Chinese dairy safety concerns 'adversely affected' 2012 results - Mengniu

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Management

Dairy safety concerns 'adversely affected' 2012 results - Mengniu
Chinese dairy giant Mengniu has reported a drop in both revenue and profits for 2012 – a result it has attributed to continuing consumer concern about the quality and safety of domestically-manufactured dairy products.

The company reported revenue of RMB 36.1bn ($5.8bn, €4.5bn) for the year ended 31 December 2012 – down on the RMB 37.4bn ($6bn, €4.7bn) achieved in 2011. Gross profit for the twelve month period also fell - from the RMB 9.6bn ($1.5bn, €1.2bn) reported in 2011 to RMB 9.05bn ($1.45bn, €1.1bn).

Commenting on its performance in 2012, the company said that consumer confidence in its products had been “adversely affected”​ by a number of quality and safety related incidents in the country in recent years.

“The food quality and safety incident during the year adversely affected consumer confidence and sales to a certain extent,” ​said Mengniu’s 2012 financial report.

Mengniu added, however, that it intends to build on efforts made in 2012 to “identify its shortcomings and perfect its quality management system.”

2012 “laid a solid foundation”

In June 2012, Mengniu announced plans to increase its sourcing of raw milk from large-sale farms and ranches to 100% by 2015. In an effort to achieve this goal, Mengniu revealed plans to build between eight and 12 ranches in 2012.

According to the company, it has already increased the proportion of its milk sourced from these farms and ranches to 93%.

Also in June last year, Mengniu’s largest shareholder, COFCO, signed an agreement with Arla Foods, through which the Danish dairy cooperative became an in-direct shareholder of Mengniu.

Under the deal, it was agreed that a China-Denmark Milk Technology and Cooperation Centre would be established to provide European-standard expertise on milk quality and safety, traceability and controlled milk production.

Through the implementation of these measures and the agreement with Arla, Mengniu believes it has “laid a solid foundation for quality management.”

“In 2013, Mengniu will further implement standardised quality and safety management and introduce more sophisticated internationalised inspection techniques into the production process through cooperation with Arla Foods”

2013 transformation into “New Mengniu”

Mengniu added that despite its efforts, it expects 2013 to be a “challenging year.”

“Mengniu will start afresh and implement measures under the new Five-Year Strategic Plan. With an aim to achieve the transformation into ‘New Mengniu’, Mengniu will sustainably strengthen milk sources and quality control, rationalise brand structure, enhance brand image, adjust product portfolio based on market demand and enhance the international management level,” ​said the company.

“Mengniu is committed to becoming a dairy enterprise that delivers products of the best quality and in the most professional and devoted manner in China, and bringing happiness to consumers.”

Related topics: Business, Food safety, East Asia, Dairy, China

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