Mengniu Dairy

China Mengniu Dairy Company Limited (Chinese: 蒙牛) is a manufacturing and distribution company of dairy products and ice cream in the People's Republic of China. The company is based in Inner Mongolia and manufactures dairy products under the Mengniu brand.

Mengniu Dairy Co. PLC
Public
Traded asSEHK: 2319
ISINKYG210961051 
IndustryDairy
Founded1995 (1995)
HeadquartersCayman Islands (registered office)
Hohhot, Inner Mongolia, China (corporate headquarters)
Key people
Ning Gaoning (Chairman)
ProductsDairy products
ice cream
Revenue $2.04 billion U.S.[1]
Number of employees
30,000
Websitewww.mengniu.com.cn

In July 2009, Mengniu sold a 20% stake to a consortium led by state-owned China National Oils, Foodstuffs and Cereals Corp, China's largest importer and exporter of food. That sale made the state the single largest shareholder.

Mengniu's main competitor in China is Yili Group.

Products

Mengniu's products include liquid milk products, such as ultra heat treated (UHT) milk, yogurt and milk beverages, ice cream and other dairy products, such as powdered milk and milk tablets. During the year that ended 31 December 2015, the company operated 33 production bases with an aggregate annual production capacity of 8.68 million tons. China Mengniu Dairy Company Limited's operates in three segments: the liquid milk products segment, which manufactures and distributes processed UHT milk, milk beverages and yogurt; the ice cream products segment, which manufactures and distributes ice cream products, and the other dairy products segment, which manufactures and distributes processed milk powder and milk tablets products. The name Mengniu literally means 'Mongolian cow'.

History

The owner and founder of Mengniu is Niu Gensheng, a former employee of Yili, another Inner Mongolian dairy giant which is now Mengniu's largest competitor. He started the company in 1999, and the company's textbook growth has swept the country by storm. In 2002, Morgan Stanley, CDH Investments and China Capital Partners signed agreement with Mengniu to invest US$26m for a total share of 32% in the company. Mengniu then went on to be listed on the Hong Kong Stock Exchange in June 2004.

Advertising

The company is a leading manufacturer of milk, yogurt and other dairy products in mainland China, partly due to its high-profile advertising campaigns. One such campaign advertised "special milk for China's astronauts" after the successful launches of the Shenzhou 5 and Shenzhou 6 spacecraft(in fact the company sponsors the Chinese space program), and Mengniu also sponsored the popular SuperGirl contest. SuperGirl Zhang Hanyun (aka Baby Zhang) became associated with Mengniu's brand, appearing in Mengniu's commercials, which became instrumental in her elevation to fame. In marketing campaigns, it also uses the slogan "中國牛 世界牛 蒙牛", which metaphorically means "Mengniu will be outstanding in Inner Mongolia, be outstanding in China and world". The company has now become a symbol of entrepreneurship in China.

2008 Chinese milk scandal
Main article: 2008 Chinese milk scandal
Mengniu production line in plant near Hohhot, Inner Mongolia

Mengniu was among those named for having powdered milk samples which tested positive for melamine. The company recalled tainted powdered milks and apologised to the public.[2] Trading in Mengniu shares on the Hong Kong Stock Exchange was suspended on 17 September.[3] Shares in other dairy companies fell strongly the next day.[4] On discovery that their liquid milk was also contaminated, Mengniu was stripped of its status as 'Chinese national brands'.[5] "This is not a situation of somebody innocently cheating just to try to make a little more money," said John Eldred, managing partner of law firm Keller and Heckman LLP in Shanghai. "They are doing it with an eye toward knowing they are cheating and knowing they are risking the health of the people who are using their products." The Washington-based firm specializes in food and drug regulation.

