Yili and Mengniu, the two rivals, are at odds again. And COFCO may have discovered that once aboard Niu Gensheng's "pirate ship", it's hard to get off. Is this fate, or a cycle? After its biggest competitor Yili acquired Shengmu's stake, Mengniu finally reconciled with Modern Dairy, and the two are back in each other's good graces. Indeed, as the New Year's bells still echo, Mengniu has been making big moves to grab headlines. Shortly after the new year, just 100 days after its fourth helmsman Lu Minfang took office, Mengniu initiated an organizational restructuring, splitting its core business segments into independent business units for ambient, low-temperature, ice cream, and milk powder. The purpose of this restructuring is simple: to re-energize the company. Right after the restructuring, Lu Minfang unveiled another big move to investors: on January 5, Mengniu and Modern Dairy jointly announced that Mengniu would acquire 16.7% of Modern Dairy's shares from private equity firms CDH and KKR at HK$1.94 per share, increasing its stake to 39.9% (37.7% on a fully diluted basis), with a total transaction value of approximately HK$1.873 billion. This scene feels familiar—since mid-September last year, when Niu Gensheng returned to Mengniu as a member of the Strategy and Development Committee, Mengniu's pace seems to have returned to the era of fierce rivalry with Yili. At that time, there were rumors that some Mengniu distributors said Niu Gensheng's appointment was just a transition, and he would soon take the helm again. So, how likely is it that Niu Gensheng will retake control of Mengniu? In our view, at least for now, it's not very likely, but Old Niu's influence on Mengniu's future will increase. That is, if Mengniu previously pursued a strategy of de-Niu Gensheng-ization, then in the coming period, Mengniu's Old Niu imprint will be strengthened to some extent. Recent events at Mengniu may support this view. Previously, Lu Minfang publicly stated that Mengniu's old organizational structure had problems such as unclear responsibilities and poor coordination between production, supply, and sales. Through this reform, establishing new business units "can make each business unit more focused and balanced, and form an organizational model oriented towards consumers and the market." By clarifying responsibilities and rights, and bearing profit and loss, team vitality is maximized. Now look at what happened at Modern Dairy. Shortly after Lu Minfang took office, he visited Modern Dairy's farms and appointed Dong Xianli, a veteran Mengniu person, as CFO of Modern Dairy. Before joining Modern Dairy, Dong Xianli had worked at Mengniu for over 12 years. Now, they have kicked out private equity firms CDH and KKR from Modern Dairy, leaving only Mengniu's bloodline. These signs all seem to indicate that Mengniu wants to return to its competitive form. Market practice over the years has shown that removing Old Niu's genes was not cost-effective for Mengniu. Numbers can illustrate this:

  • In the 2016 interim report, Mengniu's first-half sales were 27.26 billion yuan, with net profit of 1.077 billion yuan. Yili's sales were 29.926 billion yuan, with net profit of 3.211 billion yuan. Mengniu's profit was less than half of Yili's, a stark contrast to the earlier situation between the two. Truly, fortunes change over time.
  • In 2015, Mengniu's revenue was 49.03 billion yuan, while Yili's was 60.36 billion yuan, a gap of 11.3 billion yuan.
  • In 2014, Mengniu's revenue was 50 billion yuan (excluding Yashili, 47.23 billion), Yili's was 54.436 billion, a gap of 4.4 billion.
  • In 2013, Mengniu's revenue was 43.357 billion yuan (Mengniu acquired Yashili milk powder, narrowing the gap with Yili), Yili's was 47.779 billion.
  • In 2012, Mengniu's revenue was 36.08 billion yuan, Yili's was 41.991 billion.
  • In 2011, Mengniu's revenue was 37.388 billion yuan, Yili's was 37.45 billion.
  • In 2010, Mengniu's revenue was 30.265 billion yuan, Yili's was 29.664 billion.
  • In 2009, Mengniu's revenue was 25.71 billion yuan, Yili's was 24.324 billion.
  • In 2008, Mengniu's revenue was 23.865 billion yuan, Yili's was 21.659 billion.
  • In 2007, Mengniu's revenue was 21.318 billion yuan, Yili's was 19.36 billion.
  • In 2006, Mengniu's revenue was 16.246 billion yuan, Yili's was 16.339 billion. Looking at the data, just seven years after Niu Gensheng left Yili in 1999 to found Mengniu, that is, a seven-year itch between Niu Gensheng and Yili, their positions completely reversed. Niu Gensheng took only 8 years to surpass his old employer Yili and become the leader of China's dairy industry. However, since Niu Gensheng left Mengniu in 2011 and COFCO took over, under the dual effects of mergers and de-Old Niu gene strategy, Mengniu has been declining, gradually falling behind competitors. Another set of data illustrates this loss: In 2010, Mengniu's net profit was 1.237 billion yuan, while Yili's was 777 million yuan. After that, Mengniu's net profit began to be less than Yili's. Without Niu Gensheng, Mengniu's original team seemed to lose its soul. Now that Niu Gensheng is back behind the scenes, Mengniu seems to have returned to a new competitive posture with Yili. But now, both Yili and Mengniu are not what they used to be. After COFCO brought the old helmsman back on board, will Mengniu quickly return to a fast development track as before? How much effect can Niu Gensheng's old ticket have? Source: Sanshengdaodao (ID: sanshengdaodao) -END- Click the image to read directly FMCG industry's most professional and practical knowledge base 【 Reply with yellow numbers in the background to view the following keywords 】 | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales volume improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation |