“In 2024, [Mengniu Dairy] didn’t sell well. We lost around RMB 100,000 (USD 14,000) for the year.”
Zhang Cheng (pseudonym), a Mengniu distributor based in a northern Chinese city, shared this sentiment with 36Kr when asked about last year’s business performance. From his perspective, 2025 hasn’t started much better: sales of Mengniu’s liquid milk remain sluggish. “Turnover is too slow. Business is getting harder and harder,” he said.
To a certain extent, Zhang’s dilemma reflects broader troubles at Mengniu Dairy. On March 26, the company released its earnings report, disclosing 2024 revenue of RMB 88.675 billion (USD 12.4 billion), a year-on-year (YoY) drop of 10.1%. Net profit attributable to shareholders came in at just RMB 105 million (USD 14.7 million), plunging 97.8%.
Still, despite the earnings collapse, the capital market remains optimistic. On the day following the report’s release, Mengniu’s shares surged over 8% during trading and closed up more than 5%. The stock fluctuated on subsequent days.
Some analysts attribute the profit nosedive primarily to goodwill impairment, which they argue does not materially affect Mengniu’s underlying operations.
According to the earnings report, Mengniu recorded impairment provisions on subsidiaries Bellamy’s Organic and Modern Dairy that amount to a combined RMB 4.33 billion (USD 606.2 million), dragging down overall profit. But what’s harder to dismiss is the continuing strain in its core liquid milk business. In 2024, that segment generated RMB 73.066 billion (USD 10.2 billion), down 10.97% YoY, driven by a worsening mismatch between supply and demand.
On the positive side, Mengniu is actively working to optimize its inventory and diversify into new product categories while expanding its distribution channels. Meanwhile, a recent wave of fertility incentive policies could offer new opportunities for dairy brands like Mengniu.
With policy tailwinds in play, could Mengniu revitalize its long-troubled infant formula business?
Shedding historical baggage
Mengniu’s RMB 5 billion (USD 700 million) goodwill write-down was essentially the price of its previous spending spree.
Back in 2016, then-CEO Lu Minfang introduced a “wolf culture” mindset and laid out a goal to surpass RMB 100 billion (USD 14 billion) in sales and market value by 2020. This ushered in an era of expansion, during which Mengniu acquired Modern Dairy, China Shengmu, Bellamy’s, and Milkground, among others.
However, the aggressive expansion didn’t yield the second growth curve Mengniu had long hoped for. Instead, it weighed down the company’s earnings.
Consider its acquisition of infant formula brand Bellamy’s. Just before the deal, in June 2019, Mengniu sold off its stake in Junlebao for RMB 4 billion (USD 560 million). Industry insiders long speculated that this sale wasn’t Mengniu’s original intent. Regardless, Junlebao’s spinoff not only worsened Mengniu’s already weak position in the infant formula space, it also created a new competitor.
Soon after, Mengniu acquired Bellamy’s for HKD 7.86 billion (USD 1 billion), paying a premium in hopes of patching the hole left by Junlebao. But the acquisition sparked debate, largely because Bellamy’s had not obtained regulatory approval for its infant formula in China and was limited to cross-border e-commerce sales.
That regulatory gap would come back to haunt Mengniu.
A search of Bellamy’s flagship store on Tmall shows just four infant formula products listed, with the rest being rice cereal and children’s snacks. The numbers back up the lackluster performance: Bellamy’s contributed RMB 1.03 billion (USD 144.2 million) in revenue to Mengniu in 2020, down from RMB 1.6 billion (USD 224 million) in 2018, before the acquisition.
By 2021, Mengniu stopped reporting revenue from Bellamy’s separately, and began impairing its goodwill. Last year, Mengniu’s entire infant formula business generated only RMB 3.32 billion (USD 464.8 million), nearly half of what it was five years ago.
Meanwhile, Modern Dairy, another subsidiary, is also under pressure.
