Farewell to粗放 growth, is Mengniu changing its approach to become stronger?

Ask AI · How can the “one body, two wings” strategy help Mengniu transform from scale to value?

Produced by | China Interview Network

Reviewed by | Li Xiaoyan

In 2025, Mengniu Dairy (2319.HK) turned in its annual report with RMB 82.24 billion in revenue and RMB 6.56 billion in operating profit. Although revenue fell 7.3% year over year, gross margin rose to 39.9%, operating cash flow reached RMB 8.75 billion, and free cash flow was RMB 6.3 billion—both hitting record highs. This performance record of “increasing profit without increasing revenue” reflects the strategic resolve of China’s leading dairy company during a period of structural adjustment in the industry—building a solid foundation through structural optimization, cultivating a second growth curve through innovation, and exploring a path to high-quality growth through cost reduction, efficiency gains, and value creation.

As a core pillar of the dairy industry, its liquid milk business achieved RMB 64.94 billion in revenue, completing a structural upgrade even as overall scale contracted. In the room-temperature milk segment, the company proactively responded to weak demand and channel changes, stabilizing its base through product innovation and channel adaptation: on the 20th anniversary of TeLunsu, it launched high-end items such as desert organic milk, strengthening its value recognition across the entire industry chain; Mengniu Pure Milk expanded into functional subcategories such as lactose-free and prebiotics products, broadening consumption scenarios; fruit and dairy beverages upgraded to a more premium tier through the pearl-bead series and fresh coconut milk, improving product premiumization on multiple dimensions.

The low-temperature segment continued to maintain its leading advantage. For 21 consecutive years, it ranked first in market share, with fresh milk business delivering double-digit growth, and each day fresh language maintaining high double-digit growth rates. Each day fresh language captured the high-end track with new products such as 4.0 fresh milk and A2β-casein, maintaining share leadership in channels such as hypermarkets and O2O. At the same time, its coverage in Hong Kong and Macau exceeded 1,000 stores, laying the foundation for international expansion. The steady growth of the low-temperature business not only hedged fluctuations in the room-temperature segment, but also became a key link connecting consumption upgrades and channel changes.

Beyond liquid milk, Mengniu’s three major business segments advanced in tandem, building an anti-cyclical growth matrix. The cheese business was the brightest spot: full-year revenue was RMB 5.27B, up 21.9% year over year. MiQiao LanDuo remained firmly the industry leader, accelerating market penetration through a dual-engine approach—driving growth in the B-end (food service and catering) and the C-end (households). As China’s household cheese penetration rate continues to rise, this track is moving from the cultivation stage into the growth stage, providing Mengniu with sustainable growth momentum.

The infant formula and milk powder segment delivered RMB 6.65B in revenue, up 8.7% year over year, with its growth rate improving to high single digits in the second half, reaching double-digit levels. Rui hu en, You Rui, and Bellamy together formed an all-age matrix covering infants, adults, and older people. Among them, You Rui—thanks to its functional products—topped the full-channel share of adult formula. Bellamy showed significant progress in expanding into the Southeast Asian market, and its premium organic product line achieved growth of more than 20%. Although the industry faces challenges from fluctuations in the birth population, Mengniu achieved a breakthrough against the trend in a shrinking market through precise nutrition positioning and channel innovation.

The ice cream business reached RMB 5.39B in revenue, up 4.2% year over year. Classic brands such as Sui Bian (as it changes) and Green Mood continued to gain traction, and new products such as Tilan Shengxue expanded into premium scenarios. With a dual-engine strategy—customized supply in the B-end and scenario coverage in the C-end—this business steadily improved profitability, providing stable support for performance.

Behind the growth in results lies Mengniu’s management upgrade and value optimization across the entire value chain. Cost control delivered notable results: through coordinated sourcing of raw milk and a digital, intelligent transformation of the supply chain, it achieved an increase in gross margin against the trend by 0.3 percentage points. Inventory and receivables turnover days continued to be optimized, and sales and administrative expenses fell year over year, providing a solid guarantee for profit growth.

Asset quality was further purified. Mengniu proactively disposed of idle assets and historical risks, improving operational efficiency. At the same time, Mengniu has persisted in R&D and digitalization investments, building core advantages in new-quality productive forces: its independently developed HMOs obtained multiple certifications; probiotics Lc19 and Hi188 were published in top international journals; and deep-processed products such as lactoferrin and D90 demineralized whey powder were industrialized, breaking dependency on imports. Its Wuhan low-temperature yogurt plant and Ningxia “Lighthouse” plant became benchmarks for digital and intelligent operations, with end-to-end digitization improving channel response efficiency and cost-effectiveness.

The shareholder return mechanism continued to improve. Its explicit three-year dividend-and-share-repurchase plan for 2025–2027 was announced: dividend per share of RMB 0.52, to deliver stable returns and bolster investor confidence.

Currently, Mengniu still faces multiple challenges during industry transformation: structural contraction in demand for room-temperature milk, disruptions to the channel landscape from new consumer brands, and the need to further expand the scale of new growth engines. But these are not short-term difficulties; they are an inevitable process for the dairy industry to transition from scale growth to value competition.

The key to breaking the stalemate lies in sustained execution of strategic resolve. Under the “one body, two wings” strategy, “one body” centers on liquid milk, strengthening the foundation through value enhancement; “two wings” leverage innovation and internationalization to accelerate the cultivation of a second growth curve. As raw milk supply and demand move toward balance and signals of consumer recovery become clearer, Mengniu is preparing for industry recovery with a package of measures—product upgrades, channel optimization, and management efficiency improvements.

The transition from “revenue growth” to “profit growth” is Mengniu’s proactive choice to pass through industry cycles. With the liquid milk base secured and multiple businesses accelerating their rise, empowered by R&D innovation and a digital, intelligent transformation, Mengniu is on a path to high-quality growth—achieving a leap from “a scale leader” to “a value leader.” Looking ahead, as new growth engines gradually take shape, China’s dairy leaders are expected to demonstrate stronger resilience and vitality in global competition, injecting new momentum into industry recovery.