How a Chinese dairy plans to become a global brand

NBA, other international partners help Mengniu storm the Asian market

By Published on .

nmadden@crain.com

[beijing] Sweaty basketball courts, pricey chocolate lattes and Mongolia's spacious plains are an unlikely marketing mix. But one of China's savviest and fastest-growing companies is turning Mengniu, which means Mongolian cow, into a global brand by partnering with multinationals and ramping up its product line.

The Inner Mongolia Mengniu Milk Industry Co.'s latest move, an alliance announced last week with the National Basketball Association, will connect Mengniu even more closely with young consumers in China.

Besides joint support of grass-roots social programs, such as giving away cartons of milk each morning to students at 500 elementary schools, Mengniu will promote its products during televised games. Mengniu will also participate in the NBA's road show, "Jam Van," which visited 17 Chinese cities last year and runs promotions on NBA.com/china and at retail locations.

The dairy has a "very proactive, positive, energetic style of marketing; they are definitely growing quickly," said Mark Fischer, the NBA's Beijing-based VP-managing director, China.

Mengniu was started seven years ago by Niu Gensheng, former VP-sales at Inner Mongolia Yili Co., then China's leading dairy. Now Mengniu is the No. 1 producer of liquid milk by volume and has used aggressive marketing, product development and distribution to become a leading brand for milk beverages, yogurt, ice cream and powdered-milk products. Foreign investors took a stake in the company in 2002.

Despite price wars, rising costs and stiff competition, Mengniu's revenue grew to $965 million in the first half of last year, a 58.7% increase from the same period in 2005. Net profits grew almost 40% to almost $44 million for the same period, according to the company's unaudited financial statement.

Outside China, Mengniu's products sell in Hong Kong, Singapore and, starting this month, Malaysia. That's part of the global-expansion strategy devised with McKinsey & Co. after the consulting firm was brought in to help Mengniu become one of the world's top dairy producers.

"Chinese companies like Mengniu can copy what we do very quickly, but they are also getting better at coming up with their own new products and marketing programs," said Unilever's Ian Maskell, Shanghai-based brand-development director for Wall's ice cream in North Asia.

Last month, Mengniu launched its first premium product, a latte-flavored milk drink aimed at the burgeoning middle class. Until now, local dairy companies have treated the flavored-milk market as a low-cost item. Mengniu's latte drink, available in chocolate, vanilla and coffee flavors, retails for more than twice the price of standard flavored milks in China.

Ads by M&C Saatchi, Shanghai, "positioned the brand as melted ice cream to stress its high quality and elevate us beyond the commodity pricing of other milk brands," said Jiang Hong, CEO of Mengniu's Shanghai office.

Mengniu also formed a joint venture in December with France's Groupe Danone, the world's largest yogurt marketer, to make yogurt in China. Mengniu has a 51% stake in the venture.

Mengniu and state-owned Yili, both based in Inner Mongolia, are jockeying with Bright Dairy & Food Co. for leadership of China's $8 billion dairy industry. But Mengniu has created the most buzz since 2005, when it sponsored China's "American Idol"-like reality show "Supergirl," which became Chinese TV's biggest hit.
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