---
title: "Mengniu Officially Bids Farewell to Junlebao: Can Both Sides Achieve a Win-Win?"
description: "Mengniu Dairy has completed the sale of its 51% stake in Junlebao, ending their nine-year partnership. The deal, valued at over 4 billion yuan, is seen as a financial success for Mengniu but raises questions about its impact on Mengniu's 100-billion-yuan revenue goal and Junlebao's future growth."
author: "蒋政"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2019-11-23"
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original_source: "https://mp.weixin.qq.com/s/qPW16MUz6rwo6h9_mTw60A"
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# Mengniu Officially Bids Farewell to Junlebao: Can Both Sides Achieve a Win-Win?

> Mengniu Dairy has completed the sale of its 51% stake in Junlebao, ending their nine-year partnership. The deal, valued at over 4 billion yuan, is seen as a financial success for Mengniu but raises questions about its impact on Mengniu's 100-billion-yuan revenue goal and Junlebao's future growth.

**It is undeniable that with a ten-billion-level enterprise entering the market, the competition in China's dairy industry has become increasingly crowded.**
**The "marriage" between Mengniu and Junlebao has officially ended.**
Recently, Mengniu Dairy (02319.HK) announced the completion of the transfer of its 51% stake in Junlebao, marking Junlebao's official departure from the Mengniu system and the end of their nine-year cooperation. Back in 2010, Mengniu acquired the 51% stake for 469.2 million yuan. Now, the transaction price for the same stake exceeds 4 billion yuan.
Mengniu has been striving for a 100-billion-yuan revenue goal. When asked about the impact of this equity sale on the company's financial statements, a relevant person in charge at Mengniu told China Business Journal that it is difficult to make predictions. Junlebao, on the other hand, stated that its development strategy will not be affected and will continue as originally planned.
Gao Jianfeng, founding partner of Bogao & Rongna Consulting, told China Business Journal that from a financial investment perspective, this is a very successful investment for Mengniu. From an industrial operation perspective, there are some regrets in the latter half of the cooperation. "Looking only at the financial statements, it will have a certain impact on Mengniu's overall strategy. As for Junlebao after going solo, it needs to expand its product lines, market, and channels," he said.
It is undeniable that **a ten-billion-level enterprise entering the market makes the competition in China's dairy industry increasingly crowded.**
**-01-**
**Bidding Farewell to the Nine-Year "Marriage"**
"(After the equity transfer) we will continue with our previous development plans," a Junlebao representative told China Business Journal on November 20.
As early as July 1, 2019, Mengniu Dairy announced its intention to sell all its shares in Junlebao to Penghai Fund and Junqian Management for 4.011 billion yuan. After the transaction, Mengniu Group would no longer hold any equity in Junlebao.
The price is significantly higher than the 469.2 million yuan paid nine years ago. However, in the view of Shen Meng, executive director of Chanson Capital, given Junlebao's current performance and the controlling stake issue, the 40-billion-yuan selling price is not particularly high. Relevant data shows that Junlebao's sales in 2018 reached 13 billion yuan.
Junlebao, founded in Shijiazhuang, had previously accepted investment from dairy giant Sanlu. After the industry's black swan event, which cast a shadow over the entire industry, Junlebao was also significantly affected. It was not until 2010 that Junlebao officially formed a partnership with Mengniu.
Gao Jianfeng told China Business Journal that in the early stages of cooperation, Mengniu provided Junlebao with significant support in terms of team, channels, and brand management. At that time, the synergy between the two brands was "1+1 greater than 2." Later, Junlebao developed rapidly, while Mengniu's own growth slowed relatively, especially after COFCO took over, with frequent management changes, reducing the synergy between the two. "From an industrial operation perspective, there are some regrets," he said.
Relevant information shows that Penghai Fund, the acquirer, is actually controlled by the State-owned Assets Supervision and Administration Commission of Hebei Province. A research report from Guojin Securities mentioned that this transaction was more for non-economic purposes and should not be evaluated solely from operational and financial perspectives.
