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Chinese Domestic Milk Powder Brands Scale-up Goat Milk Powder Business

Like the a2 milk and organic milk segments, the goat milk segment of China’s infant formula market is developing rapidly. Ninety goat milk powders have passed formula infant formula recipe registration, and the number of goat milk infant formula products sold in China now exceeds 100. Chinese domestic dairy brands MEILING and M. Love are both preparing to go public and have revealed plans to invest heavily in the goat milk powder business.

Background

MEILING is a dairy company specializing in the R&D, production, and sale of goat milk products. The company is headquartered in an area heavily associated with goat based dairy farming, called Fuping, which is in China's Shaanxi province. The company has significant vertical production capacities and owns its own pastures, goatherds, and processing facilities. Its products include infant formula, children's milk powder, adult milk powder, and liquid milk. Its infant goat milk powder brands include Lambbin, Dairy Land, and Fu Yang Yang.

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M.Love Co., Ltd. is an infant milk powder manufacturer based in the eastern province of Jiangxi. Six series of products from the company's two factories have passed the infant formula recipe registration, and two products have passed the special medical food registration process.

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Development strategy

MEILING

The company expects to raise 314 million yuan in its IPO, 160 million of which will be used to build the second phase of the goat dairy industrialization project, which includes an imported automated joint production workshop, two goat milk powder production lines, and nine packaging lines.  

M.Love

1. The company plans to acquire foreign milk powder factories and add three imported milk powder products. The future product portfolio will include a 100% imported goat milk powder product, an imported organic milk powder, and an imported high-end milk powder.

2. It also plans to rename its goat milk powder brand "Ai You Nuo" to "Ai You Ruo Te," with the English name "AusNuotore" remaining unchanged. "Ai You Ruo Te" will focus on producing 100% goat milk products and launch a 100% sheep milk powder in the future, with an overall aim of becoming NO.2 in the Chinese goat milk powder market (Kabrita is currently NO.1)

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3. Build "Ai You Nuo" into an exclusive brand of special medical formula food and invest 4% of sales every year to support the development of its FSMP business. 

Market performance 

MEILING

The sales scale of MEILING is not large. According to its company financial prospectus, MEILING had revenue of 260 million yuan, 310 million yuan, and 340 million yuan from 2017 to 2019. Affected by the COVID-19 epidemic, its revenue in 2020 Q1 decreased by 23.95% to 24.758 million yuan, and its revenue in 2020 H1 is expected to be 135 million yuan, 16% lower than 2019. In comparison, Kabrita, which is currently the front-runner in the China mainland goat milk powder market, recorded revenue of 2.856 billion yuan in 2019.

MEILING is currently facing several big problems, including overcapacity issues, declining sales, and lack of product portfolio diversity. However, as one of the few dedicated goat dairy enterprises in China, MEILING's main advantages is its vertical production capacity, which includes ownership of its goat herds, pastures, processing facilities, etc.

M.Love

Data shows that M.Love's original "Ai You Nuo" goat milk powder, which was launched in 2017, achieved revenue of more than 200 million yuan in three years, maintaining a 70% annual growth rate [1]. So far, this goat milk powder has been sold in all provinces in China (regions and cities) except Hong Kong, Macao, and Taiwan. In addition, M.Loves is the fourth domestic enterprise with more than two registered FSMPs. The other companies with two or more registered FSMPs include Beingmate, Synutra, and Eng Rui [2].

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M.Love's ambition is to become "China's No.2 goat milk powder brand,", which is possible given the company’s rich goat milk resources and low production costs

Competition is getting fiercer.

China’s goat dairy sector is growing rapidly with positive signs that the growth momentum will maintain for several years to come. Consumer recognition of goat milk powder products is also increasing. The "China Goat Milk Powder Industry Development Research" report released by the Food and Drug Industry Development and Supervision Research Center of the Chinese Academy of Social Sciences predicts that China's infant goat milk powder market will exceed 10 billion yuan in 2020.

The No.1 goat milk powder brand is Kabrita made by Ausnutria. Since 2016, Kabrita has continued to grow and now sits firmly at the top of China’s goat milk powder market. The latest data show that in 2019, Kabrita achieved revenue of 2.856 billion yuan, a year-on-year increase of 40.5%, and its revenue in China was 2.57 billion yuan, a year-on-year increase of 45% [3].

With Kabrita’s position as number 1 in the market, several companies are now vying for the No.2 position. This competition has only intensified with the entry of several new entrants in 2019 and 2020 H1.

  • In March 2019, the Chinese milk powder brand Beingmate announced a joint venture with Australian goat milk powder brand Bubs.

  • In November 2019, BIOSTIME of H&H Group launched a 100% goat milk protein formula.

  • In December 2019, Yili launched its first goat milk powder product, "Jinlingguan Youzixiaoyang"(UITSTEKEND GEITENMELK);

  • In April 2020, Wyeth Illuma launched an infant goat milk powder through the cross-border e-commerce platform Tmall Global.

Online statistics show that there are more than 100 goat milk powder brands in the Chinese market, 90 of which have passed formula recipe registration [4].

Appendix: competitors listed in the prospectus of MEILING

No.TypeCompanyInformation
1Traditional goat milk products manufacturersXi'an Baiyue Goat Dairy GroupFounded in 1985, and main products include infant goat milk powder and adult goat milk powder. Yubao is the star brand.
2MilkGoat Goat Dairy Co., LTDEstablished in 1994, and main products include infant goat milk powder, adult goat milk powder, goat milk tablets, and other goat milk products. MilkGoat is the star brand.
3Shaanxi Herds Dairy Group Co., LTDFounded in 2003, and main products include infant goat milk powder and adult goat milk powder. Shaneng is the star brand.
4Shaanxi Yatai Dairy Co., LTDFounded in 2004, and main products include infant goat milk powder and adult goat milk powder. Duoen is the star brand.
5Leading cow milk products manufacturersYashili GroupA subsidiary of Mengniu Dairy, and launched "Doraler" brand goat milk infant formula in 2017.
6Wondersun DairyProducing goat milk infant formula and adult goat milk powder. Infant goat milk powder includes "Jing Run" and "Bang You"
7Feihe (Firmus) DairyIn 2014, it acquired Shaanxi Guanshan Dairy to get involved in the goat milk products industry.
8Synutra DairyThe goat milk infant formula brand is Sante L'amour.
9Foreign-funded or imported brands
Hyproca Dairy Group BV

A subsidiary of Ausnutria Dairy Co., LTD, running the "Kabrita" brand infant goat milk powder worldwide, as well as children's milk powder, maternal milk powder, and other products. Its products in China include baby goat milk powders such as "Kabrita", "Yuebai" and "Youzhuang".

10
Youhong Trading (Shanghai) Co., LTDMainly engaged in Karihome brand infant goat milk powder.
11
ViPlus Australia Dairy Co., LTDOne of the earlist dairy companies specializing in the production of infant formula in Australia.
***Disclaimer: All images used in this article are from the internet.
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