Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
MENGNIU DAIRY
HKEx Stock Code : 02319 
 
Corporate Profile
China Mengniu Dairy Company Limited is one of the leading dairy product manufacturers in China. The diversified products range includes liquid milk products, such as UHT milk, milk beverages and yogurt, ice cream and other dairy products such as milk powder, cheese.

Business Review - For the year ended December 31, 2012

Action One – Quality System Reform

In 2012, by aligning its quality management system with the international market-leading counterparts, Mengniu reviewed and optimised its process including milk sources, production and sales, and set up a new quality and safety management structure. Firstly, Mengniu established a quality and safety administration centre, which is responsible for formulating quality systems, developing uniformed standards, and assessing and inspecting quality management work. In addition, Mengniu established three separate quality administration centres in milk sources, production, and sales and marketing, to manage quality and safety throughout the entire process. By establishing a comprehensive organisational structure, the quality and safety management duties and responsibilities of each department were more clearly defined and allocated, enabling effective coordination among departments and quality management across the entire production chain.

During the year, Mengniu devoted considerable resources in the quality and safety management system to enhance its overall quality management level. Important measures included engaging a quality assurance expert from the international fast-moving consumer goods industry, allocating more staff and equipment to different operational segments for quality assurance purposes and strengthening the training of staff to bolster their quality inspection skills.

These measures have laid a solid foundation for quality management within Mengniu. In 2013, Mengniu will further implement standardised quality and safety management and introduce more sophisticated internationalised inspection techniques into the production process through cooperation with Arla Foods. Mengniu will also encourage all staff to participate in quality management so that quality control can be brought into full play across the organisation.

To reinforce the commitment to quality, Mengniu will take concrete actions by caring and refining every detail with sincerity and practicality, to ensure it can satisfy its customers needs.

Action Two – Milk Source Enhancement

Mengniu continued to enhance its strength in milk sources by promoting scaled ranching and monitoring quality sources more strictly. Through provision of entrusted loans, raw milk prepayment, investment in large-scale ranches and construction of modernised ranch facilities, the proportion of Mengniu's milk sources provided by ranches and scaled farms further increased to 93%, a leading position within the industry.

To enhance the milk sources, Mengniu established two platforms in regard to ranch management, namely the Entrusted Management Centre and the Resource and Technology Integration Centre. The Entrusted Management Centre separates the ownership and management of Mengniu's collaborative ranches by introducing Mengniu's own professional team to manage and standardise the management standards of the ranches, and help increase their effectiveness and revenue, thereby ensure the safety of raw milk supply. The Resource and Technology Centre streamlines the workflow and reduces the operating costs by consolidating production materials including pasture, fodder, veterinary drugs and equipment, etc. In addition, Mengniu set up the Dairy Cattle University (奶牛大學) to consolidate domestic and international technical resources and enhance the management level of ranches in terms of yield rate per dairy cattle and somatic cell control, etc.

Meanwhile, Mengniu proceeded with eight self-built ranches in 2012. The design of the standardised ranch in cooperation with Arla Foods was also completed during the year. The project covers processes from forage grass planting to preliminary processing of milk, and was a combination of advanced, scientific, intelligent and environmentally-friendly international farming concepts with Mengniu's self-built ranch management. It will be served as the model ranch of milk source management of the Group.

Leveraging its position as a large scale dairy producer, Mengniu aims at facilitating the transformation of upstream industries to scaled ranching, so as to ensure reliable product quality for Mengniu, and contribute to the upgrade of dairy industry in China as well.

Action Three – International Strategic Collaboration

On 15 June 2012, Mengniu entered into a long-term strategic cooperation agreement with Arla Foods, an European dairy enterprise. Arla Foods became the second largest strategic shareholder of Mengniu by acquiring Mengniu's equity interest, and began to participate in its daily operations.

