Mooving up

Mengniu's new factories in Huhhot, Inner Mongolia.

He has a typical Inner Mongolia-style appearance - chubby cheeks, round eyes, broad mouth and a sturdy figure. But Niu Gensheng, founder of Inner Mongolia Mengniu Dairy Group is easily distinguished from others when he begins to speak.

His passionate, loud and resonant voice and penetrating eyes are the first impressions that the 50-year-old creates for people meeting him for the first time.

Niu is not a man one easily forgets, as is his company, Mengiu, to which he devoted all his efforts in the past nine years.

From a once "small potato" in 1999 to a leading player in China, Mengniu's growth track has been literally record setting: the fastest growing Chinese company, the world's largest dairy company by sales volume of liquid milk, and the first Chinese dairy company listed in Hong Kong in 2004.

Under Niu's leadership, his dairy empire has surpassed its peers including Inner Mongolia Yili Dairy Group, climbing to the top by sales, 21.32 billion yuan in 2007, in eight years.

But Mengniu is aiming higher. In 2006, it set a goal of entering the top 20 international dairy producers list by 2010.

A legendary figure

Industry insiders say they believe Mengniu's success was inevitable due to Niu's personality.

His charisma is a factor. In the circle of Chinese entrepreneurs, Niu is widely touted for his "spiritual leadership". Other labels include "confident", "sharp-witted", "tolerant" and "unyielding" to name a few.

His values have penetrated every corner of Mengniu. Every employee is issued a "culture handbook" with more than 500 motivational quotes and creeds Niu appreciates including "you can learn the most from unsatisfied customers" and "you can get the most happiness if you don't sweat the small stuff". They are also posted throughout Mengniu's office buildings and factories.

His personality and style were forged in hardship. Born to a poor family in Inner Mongolia in 1958, he was sold by his parents to a couple surnamed Niu for 50 yuan when he was less than a month old. His adoptive parents gave him the name Niu Gensheng.

His new family though led a hardscrabble life, begging high and low and turning to friends and relatives for support when all else failed. But for Niu, that was not the worst. When he was 14, his adoptive mother died, followed by his father five years later.

The darker chapters of his life though taught Niu many positive beliefs that he says, "have exerted the biggest impact" in his life.

That is why many colleagues voluntarily resigned from his original employer and now arch-rival Yili to follow him when he founded Mengniu; that is why complaints about Niu are hardly heard in Mengniu; that is also why Niu made the astonishing decision to donate all his shares in Mengniu in January 2005, worth over 4 billion yuan, to form the Laoniu Foundation dedicated to public-welfare and was the first Chinese entrepreneur to do so.

In the beginning

Though Yili has been its archrival since Mengniu's first day, Niu frequently emphasizes his gratitude for Yili. He says if he hadn't left Yili, he "never would have thought of having his own company" and without the years of experience he had at Yili, Mengniu would "not have grown so rapidly".

In 1983, Niu joined Huhhot Hui Dairy Food Corporation, Yili's previous incarnation, as a bottle washer. He climbed the ladder though and was appointed as the vice-president in charge of operation in the late 1980s.

His generosity and work ethic helped won him a good reputation in Yili, yet he also incurred the displeasure of his boss, Zheng Huaijun, the then-president of Yili who was arrested in late 2004 for misappropriating public funds.

Before Zheng's fall, however, Niu left Yili in 1998 and began to mull over setting up his own dairy company.

Soon, a slew of his Yili colleagues including Yang Wenjun, now president of Mengniu and Sun Xianhong, Mengniu's vice-president in charge of marketing, followed to join Niu.

On January 13 1999, the brand name Mengniu, which means "cows from Inner Mongolia", was registered in Huhhot. The original team was comprised of 10 people, most from Yili, and the first headquarters was a 53-square-meter apartment in a rundown residential building Niu rented for 200-some yuan a month.

"It was too invisible and secluded to be recognized, and we even did not disclose anything about Mengniu to any friends or relatives in the beginning," Niu says.

Wise decisions

But Niu had bigger plans in mind.

Niu Gensheng

Underneath Mengniu's low-profile image was the team's tremendous enthusiasm. Within three months, they managed to sign cooperative deals with eight dairy companies on the brink of bankruptcy worth 780 million yuan, which resulted in their first batch of Mengniu-branded liquid and powdered milks and ice cream.

