Olympic Games Give Yili a Sporting Lead

Chinese Dairy's Sales Climbed Over 20% in the Past Year

By Published on .

Most Popular
BEIJING (AdAgeChina.com) -- Tea is the drink usually associated with China, but the biggest beverage battle taking place in the mainland these days is between dairy companies.

Despite aggressive efforts by multinational marketers such as Danone and Nestle, two local firms, Inner Mongolia Yili Group and China Mengniu Dairy Co., dominate China's booming dairy market. Mengniu, founded by former Yili executive Niu Gensheng in 1999, is also based in China's Inner Mongolia region. The area's vast grasslands are ideal for raising cows.

In a surprisingly short period, Mengniu established its brand in China through clever marketing, including sponsorship of an extremely popular singing contest called Supergirl. By 2006, Mengniu had nudged into the top spot with a 16% market share, just 1% above Yili, according to the China Dairy Yearbook.

Yili has struck back through an aggressive multi-pronged attack built around its sponsorship of the 2008 Olympic Games. Yili's sales grew more than 20% in the last fiscal year and it has retaken the No. 1 spot -- just barely -- according to most estimates.

Among all local sponsors, Yili has been the best at capitalizing on its association with the games, said Greg Paull, principal of R3, which has tracked the performance of all Olympic sponsors. "It has leveraged stars well and, in the past six months, become very consistent with its marketing."

Supporting National Pride

Yili created a national corporate brand campaign in November 2007 with the slogan, "Have Me, China Will Be Stronger." The advertising was designed to unite Yili's brand with the Olympic Games and with Chinese consumers, said Oliver Xu, managing director of JWT, Beijing.

"[With the 2008 Beijing Olympics] there has been a surge in patriotic feeling and national pride has been growing," he said. "China and the Chinese athletes will deliver an excellent performance in the games. Simply put, Yili provides nutrition and also draws people to support China's teams, making China a stronger nation."

Yili refreshed the campaign with a TV spot that broke on Aug. 8, the opening day of the Olympic Games, and will run through mid-September. The commercial shows three of China's top Olympic athletes, hurdler Liu Xiang, diver Guo Jingjing and basketball player Yi Jianlian (now a forward with the New Jersey Nets), practicing for the games interspersed with images of Yili milk products.

Yili has spent heavily on corporate branding and product advertising, mostly related to its position as the official dairy sponsor of the games, and was one of the top spenders at the annual November auction of prime-time advertising airtime on China's national broadcast network, CCTV.

The company has hired multinational ad agencies such as JWT and Euro RSCG on a long term basis, an unusual move for a Chinese marketer. It has also partnered with top Chinese athletes like Liu Xiang. He became one of China's most beloved celebrities almost overnight in 2004, when he won a gold medal at the Olympic Games in Athens--China's first in a men's track-and-field event.

Yili Stands By Liu Xiang

On Aug. 18, however, the value of Yili's relationship Mr. Liu was put in jeopardy by the athlete's shocking decision to pull out of a qualifying heat to defend his title, due to an injury to his right foot.
Liu Xiang and his parents in Satine ad by JWT, Beijing
Liu Xiang and his parents in Satine ad by JWT, Beijing
In spite of the untimely injury, Yili has already stated publicly that "it will continue to work with Liu Xiang," said JWT's Mr. Xu. "He still provides inspiration for many people, that hasn't changed."

Yili has more on its mind than just beating rival Mengniu. It hopes to become one of the top 20 companies in the global dairy industry by 2010. To that end, Yili invests heavily in product development to create new products and revamp old ones, particularly premium products in high demand.

Earlier this year, Yili relaunched "Classic," a high-end milk drink aimed at affluent 30-to-45-year-old Chinese. Now called "Satine" (which means "rarity" in Latin), the drink was marketed with emotional ads featuring Liu Xiang with his parents.

It also created a low-lactose nutrition milk drink aimed at younger Chinese with an ad campaign launched last month featuring Mr. Liu, Ms. Guo, Mr. Yi Jianlian and members of the national badminton team.

Dairy Market To Hit $20B by 2010

Milk consumption among Chinese consumers is skyrocketing. Retail sales grew 21% in 2006, according to Euromonitor. Other dairy products like ice cream, yogurt and yogurt-based drinks are also becoming more popular. China is now the second largest dairy market in Asia after Japan, according to McKinsey. Total sales are expected double to nearly $20 billion by 2010.

Both local and foreign marketers constantly finetune their products and marketing strategies in a struggle to keep up with rising incomes, evolving consumer preferences and the growth of hypermarkets in China.

Larger and more modern supermarkets reach more consumers, have better refrigeration and make it easier to do sampling and in-store promotions than more traditional mom-and-pop shops and roadside kiosks.

In 1998, only 29% of China's milk sales came from modern supermarkets or hypermarket stores. That figure grew to 58% by 2005 and is expected to reach two-thirds of milk sales by the end of the decade, said Michael McDonough, a Hong Kong-based economist.

The fastest-growing categories are milk beverages and yogurt, especially the tastier premium products that offer higher margins for manufacturers.

Ylii is "a domestic success story," said Randy Xiao, EVP, China at Euro RSCG, Shanghai, which handles creative for several of the company's brands. "It is a local brand that truly leveraged its Olympic sponsorship to not only create product awareness against competitors, but they've also managed to build their brand in a way that will have lasting effects beyond the Olympics."

Ads by JWT, Beijing for Yili's new low-lactose drink feature Olympic badminton players Bao Chunlai, Xie Xingfang and Lin Dan; diver Guo Jingjing; hurdler Liu Xiang and basketball player Yi Jianlian (left to right)
Ads by JWT, Beijing for Yili's new low-lactose drink feature Olympic badminton players Bao Chunlai, Xie Xingfang and Lin Dan; diver Guo Jingjing; hurdler Liu Xiang and basketball player Yi Jianlian (left to right)



Return to AdAgeChina, click here
In this article: