Breaking through the cycle bottom, Mengniu has entered the "Spring Planting" season

Ask AI · How should the one-body-two-wings strategy balance offense and defense in the dairy business?

Looking back from the spring of 2026, those “subtractions” made during the bottom phase have now turned into “additions” for growth. From proactive clearing to strategic gear shifts, every step counts.

The dairy industry is a sector with a highly cyclical character, determined jointly by industry-chain characteristics, supply-demand relationships, biological laws, and market mechanisms. About every three to five years, there is a full cycle, with the core always being the repeated oscillation of fresh milk prices and supply-demand relationships.

In the past few years, upstream raw milk prices have fallen and downstream demand at the retail end has been weak, pushing the industry into a typical period of pain during inventory reduction. Chinese dairy is undergoing a profound transformation—from a “scale dividend phase” to a “phase of intensive, fine-grained operations.”

Switching to a company perspective, Mengniu is precisely at the bottom of this downturn cycle, completing a deep self-reinvention; and it may now be standing at the starting point of a new cycle.

According to financial results, last year Mengniu achieved full-year revenue of 82.24 billion yuan, and operating profit of 6.56 billion yuan. Breaking down this performance, it becomes clear that Mengniu’s cyclical reversal was not a matter of waiting for a favorable windfall—it came from the key repairs being completed internally first.

01 A new starting line, starting with strengthening financial quality

Every cyclical reversal begins with the repair of financials. Mengniu’s pragmatism at the bottom of the cycle is first reflected in its strict control over financial quality.

Looking back at last year, against the backdrop of the industry generally facing growth bottlenecks, Mengniu’s operating profit reached 6.56 billion yuan, while its net profit attributable to shareholders was 1.545 billion yuan, showing a significant year-on-year increase. Even more eye-catching for the market is that multiple key financial indicators reached historical highs: gross margin rose to 39.9%; net cash flow from operating activities reached 8.751 billion yuan; and free cash flow reached 6.3 billion yuan.

The simultaneous strengthening of profit and cash flow means the company has the confidence to ride out the cycle.

Second is the market’s view being repaired—after the earnings release, the market quickly gave positive feedback.

Over the past several trading days, Mengniu and related dairy stocks—including Modern Dairy, China Shengmu, and Mycongel—moved up collectively. Within two days after Mengniu released its financials, its share price rose by more than 8% consecutively.

Lujiu Business Review found that internationally well-known investment banks also issued positive feedback after Mengniu’s earnings release, such as “buy,” “overweight/hold,” and raising target prices. Goldman Sachs expects that, in the context of industry recovery and sales and profits trending toward stability, Mengniu will prioritize revenue growth; by adjusting its product mix and operating strategy, it can improve long-term profit margins, and it has a “buy” rating. Bank of America’s research report, meanwhile, directly listed Mengniu as one of its top choices for China consumer stocks in 2026. UBS expects that Mengniu’s dairy product consumption has shown initial signs of recovery, and that liquid milk sales recorded high-single-digit growth in the first quarter of this year.

In addition, Mengniu’s dividends and share repurchases have sent clear confidence signals. Mengniu announced a cash dividend of 0.520 yuan per share, with total dividends of 2.017 billion yuan, and also explicitly stated that in 2026–2027 it will continue to increase dividends and maintain repurchases. This is both a return to shareholders and a signal that: the company has already passed the most difficult deleveraging phase and entered a period of value realization.

At the bottom of a cycle, it is often where companies are tested for substance and where they build strength for a leap upward. A solid set of earnings is enough to prove that now is the starting line for the next round of growth.

02 Offense and defense in balance: the one-body-two-wings model opens up room for growth

If financial clearing is “defense,” then the strategic layout ahead is “offense.”

Regarding the future, at the earnings release conference, Mengniu Dairy’s President Gao Fei said something very practical: “We need to jump out of the trap of low-price competition. We should take consumer needs as the value anchor, create healthy value for consumers with high-quality nutrition value—and this is the fundamental business logic for the dairy industry to ‘create value through value.’”

