Image source: Visual China
Blue Whale News, July 19 (Reporter Zhang Jinglun) Listed dairy companies have successively disclosed their performance forecasts for the first half of 2024, and incomplete statistics from Blue Whale News reporters show that among the 6 large dairy companies that have disclosed performance forecasts, except for Microcolando and Royal Group, which remain profitable, other companies have varying degrees of losses.
The Blue Whale News reporter also noticed that as cost-effectiveness has become a new trend in consumption, some high-premium dairy products have begun to disappear from the shelves, and some are reducing prices or switching to providing large-package, more cost-effective products per 100 grams. In this environment, dairy companies continue to try new category innovations on the one hand, and explore overseas markets on the other.
There is an imbalance between supply and demand, and milk prices have plummeted
In the first half of 2024, the life of dairy enterprises is not easy.
According to the data of the national dairy industry technology system, in May 2024, the milk price will be 3.34 yuan/kg, a year-on-year decrease of 0.55 yuan/kg (the full cost will decrease by 0.31 yuan/kg), and the profit margin of kilogram milk will enter a negative value for the first time since the dairy cow system has been recorded. The severity of this round of adjustment cycle exceeds that of 2016-2017, and the industry's loss exceeds 80%.
This trend is intensifying. According to the monitoring of the Ministry of Agriculture and Rural Affairs, in the second week of July, the average price of fresh milk in 10 major producing provinces including Hebei, Shanxi and Inner Mongolia was 3.24 yuan/kg, down 0.3% from the previous week and down 13.8% year-on-year.
In addition, the imbalance between supply and demand is still relatively serious.
From the demand side, Nielsen data shows that from 2021 to 2023, the growth rate of dairy omni-channel revenue will be 7.9%, -6.5%, and -2.4% year-on-year, respectively. In May 2024, the growth rate of dairy omni-channel will be -1.4%, and the growth rate of offline channel will be -3.5%. As a comparison, in the same period, the growth rate of beverage omni-channel was 10.8%, and the growth rate of offline channels was 9.6%.
At the same time, the supply side continues to expand. Li Shengli, chief scientist of the national dairy industry technology system, revealed that the compound annual growth rate of milk production from 2019 to 2023 will reach 7%, and the milk output in 2023 will be 41.97 million tons, an increase of 11.22 million tons over 2018, an average annual increase of 2.24 million tons, and a per capita occupancy of nearly 8kg. Milk production increased by 5.1% in the first quarter of 2024.
As a result, a large amount of raw milk is sprayed with powder by leading dairy enterprises.
According to Li Shengli's research, from April to May 2024, leading dairy companies will spray an average of 20,000 tons of fresh milk per day, accounting for about 25% of the milk collection. At the end of June 2024, the amount of fresh milk sprayed with powder dropped to about 8,000 tons/day, accounting for about 11% of the milk received, and the surplus of fresh milk in 2024 was significantly higher than in 2023. As of June 2024, the milk powder inventory of leading dairy enterprises will not be less than 300,000 tons.
Dairy analyst Song Liang told the Blue Whale News reporter that spraying powder means losing money, and a ton of powder spraying is about 40,000 yuan or 50,000 yuan.
A dairy industry insider told the Blue Whale News reporter that with the passage of time, the inventory pressure of domestic expiring large bags of powder has increased.
The performance of second- and third-tier dairy enterprises declined
This situation has already affected the revenues of industry giants.
Tianrun Dairy expects that the net profit attributable to the parent company in the first half of this year will be a loss of 26 million yuan to 31 million yuan, while its net profit attributable to the parent in the first half of last year was 126 million yuan, turning from profit to loss.
In the first half of the year, the net profit attributable to the parent company was 58 million yuan - 68 million yuan and 70 million yuan - 95 million yuan respectively, and the loss was 37 million yuan and 20 million yuan respectively in the same period last year.
In the first half of 2024, although Royal Group will maintain profitability, its net profit will decline sharply, and it is expected to achieve a net profit of 1 million to 1.5 million yuan, a year-on-year decrease of 99.3%-99.53%, compared with a net profit of 213 million yuan in the same period last year.
For the decline in performance, the reason given by Royal Group is mainly due to the high base caused by the sale of equity in the same period last year. Blue Whale News noticed that among the reasons for the change in performance, Royal Group did not mention the impact of raw milk prices on it.
Song Liang said, "The growth of Royal Group's business is mainly due to the relatively stable overall price of buffalo milk. At present, the promotion of ordinary milk is very strong, but buffalo milk is relatively niche, and the price list is relatively stable, so the performance is relatively good. ”
Dairy farming enterprises have been hit more clearly. In the first half of 2024, Australasia Group expects to record a net loss of about RMB600 million to RMB700 million, compared with a net loss of RMB310 million in the same period last year, doubling the loss in the first half of this year.
Niu Niu, the person in charge of a large ranch, told the Blue Whale News reporter that the average price of fresh milk in the country has dropped significantly compared with last year, and has continued to fall for 29 consecutive months. The selling price of dairy group companies (pastures, grass industries, dairy processing plants, and dairy terminal sales) of the whole industry chain can be maintained at about 3.6-3.85 yuan/kg, giving full play to the advantages of the industrial chain. The selling price of small social ranches is lower, between 2-3 yuan/kg.
Niu Niu also revealed that the full cost of ordinary milk in large-scale animal husbandry (large-scale breeding enterprises, 10,000-head pastures) is controlled at about 3.0-3.6 yuan/kg (affected by yield factors, high dilution cost per yield), and other social pastures are lower than large-scale animal husbandry due to management costs, financial expenses and other factors.
Downstream sales have been blocked, and the pressure on upstream farmers to produce milk has also doubled.
"In recent years, large dairy companies have more and more 10,000-head pastures, and they continue to put into production, which makes their demand for milk supply from upstream farmers weaken." Niu Niu said.
As a result, the price of culled cattle has also dropped significantly.
According to data from the national dairy industry technology system, the price of culled cows has dropped from 25 yuan/kg in 2021-2022 to 18 yuan/kg in 2023 and 12-14 yuan/kg in 24 years. The culling price of a 700-kilogram adult cow dropped from 15,000 yuan to 7,700 yuan. Male calves dropped from 4,000-5,000 yuan/head to 500-1,000 yuan/head.
However, the good news is that since the beginning of this year, feed prices have fallen as a whole, which is conducive to reducing costs.
According to the monitoring of the Ministry of Agriculture and Rural Affairs, in the second week of July, the average price of soybean meal in China was 3.62 yuan/kg, down 0.8% from the previous week and 17.5% year-on-year.
A person in charge of a small ranch in the north told the Blue Whale News reporter that the finished feed is divided into weaned calf feed, finisher cattle feed, and lactating cow feed, and the price of feed at these stages this year is on a downward trend compared with 2023. There are others that need to be fed, and the prices are also in a downward trend.
At present, among the dairy companies that have disclosed their performance, only Miaokeland has changed the decline in the performance of the previous year and disclosed the good news of the forecast increase in the report.
Benefiting from factors such as the decline in the procurement cost of upstream raw materials, the announcement issued by Miaokelando, as a downstream enterprise of dairy enterprises, shows that it is expected to achieve a net profit of 65 million to 90 million yuan in the first half of 2024, a year-on-year increase of about 128%-215%.
According to Microcolando's own explanation, it is mainly due to two major factors, the cost of raw material procurement has decreased, as well as various measures to reduce costs and increase efficiency.
The market is weak, and some of the high-premium milk disappears for a while
A clear trend is that the weakness of consumption and the oversupply of dairy products are quietly disappearing.
After several years of market competition, the price war for low-temperature milk has no intention of stopping.
A salesperson of a supermarket chain in Chaoyang District, Beijing, told the Blue Whale News reporter that the price of the same fresh milk is indeed lower than in the previous two years. For example, the actual price of Sanyuan 72 degrees fresh milk, which was previously priced at 15.9 yuan, has been as low as 9.9 yuan (950 ml), and the actual price of Sanyuan extreme organic fresh milk, which was previously priced at 32 yuan, has been as low as 22.9 yuan (900 ml).
A dairy distributor told Blue Whale News that in the past two years, high-premium products have moved towards parity, and the industry's involution and oversupply of raw materials are the main factors.
Since the rigid demand attribute is weaker than that of white milk, the weak consumption is more obvious in the yogurt field.
