COVID-19 dairy boost: Yili looks to product diversification after monumental profits leap in first half of 2021

By Pearly Neo contact

- Last updated on GMT

China dairy giant Yili is looking to focus on the diversification of its product portfolio to ensure sustained growth after seeing a 42.48% jump in H1 2021 net profits. ©Yili
China dairy giant Yili is looking to focus on the diversification of its product portfolio to ensure sustained growth after seeing a 42.48% jump in H1 2021 net profits. ©Yili

Related tags: Yili, COVID-19, Dairy

China dairy giant Yili is looking to focus on the diversification of its product portfolio to ensure sustained growth after seeing a 42.48% jump in H1 2021 net profits, with the firm seemingly enjoying a boost due to COVID-19 health trends.

Yili recently unveiled its H1 FY2021 financial results, where it saw 18.89% year-on-year growth in total revenue to hit CNY56.5bn (US$8.78bn), and a very significant 42.48% yoy growth in total net profits to hit CNY5.3bn (US$823mn).

The firm’s Assistant President Dr Yun Zhanyou told FoodNavigator-Asia​ that the achievement of such financial success even at a time of instability has been due to two main factors – the growth of the dairy industry itself, ironically as a result of the COVID-19 pandemic, as well as Yili’s proactive product upgrading and innovations.

“The flourishing growth of the dairy industry helped to boost sales volumes - the COVID-19 pandemic stimulated greater milk consumption in the Chinese market as consumers paid more attention to their nutrition, health and immunity. This provided China’s dairy market with more room for development,”​ said Dr Yun.

“The structural upgrading of our products, particularly high-end products, were also an important factor here, as this helped us to improve our profit margins. [We see that] consumer spending habits, channels and marketing scenarios are changing, [so] dairy companies are gradually being redirected towards consumer-centred competition.

“Future growth will mainly come from product innovation and structural upgrading [such as we have been focusing on] – in H1 2021, Yili’s growth was mainly driven by [doing this for] high-end products, among which the sales of key products such as Satine and AMBPOMIAL increased by 20.7% YoY and innovative new products also rose, accounting for 15.6% of the total revenue.”

The top three product categories for Yili were revealed to be liquid milk, milk powder and ice cream, and Dr Yun expressed confidence that these three sectors will continue to lead the firm’s dairy charge both in China and South East Asia.

“The liquid milk business grew 19.65% YoY to CNY 42.41bn (US$6.59bn); the powder business was up 14.83% YoY to reach CNY7.63bn (US$1.19bn); and ice cream products rose 13.80% to CNY 5.54bn (US$860.7mn) – these three categories were our top performers for the first half of the year,”​ he said.

“The liquid milk business is our traditional superior sector and as consumers’ health awareness improves and more form milk consumption habits, demand will continue to be high for liquid milk. We also believe that as China faces the challenge of an ageing population and with the government’s new three-child policy, the demand for adult and infant formula powder will continue to grow too.

“As for ice cream, the demand for this in the Chinese market will decline as autumn and winter arrive, but we see that this will remain high with our South East Asian consumers. [To cater to this demand], we are also going to be formally initiating operations at our Indonesia factory by the end of 2021.”

South East Asia developments

Dr Yun did not reveal specific numbers regarding the contribution of Yili’s South East Asian business to revenue and profit growth, but stressed that this market is an ‘integral part of Yili’s global market’​.

“Key products we have launched in this market have achieved good market performance – at present AMBPOMIAL, Youngfun, Joyday and Cremo ice cream have been launched in many places in Southeast Asia, and have been very well received by local consumers,”​ he said.

“In H1 2021, Cremo sales in Thailand increase 41% YoY, AMBPOMIAL has become the leading brand of room-temperature yogurt products in Singapore, and Joyday has achieved significant growth in market performance by combing the naming and advertising of Indonesian idols.”

Continuing in the vein of product innovation, Yili will be focusing on meeting local tastes in its product development for the region.

“According to consumer data, South East Asian consumers prefer chocolate flavour ice cream products - Therefore, we will also be developing chocolate flavoured Joyday products [which are rich in chocolatey taste] for the Indonesian market,”​ said Dr Yun.

“We are also currently developing a customized dairy beverage product for South East Asian consumers, which is scheduled to be launched in Thailand, Myanmar and other markets in 2022.”

Continuing growth

When asked how Yili plans to build on these strong financial results and grow even further in the second half of the year, Dr Yun told us that product diversification is likely going to be the way forward.

“Strong R&D is the cornerstone of our competitiveness, [and we also see the need to] develop diversified product families to meet the needs of different consumers,”​ he said.

“So whilst we will further improve the development of businesses with existing high growth such as cheese, milk powder and so on, Yili’s portfolio also has other products such as mineral water, plant protein drinks, lactic acid bacteria beverages and more which we will also develop.

“This development layout of diversified products will also help us to achieve more sustainable growth.”

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