Squeezing niche markets

Mengniu dairy's goal of entering the Top 20 Global Dairy Producer list by 2010 always arouses a speculation that Mengniu will forsake China for overseas.

But it's not the case.

Focusing on China and its niche markets is what Mengniu's founder Niu Gensheng says he's also concentrating on.

In 2002, Mengniu began to tap the overseas market when it entered Hong Kong, but it was not until 2004 when its liquid milk became China's bestselling that Mengniu considered an "overseas strategy".

Now, Mengniu dairy products are sold in Mongolia, Russia, Canada and Southeast Asia. "Under developed nations and China's neighbors are given priority when it comes to going abroad," says Niu Gensheng, Mengniu's founder and chairman.

But the "domestic market is still our major focus".

China's large untapped dairy market is the key reason where the annual average milk consumption in China is 26 kilograms, one fourth of that worldwide and far less than that of developed countries where an average of 300 kilograms is consumed annually. But China's liquid milk market reportedly has an annual growth rate of 20 percent by sales.

"It's unreasonable to reduce efforts at home and turn to somewhere that we are unfamiliar with," says Niu.

But as major cities are milked dry, finding niches is the next strategy.

"Developing products tailored for specific groups to keep attracting the public attention is what we are working on," says Mengniu President Yang Wenjun who has held the post since Niu resigned the position in 2006.

Since then, Mengniu has been hailed as an "innovation initiator" by industry observers.

Late last July, Mengniu opened its Hi-tech Dairy Research Institute in Hohhot, an international-level research and development (R&D) center, with an initial investment of 200 million yuan, the first in China and one of the few worldwide.

"Increasing R&D investment will assist Mengniu to take a big step forward in competing against international players," says Yang.

Its latest products are Mengniu Cereal Milk and Mengniu Wisdom Star, milk respectively targeted at white collar and children 2-9 years-old.

Yang refuses to disclose investment amounts, only saying "every year, we will be launching new products designed for different groups, like pregnant women, the elderly and infants".

In partnership with China Agriculture University, Mengniu's other five R&D centers have created a range of other new products, including Lab Probiotics Yogurt, Good Night Series and Fruit Milk.

In 2006, Mengniu won the top innovation award from the International Dairy Federation for Milk Delux, a high-protein milk. It was the first such award for a Chinese dairy company.

(China Daily 06/09/2008 page12)