Click to read the original article for details. Fierce competition is driving change, and manufacturers are no exception. Leveraging the 'new retail' trend, both giants like Mengniu and Yili, as well as challengers such as Bright, Wahaha, and Nestle, are experimenting with new retail. Their goal is simple: to capture more market share through innovative models. Entering the second decade of the 21st century, Chinese demand for dairy products has grown even stronger. According to the "China Dairy Quality Report (2017)", from 2011 to 2016, China's dairy consumption increased from 24.805 million tons to 32.047 million tons, with a compound annual growth rate of 5.26%. In such a vast market, anything is possible. Testing New Retail According to Zhang Jianqiu, Yili is proactively adapting to new trends in retail development. "Yili has integrated offline and online resources, vigorously promoting the development of channels such as e-commerce platforms, mother-and-baby stores, and unmanned convenience stores," he said. He added that Yili is also strengthening cooperation with retailers, providing consumers with a brand-new consumption experience through membership marketing and retail e-commerce partnerships. Yili has also enlisted JD.com to support its efforts. Zhang Jianqiu said: "In October last year, the collaborative warehouse we co-created with JD.com officially began operations. This warehouse connects with Yili's various product divisions at the front end, coordinating production based on demand; in the middle, it connects with JD's order system; and at the back end, it links to JD's sorting system, reaching a wide range of consumers and greatly improving the delivery efficiency of Yili products. Now, the fastest delivery time for Yili products on e-commerce has been reduced to within 3 hours after ordering." Besides the partnership between Yili and JD.com, the cooperation between Junlebao and Miss Fresh is also exemplary: On January 12 this year, Junlebao Dairy and Miss Fresh officially signed a strategic cooperation agreement in Beijing. Both parties stated that they will fully leverage their respective advantages in the future, deepening cooperation in areas such as channel expansion, product innovation, and brand building. Clearly, Junlebao aims to use the emerging fresh e-commerce platform Miss Fresh to reach more consumers. Notably, this cooperation marks the first large-scale "e-commerce debut" for Junlebao's low-temperature yogurt. In the new retail channel, Junlebao will leverage Miss Fresh's fast delivery advantages, using its ultra-fast cold chain delivery service system to deliver Junlebao Chunxiang yogurt to consumers within 2 hours. As a "internet-famous product," Chunxiang yogurt has a large consumer base. While providing convenient purchasing for consumers and expanding sales for Junlebao, Miss Fresh also enhances its own influence. Mengniu, which has always played the role of "Yili's chaser," seems to have taken a step ahead of Yili in the new battlefield of new retail. In addition to partnerships with Alibaba and JD.com, Mengniu has also begun experimenting with "social e-commerce." This move is considered a pioneering initiative in the dairy sector—earlier this year, Mengniu launched "Manran" fiber milkshake milk, targeting the increasingly popular weight management market. It adopted a "one-on-one" new retail channel that directly communicates with consumers, introducing the product to the public through social new retail rather than placing it on supermarket shelves. Mengniu has thus "officially entered" the micro-business circle. Currently, Manran milkshake is mainly distributed to two micro-business teams: one called "Yun Shidai" and the other "Suzhe International." Sales of Manran milkshake have exceeded 100 million yuan. Industry insiders point out that the innovative significance of Mengniu's Manran milkshake lies in rebuilding the relationship between traditional enterprises and the internet and consumers, actively utilizing the internet and fan effects, using social media as a tool to connect the marketing chain and supply chain, establishing multi-scenario marketing, and achieving "cloud inventory with zero stockpiling." Besides Mengniu, the once-popular children's beverage giant Wahaha also launched an eye-care health drink in April this year—Tianyan Jingjing fermented milk beverage. Notably, this product also follows the social retail route. Furthermore, Wahaha is no longer satisfied with leading in the children's beverage sector. Its founder, Zong Qinghou, explicitly stated, "In 2018, Wahaha Group will accelerate innovation, using traditional Chinese medicine and food therapy to develop healthy foods to meet consumer dietary needs, shifting towards health and wellness." It is reported that Wahaha is planning to launch a second beverage to return to the big health sector—a milkshake with weight-loss benefits. This is another functional milkshake product from an established beverage company, following Mengniu's Manran milkshake. Moreover, both companies have chosen new retail models to promote their products, setting the stage for a direct confrontation. The brand effect brought by established enterprises entering new retail far exceeds the marketing tactics of unlicensed micro-businesses. Facing the opportunities and challenges brought by social new retail, traditional enterprises that remain unmoved might also need to consider how to keep pace with the times. For retailers and even micro-business teams, the entry of established enterprises into new retail undoubtedly presents