---
title: "Mengniu and Yili Fight Like Gods, Other Dairy Companies Suffer?"
description: "During a recent market visit, a client reported losses exceeding 400,000 yuan on Junlebao premium牧场 products during last year's Spring Festival, a stark contrast to the 400,000 yuan profit the previous year. Similarly, a distributor of Guangming Mosilian in Jincheng said no dairy distributor in the region made money for half a year around last Spring Festival, highlighting the severe impact of the intense competition between Mengniu and Yili on other dairy and beverage companies."
author: "刘信"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-08-12"
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# Mengniu and Yili Fight Like Gods, Other Dairy Companies Suffer?

> During a recent market visit, a client reported losses exceeding 400,000 yuan on Junlebao premium牧场 products during last year's Spring Festival, a stark contrast to the 400,000 yuan profit the previous year. Similarly, a distributor of Guangming Mosilian in Jincheng said no dairy distributor in the region made money for half a year around last Spring Festival, highlighting the severe impact of the intense competition between Mengniu and Yili on other dairy and beverage companies.

During a recent market visit, a client said that last year's Spring Festival, he lost more than 400,000 yuan on Junlebao's premium pasture products. I was surprised because the previous year, the same products had brought him a profit of 400,000 yuan, and he was one of the top 30 key customers for Junlebao's room-temperature high-end milk series. Why was there such a dramatic difference in just one year? Coincidentally, a distributor in Jincheng who handles Guangming Mosilian said that for half a year around last Spring Festival, no dairy distributor in the entire region made money! This is even more surprising, as Mosilian had been a key profit product for the past two years. What exactly happened to make clients so miserable? Similarly, Wahaha's Nutri-Express and Wow-Wow series have been severely affected in national markets, especially in major sales areas like Henan, causing Wahaha's overall sales to decline to varying degrees in recent years.

In fact, after careful analysis and comparison, it is not difficult to find that almost all products competing with Mengniu and Yili nationwide have been affected by these two companies. In previous years, the industry grew rapidly, and competition between Mengniu and Yili was not fierce. Both companies simultaneously aimed for high-end milk, hoping to quickly escape the low-profit trap of the dairy industry. However, in the past two years, the two companies have become highly homogeneous, with increasing hand-to-hand combat, causing other small and medium-sized dairy companies, as well as giants like Wahaha with directly competing products such as Nutri-Express and Wow-Wow, to suffer greatly.

1. Analysis of Sales and Profits of Large Dairy Enterprises in 2016

Through years of transformation to mid-to-high-end milk, Yili has consistently had the highest profits, accounting for half of China's dairy industry profits. Especially with the significant growth of high-end milk like Ambrosial, profit contributions have been substantial. However, overall sales volume only saw slight growth, indicating how fierce competition is in the low-end dairy segment, which likely saw significant negative growth! Mengniu and Sanyuan's price competition led to negative profit growth! Mengniu even suffered losses exceeding 700 million yuan! Although Junlebao did not disclose specific profits, it is certain that its profits were greatly affected! Guangming also ended its period of rapid growth.

2. Analysis of Yili and Mengniu's Competitive Layout

1. High Product Overlap. In terms of price, various gift boxes cover retail prices of 30-70 yuan per box. Although product concepts differ slightly, overall packaging and taste do not show significant differences, and raw material costs are also similar, so channel profits at all levels are roughly the same. See the table below for details.

2. Intense Channel Competition. First, due to the high similarity of products, the generally accepted rule is that distributors can only represent one brand, and other small and medium-sized brands are basically ignored. Second, both companies place great emphasis on hypermarkets and milk stations, with dedicated stack displays, full-time promoters, and hand-to-hand promotions that make competitors miserable! Third, both companies attach importance to e-commerce channels. Since imported milk sells massively online, it has had a huge impact on both Mengniu and Yili. Therefore, both have established flagship stores on major e-commerce platforms like Tmall and JD.com, and they achieve huge sales during 6.18 and 11.11 promotions.

3. High-Profile Marketing Alternates, and Close-Range Promotions Become Long-Term Hand-to-Hand Combat. During Mengniu's rapid growth period, various high-profile marketing tactics were continuous, such as space-specific milk and sponsoring Super Girl, which made it famous overnight. It also launched high-end products like Telunsu, setting an example. Later, after the melamine incident, COFCO took over, and large-scale marketing became more restrained, causing the gap between Mengniu and Yili to gradually widen, especially in profitability.

Since sponsoring the 2008 Beijing Olympics, Yili has been continuously strengthening its efforts. Whether in low-temperature or room-temperature milk, it has re-established a high-end and healthy image. In response to Guangming's Mosilian's nationwide expansion, Yili launched Ambrosial and spent 500 million yuan sponsoring top celebrity shows like "Running Man," leveraging its excellent nationwide network to rapidly advance. In 2016, it overtook Mosilian yogurt, successfully exceeding 10 billion yuan, becoming Yili's star profit product.

3. The Outcome of Dairy Competition

1. The two giants, Mengniu and Yili, have obvious advantages. Both are now state-owned enterprises, so their political advantages are almost the same; overall sales volumes are not far apart, both above 50 billion yuan; in terms of milk source advantages, both are acquiring or building their own, with no particularly outstanding advantage. At present, Yili has a prominent profit advantage, while Mengniu, after changing its CEO to Lu Minfang, has been making continuous moves. In the future, each should have its own advantages.

2. Other dairy companies face more difficult development. Although China's per capita dairy consumption still lags far behind developed countries, overall growth in China's dairy products is weak, except for low-temperature milk and lactic acid bacteria beverages, which are growing faster. Junlebao is mainly in North China, Guangming has only Mosilian with a national layout, with other products focused in East China, Huishan mainly in the Northeast, Yinqiao mainly in the Northwest, and New Hope in the Southwest. Any second- or third-tier dairy company, surrounded by Mengniu and Yili's competition, will find it difficult to break out of its advantageous region and quickly go national.

3. The impact on related beverage companies will continue. Wahaha Group, which has long held the top position in dairy beverages nationwide, has been affected by Mengniu and Yili for several consecutive years, especially the Nutri-Express and Wow-Wow series. Hebei's Xiaoyangren company has also been affected and now finds it hard to make a difference. As Yili, Mengniu, and other dairy companies refine their operations, expand channels, and improve products, and as consumers demand healthier dairy products, especially with the rapid growth of low-temperature yogurt, customized milk, and active lactic acid bacteria beverages, non-innovative dairy beverages will soon be replaced.

The fast-moving nature of FMCG is being continuously strengthened by the ubiquity of the internet, the accelerating iteration of consumer demands, and the increasing richness of products. Only by continuous innovation, focusing on consumers, constantly reforming, building standard moats, and capturing consumer mindshare can companies keep up with the trend of consumption upgrading!

Source: Toutiao account Liu Xin
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