Mengniu and Arla Foods efficiently formulated a range of plans to expedite cooperation, which has been implemented in phase. Supported by the Ministry of Agriculture of the PRC and the Ministry of Food, Agriculture and Fisheries of the Kingdom of Denmark, and prepared over the course of several rounds of negotiation, the China-Denmark Milk Technology and Cooperation Centre (“China-Denmark Cooperation Centre”) was officially established on 26 November 2012. Combining the resources of both parties, a professional team was set up to facilitate technical exchanges.

During the year, the China-Denmark Cooperation Centre completed the design of the standardised model ranch. The quality management system model of Arla Foods will also be applied to Mengniu's self-built ranches which are currently under construction. The China- Denmark Cooperation Centre introduced the Fourier Transform Infra Red spectrum method on fingerprint technology (指紋圖譜原奶檢測方法) to enhance the management of milk sources and the accuracy of raw milk testing. The China-Denmark Cooperation Centre also proactively pushed forward the “Dawn Scheme” (晨曦計劃). The first group of outstanding staff selected from each department will be sent to Denmark to study advanced dairy management and broaden their international horizon in 2013. The China-Denmark Cooperation Centre has also initiated several projects for cooperation and exchange over milk sources and quality inspection techniques, which will be further launched in 2013.

Moreover, premium dairy products including UHT milk, milk powder, cheese and butter produced by Arla Foods will also be brought to consumers in China through Mengniu's channels.

The collaboration between Mengniu and Arla Foods has gained full support from respective government departments of both countries. Mengniu believes that Arla Foods' 140-year long history and advanced industrial experience will be beneficial to the establishment of an international technical exchange platform between the two enterprises. At the same time, the partnership will open a window for Chinese dairy industry, so as to promote the development of the whole industry.

Action Four – Branding Strategy Reform

The vision of “New Mengniu” has been reconstructed with a brand concept focusing on “Quality” and “Happiness”. Under this theme, the overall sub-brand structure was established, marking the birth of a brand-oriented vision driven by consumer need. Through the concept, Mengniu delivered the corporate vision of caring for the needs of consumers and bringing happiness to consumers by paying every bit of attention to every drop of raw milk.

In line with this concept, Mengniu has not only enhanced its product quality, but also actively launched a diversity of branding activities to deliver the brand promise of quality and happiness to its consumers. Mengniu has adopted a refreshing colour in the new packaging of its pure milk and basic functional milk products, and used the pattern of a drop of milk to demonstrate Mengniu's determination to change by “beginning from a drop” (從點滴 做起). Mengniu held several interactive activities under the theme of “The New Mengniu Listens with Heart” (新蒙牛,心溝通) to present its corporate motto to the public sincerely and openly. Such activities included inviting internet opinion leaders and consumers to visit its production bases and communicate with Mengniu physically. Targeting major sports events, including the NBA Finals, the World Table Tennis Championships and the UEFA Euro football competitions, Mengniu launched a series of television advertisements under the theme of “Selection through Trust” (因為信賴,所以選擇) to connect the brand image with healthy and energetic sports stars. Mengniu was also designated as the Official Milk Products for Mongolian Athletes at the London 2012 Olympic Games (2012年倫敦奧運會蒙古運動員指定 牛奶) by the General Administration of Sport of Mongolia (蒙古體育總局) and the Mongolian Foundation for the Promotion of the Olympic Games (蒙古奧林匹克發展基金會). In addition, Mengniu has been sponsoring China's space programme for nine consecutive years and took the opportunity of the successful launch of Shenzhou 9 Spacecraft (神舟九號) to promote quality of its products.

Mengniu reorganised the overall structure of its sub-brands by eliminating certain brands and formulating the strategy of focusing its resources on selected key brands. Mengniu regrouped the sub-brands under four categories in light of consumer need and market trends, namely daily nutrition, leisure nutrition, professional nutrition and luxurious nutrition, and set up brand centres to manage these diversified brand categories. Each brand centre implemented tailor-made branding strategies with different directions and focuses.

In the future, Mengniu will continue to build its brand under the two main themes of “Quality” and “Happiness”, and communicate with consumers and stakeholders more positively and openly. In order to gradually enhance consumers' confidence in the brand and deliver positive energy to the consumers, Mengniu will also carry out more interactive thematic campaigns to meet consumer needs.

