May 29, 2007

China's Mengniu makes foray into Sichuan province

Mengniu has announced it is building a milk factory in Sichuan province, joining the fray with major milk companies Yili, Guangming and New Hope Group which already have milk plants there.

Mengniu's CEO Yang Wenjun has signed an agreement with Meishan City for a RMB 300 million (US$40 million) plant capable of processing 180,000 tonnes of milk yearly. The plant, to be completed in June next year, would target the south-west region of the country. Coming to Sichuan along with Mengniu is the Xiandai Cattle Group from Inner Mongolia, which is also investing RMB 300 million in the area to build a 10,000 head demonstration farm in Meishan's Hongya County. The farm will feature imported high milk-output cows from Australia and New Zealand which would supply Mengniu's operations.

The two projects are estimated to yield sales of more than RMB 800 million (US$104 million) a year.

Mengniu, a major milk producer in the country, earned revenues of RMB 16.2 billion (US$2.1 billion) last year. Mengniu chose to build its base in Meishan due to government support, its proximity to market and livestock ranches, Yang said.

China's milk industry has been growing 20-30 percent for 8 consecutive years. Current per capita milk consumption levels of 21.7 kg yearly is just 20 percent of the world average. China now accounts for half the global growth in milk consumption. In the western regions near Sichuan, milk consumption is just half of national levels. Thus, there is great potential for development in the region, Yang said.

He went on to add that the plant in Sichuan would also diversify into organic milk, premium milk and other value-added dairy products.

Mengniu now accounts for 35 percent of China's milk market.