On 27 April, Beijing Sanyuan Foods Co., Ltd. (Beijing Sanyuan) released its full-year financial figures:

• Sales: USD704.7 million (RMB4.6 billion), +0.4% over USD702.2 million (RMB4.5 billion) in 2014

• Net profit: USD12.2 million (RMB78.7 million), +43.7%

Source: Baidu

Liquid dairy: now 70.6% of sales

From the company's annual dairy products sales of USD681.5 million (RMB4.4 billion), USD497.2 million (RMB3.2 billion) or 70.6% came from liquid dairy, the remaining USD184.3 million (RMB1.2 billion) from other milk products.

"The cost of sales last year was down by 6.9% to USD489.4 million (RMB3.2 billion), thanks to lower ingredient costs," stated Beijing Sanyuan. Over the year the company moved to a new business model comprising BU's focused on liquid milk, East China, infant formula, cheese and logistics. Having made efforts in channel construction, it made improvements:

• Logistics: sales up by 10.8%

• Infant formula: sales up by 10.5%

• Cheese: sales up by 3.1%

"We made continuous adjustments to our product mix, increasing the proportion of premium products, and pushed sales in other areas like Shanghai, Tianjin and Shandong, Shanxi, Anhui, Jiangsu, Hunan and Hubei provinces," said Beijing Sanyuan: "Sales outside Beijing (its "home market") reached USD353.1 million (RMB2.3 billion), up by 3.4%." By contrast, its sales in Beijing were down by 4.6% to USD329.9 million (RMB2.1 billion).

Beijing Sanyuan’s Production, Sales and Stocks by Business, 2015

Source: Beijing Sanyuan Foods Co., Ltd.

Strategic investment

Over the last 2 years, Beijing Sanyuan has developed strategically in several respects:

Capital introduction: In 2014, Fosun International Limited invested USD309.8 million (RMB2 billion) to acquire 20.45% of shares. In 2015, the company moved further towards a mixed ownership structure, offering more opportunities for investments in the business

Assets acquisition: In 2015, it acquired 90% of Beijing Allied Faxi Food Co., Ltd. (well known for its Baxy ice cream). It intended to make use of the target’s channel advantages and technology capabilities and to seek synergies with existing operations

Construction: In 2015, its relocation project (into the Hebei Industrial Park) - involving a total investment of USD247.8 million (RMB1.6 billion) - entered a critical period: all building work finished, as did most of the production process design and equipment procurement. The new plant is expected to start operation in mid-2016, with capacity given at 40,000 t/a for powdered products and 250,000 t/a for liquid dairy

Marketing investment

In 2015, the 4 key listed dairy processors - Yili, Mengniu, Bright Dairy and Beingmate - invested a combined total of USD2.4 billion (RMB15.4 billion) in advertising, recording a historical high. However, their combined net profit was only USD1.2 billion (RMB7.5 billion). Yili spent USD1.1 billion (RMB7.3 billion), 57.2% more than its net profit. Mengniu, Bright Dairy and Beingmate spent USD632.7 million (RMB4.1 billion), USD550.5 million (RMB3.6 billion) and USD70.2 million (RMB453 million) respectively.

Beijing Sanyuan did not fall behind in marketing. Last year its spend in this area came to RMB2.42 billion (USD374.8 million). In particular it sponsored “Hidden Energy” (a reality show on Zhejiang TV), cooperated with the US' Major League Baseball in themed activities such as “Cow Goes into Town” (sculpture exhibition), and secured product placements in Mr. Six (film) and Swan Dive for Love (TV series) to improve its brand recognition.

Last year was a very difficult year for all milk formula producers. Companies like Beingmate and Yashili saw declines in sales. However, Beijing Sanyuan managed to make progress against the market's general direction, achieving growth of 10.5% - its marketing activities made an indispensable contribution in doing so.

This article comes from Dairy Products China News 1605, CCM

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