Yili's Helmsman Pan Gang: Steering into the Global Dairy Top Eight in a Decade

Under Pan Gang's leadership, Yili has surpassed Mengniu to become the leading dairy company in China over the past decade, and this year it entered the global dairy top eight for the first time. What is Pan Gang's secret? Let's listen.

Reporter: Pan Yichun, Investor Daily Source: Investor Daily (ID: touzizhebao)

On July 25, Rabobank released its 2016 "Global Dairy Top 20" list, with Yili Group's ranking rising two places from the previous year, entering the global dairy top eight for the first time. This "eight" is extraordinary, not only as the highest global ranking for an Asian dairy company, but also as another milestone in Pan Gang's leadership of Yili's ascent.

Mengniu, which has long been regarded as one of China's dairy giants alongside Yili, has clearly been surpassed by Yili in recent years. In terms of performance alone, Yili's revenue in 2015 reached 60.4 billion yuan, while Mengniu's was only 49 billion yuan, giving Yili a clear advantage. In terms of net profit, Yili's 2015 net profit was as high as 4.632 billion yuan, a year-on-year increase of 11.76%, nearly double Mengniu's 2.4 billion yuan. Comparing the two, Yili has undoubtedly far surpassed its competitor and become the undisputed domestic industry leader.

According to relevant information, Pan Gang became President of Yili Group in 2002 and officially assumed the role of Chairman in 2005, holding the position for over a decade. During this period, Yili surpassed Mengniu to occupy the industry's high ground, and the market share of some sub-segments continued to expand.

According to a market research report on Yili products released by China Merchants Securities in July this year, the market share of Anmuxi, one of Yili's main products, has reached 37% nationwide, clearly overtaking competitors, and the product is expected to achieve revenue of 8 billion yuan for the year.

Stay True to the Original Aspiration: Listen to Consumers' Voices

For the FMCG industry, the principle of "the customer is God" also applies. Pan Gang's emphasis on consumers may be one of the reasons for Yili Group's rapid development in recent years.

Years ago, Pan Gang's wish was to expand the consumer base. He once told the media that in his eyes there were only two types of people: those who drink milk and those who do not. His wish was to turn these two types into one type—those who drink milk.

As the number of consumers continued to rise, Pan Gang also led Yili to expand its product range around new consumer demands. It is understood that Yili currently has more than 1,000 product varieties, including many star products such as Jindian, Shuhua, Jilingguan, Anmuxi, and Qiaolezi, covering a wide range of age groups, from infant formula to milk suitable for middle-aged and elderly people. In addition, Yili has not hesitated in its investment in new product R&D. The Investor Daily reporter noted that the company's R&D expenditure in 2015 exceeded 80 million yuan. How to provide consumers with a cup of nutritious, healthy milk is Pan Gang's original aspiration.

As Chinese consumers' demand for milk continues to upgrade, Yili's product structure has also changed accordingly. Some high-end products have been launched in recent years and quickly become profit growth points for the group. Currently, the more mature high-end sub-brands include Jindian Organic Milk, Nutrition Shuhua Milk, and QQ Star Children's Growth Milk. Public data shows that these high-end brands account for more than 40% of Yili's overall product line. The balanced layout of mid-to-high-end and low-end products has broadened Yili's market coverage and increased its consumer base, which has significantly helped improve Yili's performance.

Undoubtedly, as the national consumption level continues to rise, how Yili, as a leading dairy FMCG company, can achieve consumption upgrade has also become one of the issues Pan Gang is currently considering. In June this year, Pan Gang shared his views on "consumption upgrade" at the China-UK Business Leaders Summit. Pan Gang believes that China's current consumption upgrade mainly presents four characteristics: first, consumption quality changes from "being able to eat enough" to "eating well"; second, consumption form changes from "buying products" to "buying services"; third, consumption method changes from "offline shopping" to "online shopping"; fourth, consumption behavior changes from "standardization" to "personalization." "Only by deeply grasping these characteristics and making the enterprise conform to the trend and provide good services can we stand at the forefront of the new economic era."

Currently, Pan Gang has implemented the "BASE" practice at Yili in response to the above characteristics, namely Brand, All for Quality, Service, and Experience. According to Pan Gang, at the beginning of this year, Yili, together with e-commerce partners, launched a smart hardware device. With a simple press, the system will automatically place an order according to the consumer's settings and designate a merchant to deliver to the home, truly realizing "one-click service."

Pan Gang's emphasis on consumers has also been recognized by consumers. Recently, in the "2016 Brand Footprint Report" released by Kantar Worldpanel, Yili has become the most frequently chosen brand by Chinese consumers. Data shows that in the past year, 88.5% of urban households purchased the Yili brand 7.8 times, meaning that in 2015, consumers purchased the Yili brand more than 1.1 billion times.

Adhere to the Original Intention: Treat Quality as Life

The increase in product variety is only the primary level of meeting consumer needs. Pan Gang's goal is to ensure quality while having a wide variety and high sales volume.

The "quality" of Yili products can be directly reflected in the milk source. It is understood that Yili currently controls three golden milk source bases: Tianshan in Xinjiang, Hulunbuir in Inner Mongolia, and Xilingol. As of the end of 2014, Yili had invested a total of approximately 12.4 billion yuan in milk source upgrades and construction, ranking first in the industry.