In the past, the dairy cycle relied mainly on liquid milk as a single engine. However, the one-body-two-wings development layout has brought about a business pattern with both offense and defense, turning “creating healthy value” from a strategic vision into an executable business blueprint.

Mengniu’s ‘one body’ is about building the foundation solidly.

Core businesses such as liquid milk, milk powder, ice cream, and cheese are the ballast. Their steady operation helps prevent the company from losing momentum during cyclical fluctuations.

In 2025, Mengniu’s ambient-temperature and chilled segment recovered steadily, and its liquid milk base business continued to improve steadily. The fresh milk segment was even more impressive: it recorded double-digit growth for the full year, and its market share continued to expand. Among them, “Everyday Fresh Language” achieved high-double-digit growth. In domestic ice cream, it focuses on the “Change+Green Mood” dual-brand strategy, which also delivered double-digit growth, with profitability continuing to improve. The milk powder segment targets functional sub-segments, growing by nearly double digits for the full year, and accelerating to high-double-digit growth in the second half. The cheese segment captured the structural upgrade from “drinking milk” to “eating milk,” staying at the top of the industry, with growth exceeding 20% for the full year. These steady performances from core businesses provide Mengniu with a solid buffer against cyclical volatility.

But defense alone is not enough—the thing that truly determines the company’s position in the next cycle is whether the ‘two wings’ can take flight.

Let’s start with the wing of nutrition and health. Why must the dairy industry focus deeply on advanced processing? The logic is not complicated: in the past, what we bought/sold was mostly the primary form of raw milk, with thin added value. Once the cycle arrived, it was easy for both upstream and downstream players to squeeze margins from both sides. Advanced processing, by contrast, is about reconstituting a cup of milk into high-value products.

Here, Mengniu’s pace has clearly accelerated.

In 2025, products such as lactoferrin, enzyme-treated casein protein, and demineralized whey powder have already reached international standards; Mascarpone cheese and domestically produced Mozzarella cheese were also rolled out one by one, breaking technical bottlenecks and reducing import dependence step by step. In professional dairy products, it launched more than a dozen new products such as new national-standard cream, continuously deepening cooperation with baking and B2B brand customers. The sports nutrition brand “Maxwin” completed nearly RMB 100 million in Series A financing; both consumers and capital are backing it. Its self-developed probiotic Lc19 was published in the international top journal “Cell,” and it has already been implemented on an industrialized basis.

From basic nutrition to precise functional nutrition, this door is being opened.

The other wing is the overseas platform. When domestic market demand faces pressure, overseas markets become an important source of incremental growth. Over the past year, Mengniu achieved both growth and improved returns overseas. It is not in a rush to spread wide; instead, it leverages its existing layout and gradually deepens and thickens its presence in Southeast Asian markets. Currently, Aisai maintains the #1 position in Indonesia with a 34% market share, and it is extending into markets such as the Philippines, Vietnam, Africa, and Latin America. Bellamy also performs well in Southeast Asian markets such as Vietnam.

From “going out” to “going in,” overseas business has proven one thing: real globalization is not just selling goods abroad—it is putting down roots.

With one body stabilizing the base and two wings opening up space, perhaps that is the most noteworthy aspect of its position at the new starting point.

03 Build up strength in 2026: make the cake bigger and return to the growth track

After completing the optimization of its development structure, the next step naturally becomes: build strength, and then return to growth.

For the entire dairy industry, the most difficult period for milk prices has already passed. The industry trough is slowly rising—this is common knowledge about cycles, and it is also the signal conveyed by this round of adjustments. More importantly, policy support is starting to become explicit. The Central Document No. 1 issued at the beginning of the year specifically mentioned promoting dairy consumption. During the “Two Sessions,” the Minister of Agriculture and Rural Affairs also urged the public to drink more milk: China’s per-capita milk consumption is only 42 kilograms, far below the levels in Europe and the United States. This gap is both reality and opportunity space.

