Three conjectures on the Development Strategy of domestic Dairy Enterprises in 2015

Chinese dairy enterprises have made great progress after knowing the shame after the "Sanlu incident" in 2008. However, the crisis of trust brought by the "Sanlu incident" to the Chinese people is far from over. The hot sales of foreign milk powder and imported milk powder in "Haitao" are still staged in the infant milk powder market, aggravating the crisis and competition of the domestic dairy industry.

At the beginning of 2015, the incidents of pouring milk and killing cattle occurred in Qinghai, Shandong, Hebei and other raw milk supply places, which aroused widespread concern in the society. The milk pouring incident is the intertwined product of the decline of international milk prices, the downturn of the dairy market, the lag of the development model of the breeding industry, the lack of consumption of dairy products and other reasons, and the multiple difficulties faced by upstream dairy breeding. it seriously affects the health of the downstream development of China's dairy industry and the promotion of international competitiveness.

In order to reverse this situation, Chinese dairy companies went overseas in 2014 to accelerate their expansion. At the same time, actively expand channels to meet the needs of young consumers.

What other development measures will domestic dairy companies take in 2015 to completely reverse the enthusiasm of Chinese consumers for foreign brands? This newspaper has made a bold guess for this.

Conjecture 1: increase overseas investment?

With the increasingly fierce competition in China's milk powder industry, Chinese dairy enterprises have chosen overseas mergers and acquisitions, setting up factories or setting up subsidiaries in 2014 to make up for the lack of development of the domestic market. Yili, Evergrande, Guangming, Mengniu and other dairy industries have many overseas expansion actions. On the one hand, it shows that domestic consumers have demand for overseas dairy products, on the other hand, foreign relatively low-cost raw milk is also an important factor in the cost consideration of enterprises.

The overseas investment and construction of domestic dairy enterprises is reminiscent of the "milk dumping incident" by dairy farmers in early 2015. During the two sessions this year, Wang Jinghai, a deputy to the National people's Congress and chairman of Wandashan Dairy Group, said that the cost of breeding in China is relatively high, resulting in high acquisition costs for processing enterprises and uncompetitive products in the market. At the same time, China's accession to the WTO, in line with the international market, milk protection measures have not yet followed up, but also make China's dairy industry face more severe challenges, which is the main cause of the milk culling incident.

In short, the profit-oriented nature of enterprises leads them to choose foreign milk sources with better performance-to-price ratio. In the view of people in the industry, under the condition that the relationship between supply and demand in the domestic upstream production link has not changed, the difficulty for dairy farmers to sell milk will not change in the short term. Although the incident was alleviated with the intervention of the government, once the contract between the enterprise and the dairy farmer expires and the enterprise does not renew the contract, the dairy farmer still faces the situation of difficult sales.

Therefore, as the leader of domestic dairy enterprises, Yili's choice to build a factory overseas is representative:

First, it can realize the foreign origin production and packaging of middle and high-end infant formula milk powder, and enhance the import proportion and market competitiveness of infant formula milk powder.

Second, by using the mature deep processing technology of raw milk abroad, the products will meet the more diverse nutritional needs of consumers.

The third is to make use of New Zealand's cost advantage of raw milk to enhance the profitability of enterprises.

Fourth, meet the company's self-sufficiency rate, increase the added value of products, promote technological innovation in the global dairy industry, and promote the adjustment and upgrading of the industrial structure of the industry.

Fifth, it will help to expand overseas dairy processing bases and ensure that products meet the needs of the global market.

It is reported that Yili's overseas investment exceeded 2.5 billion yuan in 2014. Obviously, it will be easier for Yili to return to China to convince consumers if it can get sales in overseas markets. Predictably, the pace of overseas expansion of domestic dairy enterprises will be further accelerated in the future.

However, it will take time to test whether Chinese dairy brands can change their inherent impressions by building factories overseas.