistakes was the greatest help.

They sacrificed time and market share to strengthen their weak areas. When all weak areas were strengthened, Ning Gaoning was replaced by Zhao Shuanglian. The biggest difference after the "outsider" Zhao Shuanglian took office was, "I don't understand, but I let professionals do professional things."

So Lu Minfang came—the former vice president of Danone Greater China and president of Yashili. He is also the same age as Pan Gang. Although his resume is not impressive, he has been in the dairy industry all along and is experienced.

△ Lu Minfang

Indeed, after Lu Minfang took office, Mengniu showed signs of being a "fierce bull" again. In marketing, it sponsored the 2018 World Cup; in strategy, it followed Yili; in PR, it repaired industry relations; in sales, it ensured distributor interests. As a result, in the first month of 2018, Mengniu's market value exceeded 100 billion yuan, and its 2017 financial report showed sales breaking 60 billion yuan for the first time.

What excites Mengniu employees and distributors even more is that COFCO has been persuading Niu Gensheng to return to the board. In the future, Niu Gensheng may not necessarily become chairman again, as he had already stepped down early and handed the position to Yang Wenjun. As long as Niu Gensheng is there, it is an inspiration to Mengniu people.

△ Niu Gensheng

But if Mengniu only focuses on Yili, it will only harm Chinese dairy companies. The real enemy is not your peers, but those you least expect.

We do not want to see one company's rise due to another's fall. Although grabbing market share from peers helps short-term interests, it only damages the entire industry.

So we hope Pan Gang returns soon, and Niu Gensheng returns soon, to compete on the real market, not die from off-board tricks.

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