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2881 Words Aug 2nd, 2011 12 Pages

Mrs Zhang’s farmyard, cows, and watchdog.

Founded in 1999, Mengniu Group (Mengniu) has grown rapidly to become the leading dairy product manufacturer in China. Its principal products are liquid milk (UHT milk,1 milk beverages, and yogurt), ice cream, and other dairy products such as milk powder, milk tea powder, and tablets. Mengniu has overtaken its long-established state-owned rivals through dedication to quality and innovation in all aspects of its business, including marketing, governance, and aggressive adoption of international quality and best practice standards. CDH China Fund, an IFC investee private equity fund, invested in Mengniu in 2002. Mengniu went public in 2004 and trades on the
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Mr. Niu had worked at Yili for 17 years and his father before him for 38 years. Mr. Niu, and the small but experienced management team he brought with him from Yili, started Mengniu with $12,600 of their own capital.2 Mengniu competes fiercely with Yili and the other big Chinese dairy, Bright Dairy & Food. The three companies collectively controlled approximately 60 percent of the market as of August 2005.3 In only five years, Mengniu has grown explosively, overtaking Yili as the top seller of milk and simultaneously becoming one of China’s best-known brands. According to AC Nielsen, Mengniu was China’s top seller of milk in 2004 with 22 percent of the market and revenues of US$871 million. This represented a revenue increase of 77 percent over the prior year, with an increase in profits of 94 percent or US$38.5 million. In the first half of 2005, sales increased 37

percent to US$578 million and earnings 34 percent to US$30 million, putting Mengniu on track to exceed US$1 billion in sales and US$60 million in profit.4 Mengniu’s success is also a function of its commitment to innovation and quality in the dairy industry which has led it to adopt international best practices and to actively seek technological and operational improvements through joint ventures and demonstration projects with international leaders in the dairy industry.

After each milking, the fresh milk is immediately

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