Since 2023, a glut of raw milk has created systemic challenges for China’s dairy farms. As herds grew larger, margins shrank. Modern Dairy reported a net loss of RMB 1.417 billion (USD 198.4 million) in 2024, a 908.84% plunge YoY.
Independent dairy analyst Song Liang believes Mengniu needed to cut its losses and course-correct. Addressing the issues with Bellamy’s and Modern Dairy in one go could pave the way for broader reform.
He added that Mengniu’s major goodwill risk items have largely been addressed, though the company still faces a shrinking dairy market overall.
To manage the squeeze, newly appointed president Gao Fei has introduced a series of reforms to clear out distributor inventory, cut headcounts, and slash ad budgets. But according to Zhang, the impact on the ground remains limited. “There’s still a lot of forced stockpiling and channel conflict,” he said. “Among all the products, only ‘Deluxe Milk’ is really performing.”
Fresh chance for Mengniu?
There’s little question that offloading legacy burdens gives Mengniu room to optimize across its business lines. But it still needs a viable second growth engine. In this regard, the infant formula business remains a key focus.
Despite China’s falling birthrate, Song noted that infant formula remains one of the highest-margin categories in the dairy sector and is often a gateway to broader family nutrition offerings.
Gao also emphasized during the earnings call that Mengniu’s infant formula business was still profitable after excluding impairments from Bellamy’s.
During the Lunar New Year period, Mengniu partnered with the animated film Nezha 2 to promote Ruibuen, its infant formula brand. In 2022, Ruibuen also secured a patent for a specialized formula modeled after breast milk, designed to help babies absorb nutrients more easily and support healthy digestion.
Bellamy’s is also pushing forward, releasing new products under China’s updated national standards. In August last year, it launched two new offerings. At the time, Mengniu vice president Yan Zhiyuan said that “niche growth and precise cultivation” are key to winning in the formula business, and Bellamy’s still has a shot.
Lu Baoying, a senior analyst at Intelligence Research Group, said Mengniu’s vertically integrated operations give it an edge. Through large-scale purchasing, it can minimize cost volatility for key imported ingredients like whey protein, supporting production stability.
Still, she cautioned that China’s infant formula market remains fiercely competitive, with top players like Firmus (also known as Feihe), Yili, and A2 expanding rapidly. Mengniu’s growth potential in this space is increasingly constrained.
Yet Song pointed out that adult formula—rather than infant products—might be the true growth engine. “Once scale is reached, adult formula will become the main revenue and profit pillar in Mengniu’s formula division,” he said.
Across the board, dairy companies including Mengniu may be poised for a policy-driven rebound.
Since March, cities including Hohhot, Changsha, Jinan, and Shenzhen have rolled out fertility subsidy plans, with annual payouts exceeding RMB 10,000 (USD 1,400). In response, dairy companies have been quick to follow suit: Mengniu is offering RMB 180,000 (USD 25,200) in cash to families with three children, while Firmus has pledged RMB 1.2 billion (USD 168 million) in support for pregnant families. Yili, for its part, unveiled a combined initiative of RMB 1.6 billion (USD 224 million) in subsidies and full-cycle services.
Guotai Haitong Securities believes these regional policies—and the voluntary commitments from dairy firms—could help revive demand for formula and liquid milk, easing the raw milk supply glut.
On the secondary markets, the day after Hohhot’s subsidy policy was announced, A-share dairy stocks jumped more than 10%, and the Hong Kong dairy index rose over 7%.
Perhaps most importantly, signs of a market rebound are already showing. After years of falling milk prices and supply-demand imbalances, the sector appears to be stabilizing. According to Song, Mengniu and its peers may no longer need to rely heavily on milk powder production to utilize surplus milk. The raw milk market could reach equilibrium this year and that would offer a much-needed breather for Mengniu as it looks to bounce back amid a more favorable external landscape.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Chen Sizhu for 36Kr.