a new development opportunity: their own resources and experience in retail channels, combined with the brand influence and commercial demands of established enterprises, may spark different sparks through cooperation. The "Duopoly" Pattern Recently, major dairy companies have released their 2018 interim reports. Looking at the financial reports, it is not difficult to see that Mengniu and Yili, known as the "twin titans of dairy," remain strong, and the "duopoly" pattern in the dairy industry is unlikely to be broken in the present or near future. Among them, Yili Group's first-half operating revenue was 39.943 billion yuan, a year-on-year increase of 19.26%; net profit attributable to shareholders of the listed company was 3.446 billion yuan, up 2.43% year-on-year. In the dairy industry, Yili ranks first in both metrics. Mengniu follows closely. According to Mengniu's financial report, in the first half of this year, Mengniu achieved revenue of 34.474 billion yuan, a year-on-year increase of 17%; net profit increased by 38.5% to 1.562 billion yuan. Compared with Yili and Mengniu, the financial reports of other dairy companies are clearly less impressive—Bright Dairy, often considered the industry's third, had total operating revenue of 10.571 billion yuan in the first half, a year-on-year decrease of 3.23%, and net profit of 454 million yuan, up 6.05% year-on-year; Beingmate, a company deeply engaged in the infant dairy sector, had operating revenue of 1.232 billion yuan in the first half, a year-on-year decrease of 4.14%, but net profit attributable to shareholders of the listed company was 8.53 million yuan, an increase of 102.32% year-on-year. In addition to financial data, output value and milk collection volume also illustrate the existence of the "duopoly pattern." Whether in terms of output value or milk collection volume, the combined share of the two companies accounts for more than one-third of the industry. It is basically predictable that the "duopoly pattern" will continue. The Strengths of the "Twin Titans of Dairy" The two dairy companies that occupy nearly half of the market have achieved their current success for good reason. In their respective financial reports, they also elaborated on their advantages: Yili pointed out that its performance growth was mainly driven by its global dairy resource security, brand advantages, strong channel penetration, and product innovation capabilities; Mengniu stated in its financial report that in the first half of this year, all its main business segments achieved rapid growth, and the outstanding performance of high value-added star products and the milk powder segment contributed to a significant improvement in the group's overall profit. Yili's interim report also shows that the sales revenue of its key product series, including "Jindian," "Ambrosial," "Changqing," "Meiyitian," "Joy Day," "Jinlingguan," "Qiaolezi," and "Zhenxi," increased by more than 30% compared with the same period last year, and the proportion of new product sales revenue increased by 5 percentage points year-on-year. Furthermore, although Yili is still the leader in the dairy industry at this stage, it has not stopped researching new products. At the end of last year, it launched the plant-based protein beverage "Zhixuan" series of soy milk; this year, it introduced new energy drink "Huanxingyuan," fruit yogurt drink "Guoguoxi," women's formula milk powder "Youyue," and high-end drinking yogurt "Changqing PET," among others. Market feedback has been relatively positive so far. "We will actively expand new business formats to provide consumers with brand-new experiences," said Zhang Jianqiu, Executive President of Yili. Mengniu is definitely the biggest reason Yili cannot afford to relax its pace. In the first half of this year, Mengniu regained ground in the "milk powder" battlefield, where it had suffered consecutive losses. Milk powder has always been a "heartache" for Mengniu. The perennial losses of its two milk powder products, Yashily and Dumex, once affected Mengniu's performance. Mengniu Group CEO Lu Minfang once explicitly stated, "Mengniu must do well in the milk powder business; if anyone can't, I'll replace them." In the first half of this year, Mengniu's milk powder business achieved revenue of 2.947 billion yuan, a year-on-year increase of 60%; net profit was 41.003 million yuan, a sharp increase of 133.9% year-on-year. While star products performed excellently, Mengniu also made strides in brand building. In particular, the attention brought by "World Cup marketing" made Mengniu a star brand in the first half of this year. In terms of communication volume, over 50 billion person-times were exposed to the Mengniu brand through various media channels; in terms of engagement, in the "Scan to Win Red Packets" activity alone, Mengniu attracted nearly 240 million consumer participations. Along with the dramatic storyline of signed star Messi at the World Cup, Mengniu's brand proposition of "Born to Be Strong" became a hot topic on social media. The World Cup sponsorship activities and communication promotions helped boost Mengniu's brand power by 11.4%. Riding the "east wind" of the World Cup, consumer preference for and purchase intention towards the Mengniu brand significantly improved. As the oligopoly effect intensifies, some people view the dairy industry as a "sunset industry." But the tide of history does not shift with human will. With the emergence of new retail models, the dairy industry may usher in a major transformation. Source: LingShou ID: lingshouke