Profit surged more than tenfold, is Mengniu's transformation highly recognized by the market?

Ask AI · How does Mengniu achieve profit growth against the trend through asset optimization?

Produced by | China Visitor Network

Reviewed by | Li Xiaoyan

As the domestic dairy industry enters a deep adjustment phase, with most companies facing stagnant revenue or even losses during the industry winter, Mengniu Dairy (02319.HK)’s 2025 performance announcement stands out. This report shows a short-term revenue decline coupled with a significant rebound in profits, reflecting Mengniu’s strategic efforts to slim down and clear risks, as well as its role as an industry leader restructuring competitiveness and leading transformation in the era of stock saturation. Short-term data fluctuations do not hinder the long-term positive trend. Mengniu has demonstrated boldness by optimizing its asset structure and cultivating new growth drivers through diversified innovation, setting a benchmark for China’s dairy industry to navigate cycles and achieve high-quality development.

In 2025, Mengniu’s operational data showed structural differentiation: total revenue for the year declined by 7%-8% year-on-year, with operating profit margins of 7.9%-8.1%, slightly below initial expectations. Meanwhile, the company expects net profit of RMB 1.4-1.6 billion, a tenfold increase over RMB 105 million in 2024, marking a substantial rebound in profitability. This seemingly contradictory performance is not accidental financial manipulation but a strategic move led by the new management team to proactively clear historical burdens and focus on core businesses. In 2025, the company recognized asset impairments of RMB 2.2-2.4 billion, significantly narrower than RMB 4 billion in 2024. Through precise disposal of idle capacity, accounts receivable, and entrusted loans, it systematically addressed legacy issues and deeply repaired its balance sheet.

Since Gao Fei took over as CEO in March 2024, Mengniu has launched a deep reform centered on “improving quality and efficiency, moving lightly forward.” Unlike the industry’s passive response to cyclical fluctuations, Mengniu has taken short-term revenue fluctuations as a cost to actively divest non-core assets and optimize inefficient capacity, demonstrating strategic resolve and responsibility of a billion-yuan dairy enterprise. During the industry downturn, the company dared to confront problems and slim down decisively, which not only strengthened asset quality but also refocused operations on core businesses, clearing obstacles for subsequent steady development. After the announcement, Mengniu’s stock price surged nearly 7% in one day, and multiple investment banks upgraded their ratings to “Buy,” reflecting strong market recognition of the company’s risk clearing and positive transformation.

The positive business improvements further confirm the effectiveness of Mengniu’s reforms and its growing operational resilience. In the second half of 2025, the core liquid milk business stabilized and rebounded sequentially, ending a prolonged decline and gradually stabilizing the foundation. Emerging high-value-added categories such as fresh milk, milk powder, and cheese achieved double-digit growth throughout the year, becoming key drivers of performance. This success results from Mengniu’s continuous efforts in channel refinement, price control, and inventory reduction, alleviating market competition pressures through meticulous operations and pushing the core business into a healthy cycle.

Meanwhile, Mengniu’s “One Body, Two Wings” strategy has taken solid steps in business structure optimization. Based on liquid milk, the company is vigorously expanding into high-growth segments such as cheese, milk powder, and functional dairy products, accelerating its move away from over-reliance on a single category. Although liquid milk still accounts for 77.4% of total revenue and emerging categories are not yet large enough to fully offset core business fluctuations, the rapid growth of cheese and milk powder businesses has opened long-term growth space. From nationwide deployment of pasteurized fresh milk, to scene-based expansion of cheese, and dual-line efforts in adult and infant formula milk powder, Mengniu is steadily building a full-category matrix aligned with consumption upgrades and the development of a Healthy China.

Looking at the entire industry, Mengniu’s transformation is a microcosm of China’s dairy industry bidding farewell to rapid growth and entering a phase of structural adjustment. Currently, the industry faces dual pressures: upstream raw milk prices have fallen below cost levels, putting pressure on small and medium-sized farms; downstream demand remains weak, leading to price competition and limited profit margins for companies. The growth model relying on demographic dividends, penetration rate increases, and high-endization is being fundamentally reshaped, shifting from scale expansion to quality and efficiency. Encouragingly, many institutions predict that raw milk prices will bottom out in 2026, with herd reduction nearing completion, and supply-demand patterns continuing to improve, signaling an industry recovery.

In response to industry changes, deep processing has become a key breakthrough and a core focus for Mengniu’s future layout. Currently, China’s dairy deep processing rate is below 15%, far lower than developed countries’ 40%-50%, indicating huge potential for high-value products. Mengniu is closely following policy guidance and industry trends by accelerating the development of high-end categories such as mascarpone cheese, lactoferrin, and probiotics, promoting industry transition from “selling raw milk” to “selling technology and value.” Policy support includes joint initiatives by six departments to promote dairy technological innovation and consumer cultivation, and the “China Food and Nutrition Development Outline” explicitly aims to increase dairy consumption, providing strong backing for the industry’s deep processing transformation.

Undeniably, Mengniu still faces challenges: the high proportion of liquid milk, the need to scale up emerging categories, and the time required for deep processing technology and consumer education. Its operating profit margin also did not meet early expectations, indicating room for efficiency improvements. However, these are common issues during industry transformation rather than internal bottlenecks. The low per capita cheese consumption in China and high technical barriers for high-end raw materials are being gradually addressed through continuous investment by leading companies. Mengniu’s innovative exploration is paving a differentiated, high-value development path for the industry.

Having undergone deep adjustment, Mengniu has completed risk clearing and strategic calibration, standing at a new starting point. Short-term revenue decline is a necessary pain of proactive transformation, while profit rebound and business restructuring signal long-term value enhancement. Against the backdrop of approaching industry turning points and anticipated consumption recovery, Mengniu’s solid fundamentals, diversified growth engines, and forward-looking industry layout give it core advantages to navigate cycles and lead the industry.

From prioritizing scale to emphasizing quality, from extensive expansion to meticulous operation, Mengniu’s transformation journey exemplifies China’s dairy industry’s pursuit of high-quality development. In the future, with ongoing asset optimization, rapid growth of emerging categories, and effective deep processing deployment, Mengniu is expected to achieve synchronized growth in scale and profit, with stronger resilience and innovation, leading China’s dairy industry out of the winter and into a new stage of higher added value and competitiveness.