At the performance meeting, Mengniu Dairy’s President Gao Fei also candidly pointed out: “Under the past supply-demand contradictions, the industry has overly focused on competition in existing stock markets—or, in other words, price games—and has not considered how to further expand demand space, resulting in insufficient value realization. So, in this large market of basic nutrition, you cannot only think about ‘dividing up the cake’; you should also consider how to make this ‘cake’ bigger and thicker.”

This judgment is crucial. The essence of a cycle is a mismatch between supply and demand; the key to breaking the deadlock is not to fight over existing stock, but to create incremental growth.

How to make the cake bigger? Gao Fei also outlined two paths that Mengniu will follow.

Path One: Product innovation—turn what “can’t be drunk” into what “can be drunk”

A figure often overlooked is that in China, about 660 million people have varying degrees of lactose intolerance. They don’t want to drink milk; it’s just that their bodies “can’t drink it.” This is not a niche group—half of China’s consumption potential is blocked by a physiological threshold.

To address this real pain point, on the basis of continuing to strengthen its 4.0 protein product series, Mengniu’s Everyday Fresh Language developed milk with zero sugar and dual proteins, further segmenting demand for lactose-free needs and effectively expanding the consumer base for fresh milk. Mengniu also launched a line of “soft milk” and functional milk products such as prebiotics and vitamins. This is not a simple formula adjustment—it uses product innovation to break the barrier to drinking milk, bringing hundreds of millions of potential consumers back to the dining table. As Gao Fei puts it: it’s “drink milk, drink well, drink the right milk.” It sounds simple, but behind it lies concrete incremental market growth.

Path Two: Channel innovation—turn what’s “out of reach” into what’s “within reach”

On the channel front, Mengniu is following a two-legs parallel strategy.

In traditional channels, it continues to refine and improve operations, enhancing operating efficiency and stabilizing the base business. Meanwhile, in emerging channels with new momentum, it embraces membership stores, snack retail wholesalers, instant retail, content e-commerce, and more—using customized products to achieve precise reach. For example, it provides the Sam’s Club-customized Guanyi Dairy breakfast milk in 8-ton buckets, and the Hema-customized Everyday Fresh Language lactose-free milk, launching ready-to-sell hit products. These are not just simple distribution pushes, but a typical playbook of “matching products to channels.” Lujiu Business Review found that among Sam’s Club’s “yogurt heat rankings,” the top three positions include two of Mengniu’s products, and they have remained at the top for multiple days in a row.

Consumer profiles and purchasing scenarios differ across channels. With a differentiated product matrix, Mengniu achieved an upgrade from “deep distribution” to “value-focused cultivation,” placing the right products in the right places.

Moreover, 2026 is a special sports mega-year, with the Olympics and the World Cup coming back-to-back and “both at the doorstep.” Mengniu has already seized the overlapping window of the Winter Olympics and the Chinese Lunar New Year in February and delivered a momentum burst. But the key ahead is how to convert this “good start” into the certainty of full-year growth.

The specific paths are already fairly clear: co-create differentiated products with retail partners by focusing on differences; rely on a digital and intelligent transformation to deepen efficiency and synergy so that the benefits from emerging channels are deposited into long-term capabilities; and at the same time, find breakthrough points for the transformation of traditional channels to ensure the sustainability of full-year growth.

04 Written at the end

At the end of its earnings meeting, Mengniu Dairy’s President Gao Fei said: “We will adhere to long-termism, focus on the nutrition mission, and accelerate our full evolution from a traditional dairy manufacturer to a provider of comprehensive nutrition and health solutions.”

This evolution is not changing the wording—it is a fundamental leap from selling products to operating user value. Now, Mengniu is like an ecosystem process of value generation and continuous circulation.

Looking back from the spring of 2026, those “subtractions” made at the bottom phase have now become “additions” for growth. From proactive clearing to strategic gear shifts, every step counts.

Looking forward to the inaugural year of the “15th Five-Year Plan,” this year is also a key year for Mengniu to push strategic implementation and upgrade management with focused efforts. It can be said that Mengniu is already at the stage of “spring sowing.”

Spring sowing is not about commotion, but about deep cultivation. The roots that are planted will grow on their own—even if the cycle passes.