In recent years, Yili Group, led by Pan Gang, has not been satisfied with domestic market expansion and has actively sought opportunities to expand abroad. In 2013, Yili Group and DFA, the largest milk company in the United States, jointly announced the formal establishment of a strategic partnership. In 2014, the company invested 2 billion yuan in New Zealand to build four major projects: new milk powder, liquid milk, raw milk deep processing, and milk powder packaging.

The "quality" business card is particularly important in the process of "going global." It is understood that Yili has a famous "three lines": the national legal standard line, the internal control line stricter than the national standard line, and the early warning line stricter than the internal control line. The "three lines" provide layer-by-layer protection, further enhancing Yili's safety risk control capability, and are called "unprecedented" by many top global dairy suppliers.

It is precisely because Pan Gang has regarded quality as the foundation of a food company's competitiveness in recent years that the Yili brand has also been recognized by foreign counterparts. Previously, Pan Gang invited the three global quality control giants SGS (Swiss General Notary), LRQA (Lloyd's Register Quality Assurance), and Intertek (Intertek Group) to "find fault" with Yili's global quality management system. The experts from the three institutions used the word "excellent" to describe Yili's quality management.

"Treat quality as life" is a simple phrase, but it is the only way for Yili to climb to the top of the global dairy industry. "Yili's pursuit of product quality and safety is endless, and our commitment to consumer safety is unconditional. We must have reverence for consumers and take concrete actions to improve, optimize, and upgrade our global quality management system," Pan Gang said.

Temper Craftsmanship: Excellence in Every Detail

Similar to Yili's development, Pan Gang's personal growth has also been rapid. Public information shows that Pan Gang joined Yili in 1993, initially as the quality inspection director of Yili Frozen Food Company. He later served as production director of Yili Frozen Company, chairman and general manager of Yili Mineral Water Company, and other positions. After joining Yili, he became the general manager of Yili Liquid Milk Business Division, a core regional position, in just six years.

More than ten years of experience in Yili Group has taught Pan Gang that only the "spirit of craftsmanship" can make Yili grow. At Yili, there are three "100%" that all Yili people always talk about, keep in mind, and implement in action. These three "100%" are "100% dedication, 100% safety, 100% health," and they are the golden rules of every Yili company.

In Pan Gang's eyes, these three "100%" are actually the spirit of craftsmanship. Pan Gang believes that as a food company, Yili is related to the health and nutrition of consumers, and it needs to be meticulous and strive for excellence.

"1.1 billion consumers choose Yili, which is the result of the long-term efforts of all Yili people; but from 1.1 billion to zero, it may be just a moment, an event!" Pan Gang, mindful of potential dangers, uses such words to "warn" Yili people. All Yili people also know that this is not an exaggeration; it is indeed Yili's "one-vote veto."

Anything related to quality must be traced to the root, dug to the key, always thinking one step ahead and doing one step earlier than others. This is Pan Gang's craftsmanship.

In terms of improving user experience, Pan Gang also has his own unique craftsmanship. Previously, Pan Gang told the media that improving consumers' experience of milk is not limited to tasting, but also understanding the entire process of milk from pasture to table. "We have now put the global industry chain online. With panoramic technology and AR technology, everyone can visit online, and even watch on their mobile phones anytime, anywhere," Pan Gang said. It is understood that the number of online visitors has exceeded 37 million, and offline visitors nearly 9 million.

If strict quality control is the embodiment of Pan Gang's "craftsmanship" in products, then emphasis on publicity is Pan Gang's "craftsmanship" in branding. It is understood that in the past two years, Yili has sponsored many popular programs. In 2015, there were "Dad, Where Are We Going?", "Running Man", "The Brain", "I Am a Singer 4", etc., all of which were the most popular variety shows at the time. For this, the group also spent more than 10 million yuan last year.

"Climbing high, don't ask the top; the journey brings new sights." This is a saying Pan Gang particularly likes. The global dairy top eight is undoubtedly another scenery on Pan Gang's climbing journey. Two years ago, when Yili entered the global dairy top ten, Pan Gang wrote an internal letter to all Yili people. In that letter, Pan Gang said, "The character 'si' (thought) has a 'field' in it, reminding us that we are a food company, connected to the land, and connected to millions of dairy farmers, hundreds of thousands of partners, and employees; the character 'en' (gratitude) has a 'cause' in it, reminding us to always know the cause, to know that all achievements come from the trust of consumers." Now, Yili has advanced from the top ten to the top eight. There may still be a long way to go on the climbing path for Yili and China's dairy industry, and Pan Gang's "thought and gratitude" remain.

At the request of many distributor friends, the fourth B-end e-commerce inspection class of this public platform will be held from August 15 to 18 in Nanjing and Hangzhou to inspect Qianmi.com and Alibaba 1688 Retail Link. Distributor friends interested in transformation can join us for on-site inspection:

Activity process: Time: August 15-18

August 15-18

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Group photo of the 3rd B-end e-commerce inspection, from top to bottom: Yunbao Shangmeng, Weijie Chengpei, Wanshang Yizhan.

Group photo of the 2nd B-end e-commerce inspection, from top to bottom: Jinhuobao, Caiba, Yishang.

Group photo of the 1st B-end e-commerce inspection, from top to bottom: Piduoduo, Beiquan, Yishang.

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