As early as May 2016, leaders of COFCO Group met with the Hebei provincial government. At that time, the Hebei government hoped that COFCO would actively promote the equity restructuring of Junlebao Dairy. COFCO also stated that it would seriously study the equity reform plan for Junlebao Dairy.
A Mengniu representative said they were not aware of the above matters. The representative told the reporter that the transaction has now been completed and is no longer a major focus for the company.
**-02-**
**Can Both Sides Achieve a Win-Win?**
Junlebao, now independent, has found broader development space, but whether it can withstand challenges alone remains to be seen. Meanwhile, Mengniu, which has set a 100-billion-yuan goal, is being discussed in the industry for how it will continue to pursue this goal after divesting Junlebao.
**China Business Journal reporters noted that Mengniu proposed a 100-billion-yuan goal in 2017: by 2020, both its market value and revenue would reach 100 billion yuan.**
Financial reports show that Mengniu achieved revenue of 39.8572 billion yuan in the first half of 2019, a year-on-year increase of 15.6%; net profit was 2.0769 billion yuan, up 33.0% year-on-year. In 2018, Junlebao contributed 13 billion yuan in revenue and over 300 million yuan in net profit, accounting for about 20% of Mengniu's revenue and 10% of its profit that year.
Mengniu declined to respond to questions about the impact of Junlebao's departure on its financial statements, saying it is difficult to make predictions.
Zhu Danpeng, a Chinese food industry commentator, told China Business Journal that in the short term, this event will have a certain impact on Mengniu's financial reports and its 100-billion-yuan goal. However, in the long run, the impact is not significant.
In Shen Meng's view, Mengniu's push for the 100-billion-yuan goal is unlikely to rely on a relatively independent brand like Junlebao. Selling the controlling stake in Junlebao and reinvesting the funds in its own brands not only maintains a good relationship with Junlebao but also reduces resource dispersion and internal competition among different brands.
Mengniu's president, Lu Minfang, has publicly stated that he is not too worried about the 100-billion-yuan goal. In the future, Mengniu will focus on high-growth, high-profit categories and increase investment to accelerate growth.
"Junlebao now is a bit like the early Mengniu, daring to fight and strive. Mengniu is also using capital to make acquisitions to increase its revenue and profit," Gao Jianfeng said.
On September 16 this year, Mengniu proposed to acquire Bellamy's, an Australian organic milk powder and infant food brand, for a total consideration of no more than AUD 1.46 billion (approximately RMB 7.1 billion), to help the company capture the huge development potential of organic infant formula and baby food categories in China and Southeast Asia, and unleash the brand potential of the target company.
**For Junlebao, opportunities and challenges remain.**
In Gao Jianfeng's view, Mengniu has a full-category and nationwide layout. Within the Mengniu system, Junlebao needed to differentiate itself from Mengniu. After going solo, Junlebao needs to enrich and innovate its product lines and expand in markets and channels. In the future, if it goes public, the integration between the existing management team and shareholders will also need attention.
Song Liang, a senior dairy analyst, said that Junlebao, after breaking away from Mengniu, has fewer restrictions on products and will enrich its product lines in the future. **He also believes that Junlebao will have a place among the top three dairy companies in the future.**
In fact, there have been rumors in the industry that Junlebao will go public independently. In April 2019, the Hebei Province Dairy Industry Revitalization Leading Group issued the "2019 Hebei Province Dairy Industry Revitalization Work Plan," which explicitly stated "support Junlebao Dairy Group's main board listing and expand financing channels."
"This equity change is conducive to the company's listing work," Shen Meng said.
However, Junlebao did not respond to China Business Journal's interview request regarding the listing, and mentioned that the listing work is not closely related to the equity change.
Source: China Business Journal
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## Citation metadata

- Publisher: New Distribution
- Author: 蒋政
- Published: 2019-11-23
- Canonical: https://xinjignxiao.com/en/articles/mengniu-officially-bids-farewell-to-junlebao-can-both-sides-achieve-a-wi-668abb5d/
- Original source: https://mp.weixin.qq.com/s/qPW16MUz6rwo6h9_mTw60A

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