Yili, a leading Chinese diary brand, posted record quarterly revenues of 12.55 billion yuan for the third quarter of 2013. To put it in perspective, the number is more than the total revenues of Guangming, one of Yili’s domestic competitors, in the first three quarters of the year. Mengniu, another competitor has not yet released its results.
One factor frequently cited by Chinese market observers is Yili’s ability to secure its supply of raw milk. The company owns more diary farms than either of its competitors. Mengniu, for example, relies more on individual farmers, which makes it more vulnerable to quality problems that have sunk domestic brands such as Sanlu.
Yili’s advantage appears particularly pronounced in a time when China is experiencing a sort of “milk crunch”. According to a report that appeared on today’s China Business News, the number of milk cows nationwide has dropped to somewhere between eight and nine million, a low point in recent years. The article attributes the change to a variety of factors including rising beef prices, outbreak of foot-and-mouth disease and farmers’ lack of confidence in the future of the dairy industry in the aftermath of several serious food safety scandals.
Despite strong growth, the company’s results still fell short of investors’ expectations – Yili’s stock price dropped slightly after the release of the results.
Companies and brands affected
Yili (SHA:600887)
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