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Author: Xu Feng, Editor: Xiao Shimei

Recently, Meiji Landou released its performance forecast for the first half of 2024, expecting to achieve a net profit of 65 million to 90 million, a year-on-year increase of approximately 128% to 215%. It is worth noting that this level has exceeded the net profit for the whole year of 2023.

As the leader in the cheese industry, Meiji Landou can stand out from a group of dairy giants, which is closely related to the management's keen insight into the industry, first-mover advantage and marketing strategy. In the future, how to better combine cheese with Chinese culture, accelerate consumer cultivation and expand the industry base is both a challenge and an opportunity for Meiji Landou.

【Resume high growth】

When talking about the popular online dairy products in recent years, cheese sticks, a sub-category of cheese, is definitely one of them.

As we all know, cheese has always been a traditional table food in Western countries. It has extremely high nutritional value and is mainly made from concentrated milk. The calcium and protein content can be 6-10 times that of ordinary milk. Therefore, cheese is also known as "milk gold".

In my country, cheese is generally considered an imported product. However, ethnic minorities in China have always had the habit of eating cheese. If we want to popularize it on a large scale in China, long-term consumer cultivation is still needed.

Among the specific categories of cheese, cheese sticks are more well-known to the Chinese people. Meiji Landou, which has cheese sticks as its major product, has long been the industry leader. The company made an indelible contribution to the early market cultivation.

Meiji Landou mainly deals in cheese products, and its business includes cheese, liquid milk and dairy products trading. In addition to cheese sticks, its cheese products also include mozzarella cheese, cheese slices, etc., which are used for B-end channels and home cooking scenarios, as well as adult snacks that have been developed in recent years.

Meiji Landou entered the cheese industry early and launched its cheese business transformation strategy as early as 2015. Riding on the rapid development of the industry and the correct marketing and product strategies, its operating income rapidly increased from 512 million in the following year to 4.049 billion in 2023. During the same period, the revenue from the cheese business increased from 138 million to 3.137 billion, and the proportion of revenue also increased from 27% to 77%, and the proportion of gross profit even exceeded 98%.

From the overall performance point of view, after the adjustment period in 2023, the net profit of Meiji Landou resumed high growth in 2024, with operating income of 950 million in the first quarter, a year-on-year decline of 7.14%; net profit of 41 million, a year-on-year growth rate of 70.63%. At the same time, the net profit in the first half of the year is expected to be 65 million to 90 million. Even if the lowest 65 million is calculated, it has exceeded the 63.44 million for the whole year of 2023, sending a positive signal of getting out of the adjustment period.

The substantial increase in the net profit of Meiji Landou in the first half of the year is mainly related to factors such as product structure optimization, cost reduction, and expense control. Meiji Landou's cheese raw materials are mainly imported. In recent years, the decline in international cheese and raw milk prices has reduced the procurement cost of raw materials. At the same time, Meiji Landou began to build its own cheese supply chain in 2023.The launch of domestically produced original cheese also made a certain contribution to cost control.

In terms of products, in addition to upgrading and iterating its major product, cheese sticks, Yili Group has also entered the adult snack field, continuously expanding new consumption scenarios, aiming to cultivate more growth curves, which has now become an important strategic goal for Yili Group.

In addition, the improvement in Meiji Landou's net profit also benefited from cost control. Since 2023, the company has been reducing expenses. For example, the sales expense rate, which accounts for the majority, was 22.4% in the first quarter of 2024, which continued to decline from 23.18% in 2023, while the rate in 2021 and 2022 exceeded 25%.

In terms of profitability, in the first quarter of 2024, Meiji Landou's gross profit margin and net profit margin both increased significantly, with a gross profit margin of 33.09%, an increase of 3.85% compared to 29.24% in 2023; the net profit margin was 4.35%, also a quarterly high since 2023.

From an industry perspective, although growth has faced challenges in the past two years, it remains a highly prosperous blue ocean track in the long run.

[Still a high-growth track]

Compared with overseas, my country's cheese industry is still in its early stages of development.

on the one hand,my country's cheese consumption is still relatively low and its output is negligible compared to that of foreign countries.According to research by Great Wall Securities, in 2022, my country's per capita cheese consumption was only 0.2 kilograms, significantly lower than South Korea's 2.32 kilograms and Japan's 2.91 kilograms, and even less than one-tenth of Japan and South Korea, not to mention other European and American countries.

