Production | Tiger Sniff Research
Author | Chen Xiaoyu
On March 26, Mengniu Dairy issued its 2019 financial report, and revenue and profit maintained double-digit growth. During the reporting period, Mengniu’s operating income reached 79.030 billion yuan, a year-on-year increase of 14.57%; net profit attributable to mothers was 4.105 billion yuan, a year-on-year increase of 34.91%.
In terms of business, Mengniu’s growth in 2019 mainly comes from the two major businesses of liquid milk and milk powder, of which liquid milk business revenue was 67.88 billion yuan, a year-on-year increase of 14.3%, and milk powder business revenue was 7.87 billion yuan, a year-on-year growth of 30.8%.
It seems that the core big single product can support Mengniu to continue to rise.
How is Mengniu’s growth ability?
Mengniu continued the growth momentum of 2018 in 2019. M & A is still an important method to increase its income, but the 100 billion target affected by the epidemic will be hopeless.
(Data source: Wind)
In 2019, Mengniu realized revenue of 79.030 billion yuan, an increase of 14.57% over 2018This is the third year Mengniu has maintained double-digit growth since 2017.
In 2017, Mengniu put forward a goal called “Double 100 Billion”, that is, to achieve a scale of double 100 billion in sales and market value in 2020. At present, Mengniu’s revenue scale is still 20 billion short of the previously announced 100 billion target. A little calculation shows that to achieve the 100 billion target company needs to achieve 21% year-on-year growth in 2020.
In order to achieve this goal, Mengniu has conducted several rounds of mergers and acquisitions. Only in September and November of 2019, Mengniu successively acquired Australian milk powder brand Bellamy and dairy company Lion-Dairy & Drinks Pty Ltd, spending a total of over 10 billion yuan. In early 2020, Mengniu once again invested in the cheese brand “Miao Ke Lan Duo”, and it is expected that the company will have further acquisitions within the next year. This series of actions will help increase Mengniu’s revenue after the consolidation.
In addition, the financial report also disclosed that Mengniu established the “International Division” to manage overseas brands and overseas market operations, allowing overseas resources to play a better synergistic role in the company’s attempt to allocate global resources. Combined with the recent frequent overseas acquisitions mentioned above, we can see that Mengniu’s overseas business development may soon enter a more specific acceleration period.
At the same time, 2020 was “the original” Olympic year, and large-scale sports events have always been one of the largest and most effective marketing platforms for dairy products. Every time various large-scale events (Olympics, World Cup, etc.) Mengniu and Yili will inject a large amount of sales expenses for large-scale publicity, and this will usually have a significant driving effect on the sales of goods that year, and will help to impact revenue .
However, this series of plans was completely disrupted by the sudden impact of the epidemic. Affected by the epidemic, Mengniu’s main business has been hit to a certain extent, and the delay of the Tokyo Olympics will inevitably disrupt the company’s overall marketing plan and business arrangements. It can be said that achieving the 100 billion target in 2020 is unrealistic, and it can only be postponed To 21 years.
How is the revenue of Mengniu’s product lines?
Mengniu’s current core business, the liquid milk industry, has grown steadily, and the milk powder business has continued to accelerate, driving overall revenue growth.
(Data source: Wind)
Mengniu’s revenue is split by product in 2019. At present, the company’s large single products are still strong, which is the main driving force for growth.
In 2019, Mengniu’s liquid milk products, the core business segment, achieved revenues of 67.878 billion yuan, a year-on-year increase of 14.3%, which is basically in line with the overall growth. The proportion of liquid milk in total revenue was 85.89% in 2019, a slight decline from 2018.
Further split, Mengniu’s liquid milk business line can be roughly divided into three major product lines: room temperature milk, low temperature yogurt, and low temperature fresh milk.
In terms of room temperature milk, the fist product Telunsu benefited from product upgrade strategies and intensive promotional activities, with an annual growth of about 24%; pure Zhen’s growth was about 20%. In terms of market share, according to Nielsen data, Mengniu’s room temperature liquid milk market share increased from 26.4% in 2018 to 27.2% in 2019.
In terms of low-temperature yogurt, Mengniu’s current low-temperature milk product line revenue is still growing, outperforming the industry’s current continued shrinking trend, thereby achieving further harvest market share. According to Nielsen data, Mengniu low-temperature yogurt market share increased from 22.9% in 2018 to 23.5% in 2019.
In terms of low-temperature fresh milk, Mengniu’s revenue in 2019 exceeded 700 million, an increase of more than 100%. Because fresh milk has far more logistics requirements than normal temperature milk, Mengniu is currently trying to build its own cold chain milk delivery system through cooperation with Alibaba. If it can successfully land, it will be beneficial to the nationwide rollout in the next step. At present, this business is only just beginning for Mengniu. It is still in the incubation period and has a small market share. Guangming is still a leading enterprise in low-temperature fresh milk. According to Nielsen data, Mengniu’s low-temperature fresh milk market share increased from 3.1% in 2018 to 7.1% in 2019.
In the same period, Mengniu ’s milk powder business achieved revenue of 7.87 billion yuan, a year-on-year increase of 30.8%. It is the fastest-growing business segment of Mengniu, accounting for 9.96%, an increase of 1.24 over 2018 Percentage points. This is mainly benefited from the income from Yashili and the income of the milk powder business during the period of Junlebao’s consolidation. Subdividing further, JunleDuring the period of consolidation (January 1, 2019 to November 19, 2019), Baobao’s milk powder revenue reached 4.458 billion yuan, an increase of 48.3% over 2018. Yashili realized revenue of 3.412 billion yuan, an increase of 13.31% year-on-year. However, Junlebao has already made its debut in 2020, and whether Bellamy Milk Powder, which Mengniu completed the acquisition in the second half of 2019, can fill this vacancy is unknown. It is unlikely that the Mongolian milk powder business will continue its high growth in 2019.
In the same period, the ice cream business achieved revenue of 2.561 billion yuan, down 5.9% from 2018. The company’s explanation for this is that it has adjusted the ice cream brand structure, product system and channel system. The specific effect needs to be further judged based on the 2020 data.
How profitable is Mengniu?
The profit side of Mengniu has performed well in 2019, and its profitability is improving.
(Data source: Wind)
In 2019, Mengniu’s net profit attributable to mothers was RMB 4.105 billion, a year-on-year increase of 34.91%. If the one-time impact of the net income, impairment of goodwill and other intangible assets from the sale of Junlebao is eliminated, it will realize revenue 3.867 billion yuan, a year-on-year increase of 27.08%.
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