△Scan the QR code to follow New Distribution's video account and reserve the live broadcast Let's first look at these two pieces of news: Recently, the State Administration for Market Regulation (SAMR), based on reports and preliminary investigations, launched an antitrust investigation into Alibaba Group Holding Limited for suspected monopolistic practices such as "choosing one of two." Yili recently announced that on December 21, 2020, it received the "Decision on Not Prohibiting the Concentration of Undertakings" from SAMR, which decided not to prohibit Yili's acquisition of shares in Zhongdi Dairy. These are two recent events, both involving decisions by SAMR and industry giants, yet the outcomes are quite different. First, let me explain what Alibaba's "choosing one of two" behavior is: a few years ago, Alibaba told brand merchants, "If you want to be on Tmall, you cannot be on JD.com or other platforms simultaneously." On November 28, 2017, JD.com filed a lawsuit against Tmall and Alibaba at the Beijing High People's Court, alleging abuse of market dominance. JD.com claimed that Alibaba abused its dominant position in the B2C online retail platform market in mainland China, and its "choosing one of two" constituted exclusive dealing under the abuse of market dominance. On November 10 this year, SAMR released the draft "Antitrust Guidelines for the Platform Economy," which directly targets the increasingly fierce monopolistic behaviors in the internet platform economy, explicitly listing "choosing one of two" or behaviors with the same effect, as well as exclusive dealing, as likely constituting exclusive dealing. Clearly, Jack Ma, who made controversial remarks at a summit in Shanghai, is currently under the greatest pressure of his career as China's richest man. Ant Group's IPO was halted, acquisitions were rejected, and now he faces an antitrust investigation... So the question arises: Will China's dairy giants face antitrust action? The answer is: Not in the past, not at present, and not in the near future. Why do we say that? Let's listen to the professional analysis of Shiwu, a leading new media in the dairy industry: First, China's dairy industry still needs further consolidation and is far from reaching a "monopoly" level. The modernization of China's dairy industry began around 2000. Before Yili and Mengniu went national, the industry was dominated by city-based dairy enterprises. Each province and core city had many regional low-temperature dairy companies, each dominating their local markets and serving local consumers. With the advent of ambient milk breaking the constraints of sales radius, Yili and Mengniu rapidly expanded nationally. These two dairy giants grew stronger, expanding from Inner Mongolia to all of China and then to the world. According to the 2020 Global Dairy Top 20 ranking, Yili ranks fifth globally, and Mengniu ranks eighth. Don't be intimidated by Yili and Mengniu's nearly 100 billion yuan sales scale. Their size is merely a result of China's demographic dividend, with many terminal outlets and wide distribution across the country. According to Shiwu's field research, in some regions, such as Shijiazhuang, Junlebao dominates in supermarkets like Beiguo. As a local brand, Junlebao's products occupy the largest display area. Similarly, in Chengdu, Sichuan, New Hope Dairy has the largest distribution area locally. Photo taken by Shiwu team at Beiguo Supermarket in Shijiazhuang So, from a regional market perspective, although Yili and Mengniu have a larger overall national share, they have not achieved a "monopoly" position in regional markets. Let's look at the 2020 Global Dairy Top 20 ranking: Based on 2019 revenue, Yili and Mengniu combined had $25.3 billion, only $3.2 billion more than Nestlé, the world's largest dairy company. In other words, Yili and Mengniu together are only equivalent to the size of the current global number one. In summary, Yili and Mengniu still have significant room for growth in both the Chinese and global markets, far from reaching monopoly levels. Second, the state supports mergers and acquisitions in China's dairy industry and supports increased brand concentration. According to professional research by Shiwu, since the antitrust investigation and penalties against some foreign brands in 2013, the state has been promoting mergers and acquisitions in the infant formula industry, and policy encouragement and support have continued to this day. The sole purpose is: to improve the quality of domestic formula through increased brand concentration. At the same time, after the chaotic situation of too many brands is addressed, it becomes easier for regulators to manage. In addition to formula, in the liquid milk sector, although there is no national-level policy support, local governments have been supporting local leading enterprises to grow stronger, providing policy preferences from milk sources to production. The "Hebei Province Dairy Industry Revitalization Plan (2019-2025)" proposes: to build a number of internationally competitive dairy processing enterprises. By 2022, there will be 3 dairy groups with sales revenue exceeding 10 billion yuan, including one exceeding 30 billion yuan, entering the national top 3 and global top 20. Dairy product output will reach 5 million tons, ranking first in the country. Infant formula output will reach 200,000 tons, with an import substitution rate of 30%. By 2025, dairy product output is expected to reach 7.6 million tons. We will create a number of brands that win domestic and international dairy awards, and cultivate one leading infant formula enterprise with global sales ranking in the top 5 and the largest market share in China. In summary, whether at the local or national level, as long as it is a merger or acquisition in China's dairy industry, go ahead and do it. The state is eager to increase industry concentration, so there is no need to worry about whether the restructuring plan will be approved. Think about it: in the past many years, which merger or acquisition case has the state prohibited?! Third, the dairy industry is a sector that links primary, secondary, and tertiary industries, concerns people's livelihoods, and the state encourages and supports the development of the real economy. Jack Ma's Ant Group and Alibaba's internet finance empire belong to the financial industry and internet economy. In the financial field, the state emphasizes security; in the internet field, the state focuses on innovation. In any field, the state does not allow a one-sided shift from real to virtual, does not allow capital feasts, and does not allow economic bubbles. The dairy industry, whether liquid milk or formula, belongs to the real economy of the entire industrial chain. Behind a glass of milk or a can of formula, it drives employment from grass planting to cattle raising to production and processing, as well as transportation and sales, activating the primary, secondary, and tertiary industries. If such an industry were prohibited from growing stronger, it would only be for the sake of antitrust, without putting national welfare and people's livelihoods first. In addition, the dairy industry is different from internet platforms; there is no "choosing one of two" issue. Whether to choose one or the other depends on consumers: whoever has fresher and higher-quality milk, or more nutritious formula, will be recognized by consumers. In summary, dairy giants should continue to grow stronger. Whoever has a larger share is their capability; whoever has a higher market share means consumers trust them more. Source: Shiwu (ID: food-gnosis), Author: Zhang Zhiwei