Mengniu's Net Profit Plunges by 97.8%

Mengniu's Net Profit Plunges by 97.8%, and the Baijiu Industry Also Struggles to Smile

In the highly competitive business market, the development trends of enterprises always draw much attention. Recently, an annual report of Mengniu Dairy has been like a huge stone thrown into a calm lake, causing ripples. On the evening of March 26, 2025, Mengniu's released annual report showed that in 2024, Mengniu achieved a revenue of 88.6748 billion yuan, a year-on-year decrease of 10.1%, and the net profit attributable to the parent company plummeted to 104.5 million yuan, with a year-on-year decline of as high as 97.8%. Compared with the net profit attributable to the parent company of 4.809 billion yuan in 2023, this data represents a "cliff-like drop". What exactly has happened to Mengniu, which used to be so glorious in the dairy industry, to lead to the current situation of both reduced revenue and profit?

 Blind Acquisitions: Trapped in the "Quagmire" of Assets

As one of the "two giants" in the dairy industry, Mengniu's past glory is obvious to all. Even in a dominant position in the market, it shouldn't have ended up in such a "downcast" state. However, in order to surpass its competitor Yili and take the top spot in the industry, Mengniu seemed too eager for success during its development process and excessively pursued scale expansion, thus falling into the trap of blind acquisitions and purchasing a large number of assets of poor quality.

Take 2019 as an example. Mengniu spent a huge sum of 7.1 billion yuan to acquire the Australian milk powder brand Bellamy's. However, this seemingly ambitious acquisition turned out to be a nightmare. Bellamy's revenue dropped sharply from its peak of 1 billion yuan to less than 100 million yuan, directly resulting in a goodwill impairment of 3.8 to 4 billion yuan for Mengniu. Looking at the jointly-operated Modern Dairy, due to the decline in raw milk prices and the shrinkage of biological assets, Mengniu bore a loss of 790 to 900 million yuan. There is also the acquisition of Yashili for billions of yuan. Its revenue declined from 3.89 billion yuan in 2013 to 2.2 billion yuan in 2016, and in 2016 alone, the goodwill impairment was 2.254 billion yuan. Such a series of acquisition behaviors that "lose both the lady and the soldiers" are difficult for even a powerful enterprise to withstand. Therefore, to some extent, the plunge in Mengniu's net profit is an inevitable consequence of its blind expansion and decision-making mistakes.

If the blind acquisitions by the former "commander" Lu Minfang brought heavy pain to Mengniu, then the current "commander" Gao Fei shoulders a more arduous mission. Gao Fei not only needs to set things right and conduct a thorough "disinfection" of the past mistakes but also needs to put forward practical development strategies to find a new way out for Mengniu.

Currently, from a theoretical perspective, the "One Body with Two Wings" strategy proposed by Gao Fei is in the right direction. The "one body" focuses on core businesses, covering areas such as liquid milk, milk powder, ice products, and cheese. The "two wings" refer to innovative businesses and internationalization drivers. This strategy aims to stabilize the existing businesses in the basic market and actively expand international channels and new businesses at the same time, so as to achieve the diversified development of the enterprise.

However, the ideal is plump, while the reality is skinny. Although the direction is clear, Mengniu faces many challenges in the actual implementation process. Judging from the population data trends, in the next few years, the existing market of the dairy industry is expected to shrink, which undoubtedly brings huge pressure to Mengniu's core business. In the international market competition, it is by no means an easy task for Mengniu to stand out. It requires a large investment of time, energy, and resources. In this situation, Mengniu has to adopt the strategy of "cutting losses" to reduce costs and improve efficiency. For example, regarding the much-concerned staff reduction incident last year, according to public information, at the end of 2023, the number of Mengniu employees was 46,064, and by the end of 2024, it had decreased to more than 41,000, a reduction of about 5,000 people in total. Although this approach can help the enterprise reduce its burden to a certain extent, it is also necessary to avoid overly hurting the feelings of employees, because after all, employees are an important cornerstone of the enterprise's development.