The Blue Whale News reporter visited a number of supermarkets in Beijing and found that the high-priced yogurt, including Lechun and Wudao, reduced the number of single products, or turned to provide large-packaging, more cost-effective products per 100 grams. In addition, 5.9 yuan for a cup of Mengniu Guanyi milk yogurt, 3.9 yuan a bag of Junlebao simple yogurt and other 4 yuan to 5 yuan price band products appeared in the prime position of the shelves.
Uncle Hu, a consumer who was buying yogurt, told the Blue Whale News reporter that he used to buy yogurt when he went to the supermarket, but after finding that yogurt was getting more and more expensive, he didn't even go to the yogurt area, and changed to drink milk. Now that the yogurt is on sale, the price is back to the acceptable range, and I start to buy yogurt every once in a while.
Mr. Ma, the owner of Beijing Little Pony Milk Station, told the Blue Whale News reporter that the sales of dairy products this year are not as good as in previous years. Consumption has been downgraded, and high-priced milk is now moving slowly. The milk station is relatively fast, and the high-priced milk in some places is about to expire. "Now the cheaper the milk, the better it sells, like fresh milk in bags and a dozen yogurts."
Song Liang said that in the future, dairy products will move from high-end to popular, and truly become an ordinary food on the table. "However, due to the trend of fragmentation, personalization and diversification of consumption patterns, there will be a high-end development logic in the field of dairy products. However, from the perspective of the development direction of most enterprises, it is the trend to return to cost performance. ”
In Song Liang's view, the basic nutritional needs of dairy products are transforming to the direction of professional nutrition, "In the future market, specialized and refined functional nutrition dairy products will be the main direction pursued by consumers." ”
Image source: Visual China
The dairy enterprise competition has entered the second half
In order to cope with the current growth pressure, various dairy companies are also trying more ways to save themselves.
Not long ago, Yili announced its entry into the milk beer market in a high-profile manner, and then its high-end ice cream brand Zhenxi's ice cream cake physical store opened in Chengdu. Going back further, Yili has also entered the pet food industry and tried to lay out the sugar-free tea track.
Adopt a cow has innovated in packaging, and jointly launched a new product "Ton Ton Milk" with BOTTLEDJOY. It is reported that the new product borrows from the bottle type of BOTTLEDJOY, which will load milk into "tons of barrels", and will also distribute portable shoulder straps with a net content of 460ml.
The Royal Group has broken through the restriction that buffalo milk can only be purchased in supermarket containers by opening a milk tea shop "in Guili", and has increased the differentiation of milk tea shop products with buffalo milk raw materials. These actions in themselves increase the diversification of milk products and allow the raw milk to be consumed in the cycle.
On the other hand, going overseas has become a wave of the dairy industry.
Yili opened a flagship store in Los Angeles, United States, selling liquid milk products such as Ambrosia and yogurt, as well as cold drink products such as Cholex, bitter coffee and ice factory. At present, Yili's products have successfully landed on five continents: Asia, Europe, America, Oceania and Africa.
Mengniu also performed well in overseas markets, especially in the ice cream business. In 2023, its acquired ice cream brand Ai Xue ranks first in Indonesia and third in the Philippines, and is actively expanding the Indochina Peninsula market such as Viet Nam and Thailand. In that year, Mengniu's ice cream business revenue was 6.03 billion yuan, a year-on-year increase of 6.6%, of which the growth rate of overseas markets was more than 20%, and the domestic market was a drag.
The two dairy giants are the vanguard of overseas expansion, and other dairy companies are also following suit. Recently, Ausnutria announced that it has acquired the remaining 50% shares of Netherlands Amalthea Group to further strengthen the competitive advantage of the goat milk industry chain. At present, Ausnutria's Jiabei Aite is sold simultaneously in more than 60 countries and regions around the world, and has been ranked "No. 1 in sales and sales volume of global goat milk powder market" for many years.
Song Liang believes that the products and industries of China's dairy industry are very mature, and the international resource layout is also very good, so it is a good opportunity to expand overseas markets at this time.
"Foreign consumers have some unfamiliarity with our products and brands, and even some have doubts, as long as there is a breakthrough, Chinese dairy companies have a great opportunity to develop overseas." In Song Liang's view, in the food industry, China is the most competitive country in the world, and the dairy companies that survive in this fierce competition still have certain advantages in terms of product building, brand building, channel expansion and marketing capabilities.