Comparatively, construction of Mengniu's first factory in Huhhot didn't begin until late 1999. Now there are 50 manufacturing bases in 22 cities.

Mengniu's strategy of "getting dairy sources before establishing factories" helps it win over a year in the competition.

With the products on the shelves, marketing campaigns followed. On the morning of May 1, 1999 Huhhot residents awoke to the sight of 300-odd red Mengniu billboards and consumers outside the city began seeing ads on CCTV in June 1999.

"Good products also need promotion," says Niu.

In 1999 alone, 3 out of 10 million yuan Mengniu raised went to advertising. Annually, five percent of sales go to marketing, higher than the industrial average. Mengniu had the largest volume of ad slots on CCTV in 2004, 310 million yuan.

In its advertising spending, Mengniu believes in utilizing "big events".

This was reflected with the ad campaign designed around China's first manned space launch on October 15, 2003. In June 2003, Mengniu appointed a group to develop the campaign and bought the rights to be the official dairy provider for the Chinese space program. When the launch was officially proclaimed successful on October 16, ads saying, "Mengniu milk is specially provided for the astronauts" blanketed television, newspaper, bus stations and supermarkets throughout Beijing and other major Chinese cities.

The spending was huge, 100 million yuan, but the impact was even greater. Almost every Chinese interested in astronaut Yang Liwei's historic voyage in Shenzhou V also noticed Mengniu's tie-in. As ACNilsen statistics show, in October 1999, Mengniu climbed up to the top position in China by sales of liquid milk, and the momentum has continued since.

Outer space wasn't Mengniu's only frontier. The dairy empire also created Mengniu Sour Sour Yogurt to sponsor Super Girl, an enormously popular TV series in 2005, similar to American Idol. Yogurt sales in 2005 witnessed a growth rate of 257 percent year-on-year.

"We are good at connecting with the emotional attachments of consumers," says Niu.

Long-term development

From the first beginning, Niu set a long-term goal, developing Mengniu for at least 100 years. That is why Mengniu spent huge introducing worldclass facilities.

In 2002, it spent 960 million yuan building a 160,000-sq-m "global model factory" in Helinge'er county of Huhhot, also Mengiu's third-phase project of the manufacturing base there. It's completely digitalized, China's first, and processes the largest volume of liquid milk worldwide, 1,000 tons per day. It was followed by the fourth- and sixth-project, with daily productions of 1,000 and 2,000 tons respectively.

In 2004, Mengniu spent 200 million yuan for the 5.9-million-sq-m Aoya International Pasture, China's largest, where 10,000 cows from the US and Australia and China's first milking robots were introduced. The milk from the pasture is mainly provided for high-end products.

Currently, 10 tons of milk can be squeezed from each cow annually, while the national average figure is 4-5 tons. "The goal is 20 tons, and we will have another 15 pastures besides the existing five," says Niu.

"The best facilities produce the best goods."

When it comes to sales network, Mengniu positioned itself as a national brand, from the first day.

In late 1999, Mengniu planned to expand outside and the first destination was Shenzhen, bordering Hong Kong in China's Guangdong province 3,300-kilometes away from Huhhot. This seemed challenging, as Inner Mongolia-made milk was new to Shenzhen residents and Yili's initial attempts to crack the market in 1997-1998 failed when supermarkets rejected its products.

Mengniu took a different approach - first selling products in small residential neighborhoods, and using a buy one, get one free strategy. By 2000, Mengniu successfully topped the market, surpassing Nestle and Bright.

The "for free" strategy also helped Mengniu conquer Hong Kong in 2002. In Shanghai Mengniu first promoted its products on the Internet beginning in 2000, and did not start negotiations with supermarkets until the brand gained online awareness, a move that greatly reduced marketing costs.

Mengniu's next focus is the second-and-third-tier cities as dairy consumption in major cities is peaking. Early in 2005, it started stepping downwards, the first dairy company to do so. To tap the consumption of lower-tier regions, beginning in June 2006, Mengniu donated a box of milk to children at 1,000 poverty-stricken schools daily. Now the investment is at 200 million yuan.

Niu refuses to comment on the program, merely saying, "the efforts cannot pay off until five years later when the individual income there rises to a certain level".

(China Daily 06/09/2008 page12)