China's leading dairy will drop in on students at over 100 universities across the country and visit more than 300 tier-two and tier-three cities with concerts and sampling programs to promote the brand, which is sold in trendy flavors like strawberry, blueberry, orange and passion fruit. The road show and campus visits coincide with a series of TV spots and a web site, all aimed at young Chinese, particularly women, who are the core market for milk, yogurt and ice cream products.
The first spot aired in late March. The ads continue last year's TV campaign, a four-part mini-drama about three young Chinese. The story line, rolled out over several months, drew millions of consumers to Yili's web site, where they poured out opinions about how the story should end and downloaded extras like the jingle as mobile phone ring tones. Their views helped shape the drama's ending.
This summer, Yili will introduce a new story with each spot, rather than one serialized tale, featuring Taiwanese pop star Will Pan as well as a Yili consumer who won a singing contest organized by the dairy last fall. Teens applied to enter the contest through a promotion that ran on Yili's web site and via SMS text messages.
The campaign, created by WPP Group's JWT, Beijing, is part of an aggressive strategy to raise Yili's profile in China in an increasingly competitive marketplace. The Yousuanru campaign is Yili's latest weapon in the war to dominate China's dairy industry, even though it's a relatively new category in China.
Milk consumption rising
Poor distribution and lack of refrigeration, both in delivery trucks and in retail stores, made it impossible for dairy marketers to expand nationally until the 1990s. UHT, or ultra-high temperature, milk allowed the industry to expand rapidly although many Chinese and other Asians are lactose-intolerant, another obstacle to growth. In western countries, dairy companies usually make their profit in cheese, which has never really caught on among Chinese consumers, so nearly all dairy sales are for white milk, which has a low profit margin.
But consumption of flavored drinks made from milk and yogurt, usually with a sour taste, is on the rise and a growing appreciation about the benefits of calcium have led to double-digit growth for the dairy sector every year over the past decade.
Much of Yili's marketing muscle these days promotes the health benefits of dairy products through its link to the 2008 Olympic Games in Beijing and sponsorship of Olympic hurdler Liu Xiang. Yili became the national dairy sponsor of the games in November 2005.
While many national sponsors do little more than slap the Olympic logo on packaging, Yili is “very progressive” about using the sponsorship of the games and Mr. Liu, said Oliver Xu, managing director of JWT, Beijing.
“The connection is their belief that dreams are made possible through good health and the Olympics is definitely top of everything they are doing,” said Mr. Xu. “It's different from other Chinese companies, it invested a lot last year and this year will spend even more to support both its corporate brand and its products," particularly through national TV advertising on China Central Television (CCTV). Yili committed nearly $13 million for airtime last November at the state-run broadcaster's auction of 2007 prime-time advertising slots.
Rival Mengniu has momentum
The company hopes its youth-oriented programs built around music and events will halt the momentum of its chief rival, Inner Mongolia Mengniu Milk Industry Co., a partner of Denmark's Arla Foods. Yili is barely clinging to its position as the top player in China's dairy industry following Mengniu's meteoric rise, particularly among teens.
Yousuanru has been the leading brand in the sour milk drink category for years, but for the past year, “they have really been challenged by Mengniu,” said Mr. Xu. “Yili is growing very fast, but competitors are growing even faster. If you take Mengniu as the benchmark, Yili still is not doing enough. They are really improving now, but this year will be tough for Yili.”
Founded in 1999 by ex-Yili sales executive Niu Gensheng, Mengniu has used smart marketing to boost sales. In particular, Yili's own sour milk drink, Suan Suan Ru, became a major brand as the sponsor of the second season of the American Idol-like “Supergirl” reality show, the most popular series ever to run on Chinese television. By helping the show's creator, Hunan Satellite TV, to promote the singing contest, Suan Suan Ru sales soared.
Mengniu also sponsors China's space program, an emotional symbol among Chinese of their country's transformation into a political and economic power. And in January 2007, it signed a deal with the National Basketball Association, connecting its brand with one of the most popular sports in China.
Yili and Mengniu control half the market
China does have other major dairy manufacturers, such as Shanghai Bright Dairy & Food Co., which has partnered with Danone Group, and up-and-comer Shijiazhuang Sanlu Group, China's largest milk-powder company, now part-owned by New Zealand's largest dairy exporter, Fonterra Cooperative Group.
But Yili and Mengniu, both based in Inner Mongolia's capital, Hohhot, control nearly half of China's $7.5 billion milk market. The industry could reach $20 billion by 2010.
Although state-owned Yili is still the market leader, the whole category is enjoying double-digit sales growth. Mengniu's marketing success is putting pressure on Yili to prove a state-owned company can succeed in China's ruthlessly competitive marketplace.
Although it does not have global Olympic deals like Coca-Cola Co. and Visa, Yili hopes its national sponsorship ultimately will raise its profile overseas as well as at home. Like many Chinese firms, Yili has major global ambitions. It hopes to rank among the top 20 dairy companies in the world in 2010, and be a top ten player by 2015.
“We will take the opportunity of sponsoring the 2008 Olympic Games to increase our product and brand awareness in the world,” said Pan Gang, chairman of Yili's board of directors, during a visit last year to the China Europe International Business School [CEIBS] in Shanghai.
But international expansion depends on whether Yili can keep pace with nimble, savvy rivals like Mengniu.