Essay About Domestic Dairy Enterprises And China Dairy Product Sales

Fundamental Analysis of China Mengniu Dairy Co. Limited
Fundamental Analysis ofChina Mengniu Dairy Co. LimitedFINA 6112—Investment Portfolio AnalysisDiamond Group members:1155072506   CHEN Zhangchen   1155069907   JIAO Ying         1155069908   NI Jialu           1155067874   Ling Yiyi1155066426   HE Minyi          1155070465   JIANG Zhengqing   2015/10/24Analysis Summary[pic 1][pic 2]Industry OverviewChina’s diary industry has developed substantially over the past 15 years as consumers become more aware about the nutritional benefits of diary. Diary product sales volume reached 26.4 million tons in 2014 compared with 0.779 million tons in 2000. There is significant growth potential for domestic dairy enterprises since per capita liquid milk consumption in the country was 15.9kg in 2012, which was much lower than the amount for developed countries. [pic 3]Figure 2: China Dairy Product Sales VolumeFigure 3: Per Capita Liquid Milk ConsumptionFurthermore, urban residents purchased more diary products than rural residents due to the income gap, which presents high demand potential from rural markets.[pic 4]Competitive Analysis1. High market shareDespite hundreds of diary companies in China, only few of them possess the ability of large-scale production, such as Mengniu, Yili and Bright diary, comprising a combined market share of 60%. Moreover, dairy crisis in 2008 has pushed out smaller enterprises out of the market. Figure 4: Liquid Milk Market Breakdown2. Distinctive integration strategy  [pic 5]Danone is the second largest strategic shareholder of Mengniu and holds 9.9% of its shares. The joint-equity company operated by Mengniu and Danone managed to represent the largest chilled dairy market share in China due to its combination of superior quality management technique and product innovation competence of Danone with the brand influence and the extensive sales networks of Mengniu.Through cooperation with Arla Foods, the international Denmark-based food cooperative, Mengniu acquired the opportunity to improve its innovation and operating capabilities by introducing world-leading dairy industry knowledge and production technology of Arla Foods.