Action Five – Sales Channel Consolidation

During the year, Mengniu embarked on comprehensive consolidation of its sales channel aiming at taking more controls over sales terminals and increasing overall efficiency. At present, Mengniu has finished consolidation on three aspects.

First, Mengniu has reduced layers between sales management headquarters and points-ofsale, which greatly enhanced efficiency of internal communication and approval process and shortened the response time. The decision-making point was also shifted from the headquarters to the points-of-sale to better cater for the demand of the distributors and increase overall operational efficiency with a view to facilitating business development.

Mengniu integrated marketing and sales resources of UHT milk, chilled products and ice cream business, and set up centralised platforms based on key functions. Sales management and channel marketing platforms were built for the purpose of sharing marketing resources and enhancing the utilisation efficiency of resources.

Mengniu has formulated workflow and inspection standard to standardise the management process of all points-of-sale so that front-end sales will become more controllable with professional and standardised operation norms.

With regard to channel promotion, Mengniu has adjusted its branding strategies to focus on key brands with an aim to boost their sales performance and channel penetration.

The integration of the sales system is still in progress. In the future, Mengniu intends to establish a standardised and informationalised operation model and perfect its system through resource consolidation.

Action Six – Information System Upgrade

With an aim of establishing an informationalised operation management system that can quickly adapt to operational changes and meet internal control requirements, Mengniu has launched a project to upgrade the information system in accordance with the industry standards during the year. As a result, Mengniu has successfully standardised both the human resources management system and the financial budget management system.

Besides, Mengniu has optimised the transportation system by deploying base stations and GPS systems, which not only enabled control of refrigeration and tracking of transportation vehicles, but also shortened transportation distance, thereby lowered logistics costs and slowed down the melting of chilled products.

Business Outlook - For the year ended December 31, 2012

Stepping into 2013, there is still great development potential and room for improvement for the dairy industry, in view of China's continuous urbanisation and the ever-increasing spending power and health awareness of consumers. Under the government's stringent supervision, the dairy industry would maintain a healthy growth along with a more concentrated industry trend. As a leader in China's dairy market, Mengniu is continuing to lead the healthy development of the industry by proactively seizing industry opportunities and leveraging its strength.

Organisational restructuring in 2012 has prepared Mengniu for its overall enhancement in the coming years. By adhering to principles of strategy orientation, market-driven business, transformational upgrade and shared growth, Mengniu has developed a new Five-Year Strategic Plan. In the future, Mengniu will continue to enhance its cross-departmental collaboration, strengthen team cohesiveness and management capability by integrating the new and existing culture. Meanwhile, Mengniu will continue to carry forward the upgrade of information system and rebuild the core operating system in accordance with the benchmark software platform adopted by the fast-moving consumer goods industry. This will standardise the management system of purchase, sales and inventory, enabling Mengniu to respond quickly to market trends and market feedback. At the same time, Mengniu will continue to make effort on research and development to develop new star brands and products that meet market demand, product mix optimisation and sales channel expansion, in order to achieve a balanced development of Mengniu.

2013 will continue to be a challenging year. Mengniu will start afresh and implement measures under the new Five-Year Strategic Plan. With an aim to achieve the transformation into “New Mengniu”, Mengniu will sustainably strengthen milk sources and quality control, rationalise brand structure, enhance brand image, adjust product portfolio based on market demand and enhance the international management level. Mengniu is committed to becoming a dairy enterprise that delivers products of the best quality and in the most professional and devoted manner in China, and bringing happiness to consumers.

Source: China Mengniu (02319) Annual Results Announcement
Chairman Ning Gaoning Issued Capital (shares) 1,832M
Par Value HKD 0.1 Market Capitalisation (HKD) 59,262M
 
Login
Password
Register  Forget Password
Advanced Search
© 2024 The Standard, The Standard Newspapers Publishing Ltd.
Home | Business | Metro | Focus | Opinion | Markets | World | Sports | Entertainment | Monday Money | Property | Macau | Weekend