Covid-19 Surge in Demand for Dairy Translating to Major Growth for China D20: Yili, Bright, Beingmate, Sanyuan all Major Benefactors
Dr. Paul O’Brien 保罗 ????????
![Dr. Paul O’Brien 保罗 ????????]()
Dr. Paul O’Brien 保罗 ????????
Medical doc , China FMCG Policy and Market Expert (Food, cosmetics Pharma)
- As of May 4, 17 of China's largest dairy companies including several of the major players in the D20 such as Yili, Bright, Sanyuan, New Hope Dairy, Beingmate and Tianrun Dairy, have released their Q1 2021 financial reports.
- The perception of dairy as being healthy and having beneficial immunomodulatory properties has been magnified by several orders during the COVID-19 period and was further bolstered by both official government policy to stimulate dairy consumption and also by endorsements from celebrity scientists (Zhong Nanshan) and those at the frontline of China's battle with Covid-19.
- This change in consumer behavior and increased demand for dairy has seen major stakeholders report large upturns in both revenue and profitability. The dominant global dairy superpower Yili recorded its strongest Q1 report ever with revenue of 27.4 billion Yuan, net profit of 2.8 billion and year-on-year growth of 148%.
- Segmentation and functionalization through fortification continue to drive product development. Most brands continue to invest heavily in the breast is best principle, and attempts to reverse engineer breast milk and identify bioactive substances for use as functional ingredients continues to be a major trend. Government pushes to develop non-ambient dairy (fresh milk, cheese, yogurt, cream etc.) has been a major growth driver for several of the D20 particularly for players outside the top 3 (Yili, Mengniu, Bright) who are looking to develop outside of the hyper-competitive UHT space.
- Bright's Q1 2021 revenue was 6.986 billion yuan and came off the back of a year-on-year increase of 36.07%. Net profit was just under 1 billion yuan, representing a year-on-year increase of 28.59%. Liquid milk (combination of ambient and fresh) was the greatest contributor to the companies revenue (3.95 billion yuan) and represented a year-on-year increase of 41.92%. Its other dairy products contributed 2.079 billion yuan to total revenue, up 13.4% from the previous year.
- New Hope Dairy was another major benefactor. Its growth was bolstered by an increased demand for fresh milk, strong dominance in regional markets (Kunming, Chengdu etc.) and innovative product launches from its strong product development pipeline. Total revenue was just over 2 billion yuan and profit was recorded at 29 million up over 200% (yoy). Government policy is set to further stimulate the low-temp fresh milk segment as too is overall consumer behavior. Expect good things in the future.
- Sanyuan reported a Q1 2021 revenue 1.868 billion yuan, representing a year-on-year increase of 23.05%. Net profit was 44.12 million yuan, a year-on-year increase of 137.14%. Liquid milk, solid milk, ice cream and spreads contributed approximately 1.097 billion (up 29% yoy), 192 million, 354 million (up 46% yoy) and 217 million yuan in revenue, respectively.
- A return to profitability for Beingmate in Q1 2021 could be the first green shoots of recovery. Total revenue was down but this is likely down to the strategic amputations of failing business divisions designed to stop the rot that has seen the company slide from the top ranks of China's dairy sector towards potential collapse. Beingmate's revenue in the first quarter of 2021 was approximately 567 million yuan, a year-on-year decrease of 20.59% and net profit was approximately 14.54 million yuan, a year-on-year increase of 12.23%.
- Tianrun Dairy reported revenue of 463 million yuan ( + 33.19% yoy). Its profit was 33.436 million yuan (+ 69.4% yoy)