Cheese production also relies heavily on imports. According to Zhiyan Consulting data, in 2021, the cheese production of the EU and the United States accounted for 75.74% of the world's total. Among them, the EU's cheese production in 2021 was 10.35 million tons, accounting for 47.35% of the global production, and the United States' production was 6.206 million tons, accounting for 28.39%. my country's production was only 153,300 tons, accounting for less than 2%.

With the increasing popularity of Western catering culture in China and the guidance of national policies, the cheese industry has great potential for future growth.

According to Great Wall Securities Research, the scale of my country's retail cheese market will be 14.294 billion in 2022, with a compound growth rate of more than 20% from 2009 to 2022. According to the three-year action plan for the cheese industry released by the China Dairy Association, the national cheese production will reach 500,000 tons in 2025, and the market scale is expected to exceed 30 billion.

From the perspective of the competitive landscape, the cheese industry is an emerging industry with many participants, but after recent years of market competition, the industry landscape has become stable.

According to Kantar, in 2023, Meiji Landou's cheese market share exceeded 35%, and its cheese stick market share exceeded 40%, ranking first in the industry. In addition, according to Euromonitor statistics, the combined market share of the top five cheese brands has remained stable at around 70% over the past three years.

Although the "seats" in the current cheese industry have been divided, this does not mean that the leading companies can "rest easy". Changes in the market environment still require companies to respond to challenges.

In recent years, on the one hand, the domestic consumer market has been stratified, and the phenomenon of consumption downgrade has become increasingly obvious, which is unfavorable for the cheese industry, which has not yet formed consumption habits and is a non-essential consumer product. In addition, with the slowdown in the growth of newborns, the growth of cheese sticks, a major cheese product, has also been limited.

In this regard, Chai Xiu, president of Meiji Landou, believes that China's cheese industry has entered the 2.0 era, and the era of expanding the category of "cheese +" snacks with the family dining table as an important scene is about to come.

【New stage, new beginning】

The so-called "cheese +" is to extend cheese to as many consumption scenarios as possible, continuously expand the consumer base, and cultivate more big single products like cheese sticks.

The current cheese industry is still in the consumer cultivation stage. When the industry ecology changes, it will test the innovation, marketing and risk tolerance of enterprises. In this regard, the advantages of Meiji Landou as a leader are more prominent.

Just in June, Mengniu officially injected its cheese assets into Yili Group, realizing the business integration of the two companies and using Yili Group as the cheese business operation platform for the entire Mengniu Group.

The asset injection from Mengniu is a powerful combination that will directly increase the revenue scale of Meiji Landou and further expand its market share. In 2023 and the first quarter of 2024, the operating income of Mengniu cheese will be 1.274 billion and 211 million respectively, accounting for 31.46% and 22.21% of Meiji Landou's revenue in the same period.

At the same time, in response to changes in the industry, Meiji Landau continues to expand new product categories.The intention is to break through the circle of scenarios and consumer groups.

In order to get rid of its dependence on its main business of cheese sticks, Meiji Landou is vigorously expanding into the field of adult snacks, which has more room for imagination, such as hand-torn cheese, cheese time series, sugar-controlled snack cheese grains, and mousse cheese cups focusing on the afternoon tea scene for working ladies.

In the second half of 2023, Meiji Landou also launched a cheese platter for wine, hoping to learn from the wine-accompaniment scene of Japanese cheese and cultivate new product categories.

Currently, the positioning of cheese products and how to better integrate cheese with Chinese culture are major issues that the industry needs to consider. Currently, consumers have a high degree of acceptance of cheese as a snack, but Chai Xiu believes thatCheese is by no means limited to being a snack, but is a high-end nutritional product with clear functional value.Cheese category education needs to further strengthen the "functional" label, which is a major difference between cheese and other foods.

Since Meiji Landou's current products mainly focus on children and young consumer groups, Chai Xiu said that in the future it will also enter the cheese snack series for all groups and all scenarios, including functional cheese products for middle-aged and elderly groups.

In terms of integration with Chinese culture, it will take time for cheese products to enter Chinese families' tables. Although the market is huge, changing traditional Chinese eating habits still requires a long period of consumer cultivation, which will inevitably cost a lot of time and money. For the leading company Meiji Landou, this is destined to be a difficult road.

From the performance point of view, the high growth of Meiji Landou's net profit in the first half of the year means that the effect of the business strategy transformation is beginning to show. In the face of changes in the market environment, the multi-category and multi-scenario product route has added more driving force to the company. In the future, Meiji Landou still needs to continue to work hard and deepen its scene cultivation, and a new journey has begun.

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