Mengniu, whose products tested negative in Hong Kong government tests, was immediately de-listed by supermarket chains after tests showed that contaminated samples had been found on the mainland.[6] Mengniu's CFO attempted to reassure consumers by offering a no-quibble refund on all products, and by drinking liquid milk in front of reporters. He also said that its export products were less likely to be contaminated. This comment spurred accusations on Internet bulletin boards that the company's preferential export policies was because it thought Chinese lives were cheaper than foreigners'.[7]

  • On 5 August 2008, the two largest shareholders, Yinniu[8] and Jinniu, sold HK$1.28 billion worth of shares through a placement, their fourth such sell-down since the company went public in 2004.
  • On 17 September 2008, Hong Kong Stock Exchange[9] suspended trading in shares of China Mengniu Dairy Co. Ltd.
  • On 23 September 2008, China Mengniu Dairy Co. Ltd. shares dropped 60 percent, the most since its debut in 2004, to HK$7.95 at the 4:10 p.m. close. Trading later resumed. Malaysia, Singapore, Taiwan and the Philippines have decided to pull Chinese dairy products off shelves.
  • In February 2009, there was controversy about the safety of using osteoblast milk protein (OMP) in Mengniu's Milk Deluxe.

In 2011 Mengniu Dairy stated that moldy cattle feed led to excessive toxin levels in its milk.[10]

Mengniu Arla

In 2006, China Mengniu Co. Ltd teamed up with Arla Foods, the largest producer of dairy products in Scandinavia, to produce and distribute solid milk products in China, including Hong Kong and Macau. The Chinese dairy products maker said it would hold 50 percent of the venture, while Arla Foods would own 48 percent. The joint venture company was named Mengniu Arla.[11][12][13]

On 17 September 2008, Arla Foods issued a statement on the company's web site,[11] Mengniu Dairy, its Chinese joint venture partner, whose products have tested positive for melamine, and subsequently have been recalled and production at Mengniu Arla's powdered milk factory has been temporarily suspended.

CEO Peder Tuborgh, Arla Foods,[14] said: "The situation is extremely distressing for all the families who need milk of the highest quality to feed their children. It is extremely important that we get to the bottom of the problem so that consumers' safety can be guaranteed and confidence in the Chinese dairy industry maintained, together with Mengniu and the authorities, we're doing everything we can to safeguard quality."

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References
  1. 内蒙古蒙牛集团欢迎您!
  2. Lee Spears, "China Revokes `Inspection-Free' Right as Milk Scandal Spreads", Bloomberg (18 September 2008)
  3. Reuters "China Mengniu Dairy shares suspended -HKex", Reuters (17 September 2008)
  4. Reuters, "Investors dump financials and dairy producers", South China Morning Post (18 September 2008)
  5. Yili, Mengniu, Bright Dairy lose their status as 'national brands', China Central Television (22 September 2008)
  6. Paggie Leung & Mary Ann Benitez, "HK store chains strip shelves of Mengniu goods", Page A2, South China Morning Post (20 September 2008)
  7. Jasmine Wang, "Export milk less likely to be tainted, says mainland firm", Page A2, South China Morning Post (20 September 2008)
  8. "Mengniu shareholders cash in US $165 million By Anette Jönsson". 5 August 2008. Retrieved 2008-09-25.
  9. "China Mengniu Dairy shares suspended -HKex". Retrieved 2008-09-23.
  10. China's Parents Crave Illegally Imported Baby Formula May 02, 2013 BusinessWeek
  11. "Mengniu Arla - moving ahead in the land of opportunity". Archived from the original on 2008-10-27. Retrieved 2008-09-23.
  12. "Mengniu shareholders cash in $165 million By Anette Jönsson". 5 August 2008. Retrieved 2008-09-25.
  13. "Big sky country offers niche opportunities - SPECIAL REPORT". Archived from the original on 2010-11-20. Retrieved 2008-09-26.
  14. "Arla Hit by China Baby Milk Contamination Crisis Source: FLEXNEWS 17/09/2008". Flexnews. Archived from the original on September 21, 2008. Retrieved 2008-09-29.

Further reading

Peverelli, Peter (2006). Chinese Corporate Identity. Oxon, United Kingdom: Routledge. ISBN 9781134194018.

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