As the milk powder price war intensifies, Wonder Sun alone has raised prices across the board. Although the company denies this, distributors insist they are increasingly struggling. What exactly happened between Wonder Sun and its distributors?
10 Products Adjusted in Price
Recently, a "Wonder Sun Product Price Adjustment Letter" (see below) circulated on the internet. The letter, addressed to "various terminal stores," stated that the Wonder Sun Jiamusi office would "uniformly" adjust retail prices at all stores in its jurisdiction on May 23.
Among them, the retail price of "Anlicong" (900g), one of the largest milk powder brands of this Heilongjiang dairy company, was listed at 328 yuan in the letter. Recently, a reporter checked Wonder Sun's Tmall flagship store and found only 800g products for sale; other Tmall stores showed the product priced at around 295 yuan per can.
From the screenshot of the letter, phrases such as "the office will adjust supply prices on May 25" appeared, along with strong language like "the office will investigate low-price selling" and "the office will form an investigation team for comprehensive checks and conduct entrapment enforcement."
The screenshot did not reveal the signature or sender, and as of press time, no similar information was posted on Wonder Sun's official website.
During an interview, an industry insider in the infant products sector claimed that retail prices for related products had been raised by 10 yuan and retail promotions were restricted. "Previously, we could sell two for one or directly sell at the bare price after discounts; that won't be possible anymore." Unfortunately, this claim could not be confirmed by Wonder Sun.
Public reports from 2013 showed that Wang Jinghai, chairman of Wonder Sun Dairy, stated in an interview that the company's "Anlicong" formula infant milk powder, in terms of nutritional composition and taste, had been proven through scientific experiments and extensive infant feeding to be extremely similar to breast milk and could fully replace imported foreign milk powder.
That report, published two years ago, also stated that many foreign brands on the market were newly registered trademarks after the melamine incident, produced by foreign factories on an OEM basis, and were highly competitive due to huge profits. "In contrast, leading national agricultural industrialization dairy enterprises that drive agriculture and animal husbandry development and bear social responsibility are unable to compete with foreign brands and miscellaneous foreign brands due to high costs, thin or even negative profits, leading to market shrinkage and damage to the dairy industry's source."
Business registration data shows that Heilongjiang Province Wonder Sun Dairy Co., Ltd. was established in 2005 with a registered capital of approximately 743 million yuan. Its shareholders include Fujian Company Limited (British Virgin Islands), Heilongjiang Beidahuang Agricultural Reclamation Group Corporation, and Taiwanese food giant Uni-President.
In December last year, China Food Safety News quoted Wang Jinghai's report at a staff meeting, stating that Wonder Sun Dairy faced a complex situation of slowing macroeconomic growth, a sluggish domestic dairy market, and intertwined contradictions. The company accelerated structural adjustments and stabilized market operations, expecting to achieve sales revenue of 5.175 billion yuan and profits of 279 million yuan, with significant improvements in economic operation quality and key indicators.
"Wonder Sun Dairy expects to achieve a 15% increase in total operating revenue and a 30% increase in profit next year," the report said.
With such a promising outlook, what is Wonder Sun up to now?
Distributors' Contradictions
The reporter further sought verification from Wonder Sun regarding the issues raised by distributors, but the price increase was denied by Wonder Sun. "This letter is not an act of Wonder Sun Dairy. The retail prices of Wonder Sun products have not been adjusted," a Wonder Sun spokesperson responded.
To this end, we consulted Wonder Sun's Tmall flagship store, and its customer service said: "We have not received official price increase information." However, the sales price on Wonder Sun's Tmall flagship store differs significantly from the actual retail price reported by distributors. Taking Anlicong 900g Stage 1 milk powder as an example, the Tmall flagship store sells it for 304 yuan, while the distributor said the store price is around 200-220 yuan.
Currently, e-commerce platforms are running promotional activities, and the post-promotion prices are close to the adjusted retail prices. For example, the adjusted retail price for Anlicong Stage 2 is 308 yuan, while the flagship store's promotional price is 296 yuan.
The distributor told the reporter that Wonder Sun's milk powder sales are currently considerable, but distributors have no profit to make. One reason is that due to competition from major brands and pressure from e-commerce channels, product selling prices have been pushed very low, leaving increasingly narrow profit margins. However, raising prices, or strictly selling at the manufacturer's specified price, adds another difficulty for distributors. "Now imported milk powder has dropped to below 300 yuan. If Wonder Sun's milk powder prices are on par with them, it's hard for us to have a sales advantage," the distributor admitted.
Hidden Dangers of Management Deficiencies
In fact, distributors and Wonder Sun have different accounts on whether prices were actually adjusted. However, industry insiders see this as a reflection of the chaos in Wonder Sun's milk powder pricing system. Distributors also said that due to the lack of a unified pricing system, cross-regional selling is very serious.
"First, due to large product inventory, many distributors do not strictly follow the pricing system, resulting in inconsistent prices across regions; second, there is no distinction between online and offline products, leading to large price differences, which is also a manifestation of price chaos," said Zhu Danpeng, a researcher at the China Brand Research Institute. In his view, although Wonder Sun has not adjusted prices through official channels, it is possible that it is using agents to rectify the pricing system, which is common in the FMCG industry.
The most direct benefit of rectifying prices is avoiding cross-regional selling, and it also helps the company control product quality, sales, inventory, and other aspects. "Wonder Sun's move to rectify also reflects to some extent that the company's milk powder sector has to make adjustments," another unnamed industry insider said.
According to Wonder Sun's official website, Wonder Sun Dairy is a holding company of Beidahuang Group, with total assets of 3.8 billion yuan, 24 subsidiaries and branches, an annual fresh milk processing capacity of 800,000 tons, and can produce nearly 150 varieties in 11 major series, including milk powder, liquid milk, and soy products.
Other public data shows that in 2004, Wonder Sun's annual sales revenue was 1.35 billion yuan, with net profit of 12.62 million yuan. In the comprehensive ranking of the dairy industry, Wonder Sun ranked fourth nationally after Yili, Mengniu, and Guangming. However, in recent years, Wonder Sun has basically disappeared from the scene. Since it is not a listed company, Wonder Sun has not disclosed sales data. However, based on the calculation that Uni-President, one of Wonder Sun's shareholders, recorded a 9% stake in unlisted securities at 212 million yuan in its financial report, the asset appraisal company commissioned by Uni-President valued Wonder Sun at less than 2.4 billion yuan, far behind giants like Yili and Mengniu.
"Perhaps Wonder Sun's disappearance is related to the disorderly management of the company's various business segments and levels. If no adjustments are made, the gap between Wonder Sun and dairy giants will only widen," Zhu Danpeng admitted.
(Source: Xiaoshidai, China Economic Net, Beijing Business Today)
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