Core Insights - FrieslandCampina has appointed Zhang Zhanhong as the new president of its professional nutrition division in China, effective November 1, 2024, bringing over ten years of experience in managing infant formula brands in the Chinese market [1][2] - Zhang has emphasized a strategic framework focused on "focus, agility, and cohesion" to strengthen the core business [1] Market Position - FrieslandCampina's brand, Royal FrieslandCampina, has become the top-selling single SKU in China's infant formula market, with over 10 million cans sold in 2024 [3] - The company holds the third-largest market share in the infant formula sector in China, leading among international brands [3] Sales Performance - In 2024, the Chinese infant formula market experienced a 9.8% decline in offline sales, with a 9.4% drop in volume and a 0.3% decrease in average price [4] - Despite the overall market decline, FrieslandCampina's professional nutrition segment saw a 6.0% revenue increase to €1.218 billion (approximately ¥9.277 billion) and a 16.4% rise in operating profit to €227 million (approximately ¥1.729 billion) [9] Birth Rate Impact - The decline in marriage registrations in China, down over 20% in 2024, suggests a continued decrease in newborn numbers [5] - However, the birth rate saw a slight recovery in 2024, with 9.54 million newborns, ending a seven-year downward trend, which positively impacted the infant formula industry [9] Market Trends - The infant formula category's growth rate improved from -5.9% in 2024 to -0.8% in Q1 2025, with segments one and two showing positive growth [10] - The ultra-premium segment has become mainstream, with the ultra-premium+ market growing by 13.3% in early 2025 [13] Strategic Focus - FrieslandCampina plans to leverage its milk source advantages and enhance product quality through increased R&D investment and new product launches [16] - The company aims to balance channel strategies, ensuring cooperation with partners for mutual benefits [20] Pricing Strategy - FrieslandCampina is focused on maintaining price consistency across online and offline channels to avoid competitive pricing pressures [21] - The company does not plan to adjust its product mix or pricing strategy significantly [21] Competitive Landscape - Domestic brands like Yili and Feihe are utilizing birth subsidies to promote their ultra-premium products, which has affected market pricing dynamics [23] - FrieslandCampina is evaluating solutions to align its product offerings with consumer needs, potentially influencing birth rates [24][25]

Core Viewpoint - The dairy industry, particularly the infant formula segment, is facing challenges as major players like Mengniu and Yili transition away from high growth models, leading to significant goodwill impairments and revenue declines [3][6][10]. Group 1: Company Performance - Mengniu's revenue in 2024 was 88.68 billion, a year-on-year decline of 10.1%, with a net profit of 1.05 billion, down 97.8% due to goodwill impairment related to Bellamy [3][12]. - Yili reported revenue of 115.78 billion in 2024, a decrease of 8.24%, with a net profit of 8.45 billion, down 18.94%, impacted by a 3.03 billion goodwill impairment from Aoyou [3][12]. - Both companies are experiencing a shift in focus towards profitability rather than growth, with Yili's milk powder and dairy products achieving a gross margin of 41.02% in 2024, compared to lower margins in liquid milk [11][12]. Group 2: Market Dynamics - The infant formula market is under pressure, with offline sales in 2024 declining by 9.8% in value and 9.4% in volume, reflecting a saturated market due to declining birth rates [8][12]. - Yili's acquisition of Aoyou and Mengniu's acquisition of Bellamy were strategic moves aimed at capturing high-end market segments, despite the current market downturn [6][8]. - The competition in the high-margin infant formula segment is intensifying, with both companies aiming to enhance product value and structure to adapt to market changes [11][17]. Group 3: Future Strategies - Mengniu's new president, Gao Fei, has introduced a strategy focusing on core business and innovation, aiming for revenue recovery by 2025 [17]. - Yili plans to improve product value through diversified operations and global expansion, with expectations of continuous profit improvement in existing businesses [17]. - Both companies are committed to returning to previous stock price highs, with Yili maintaining a dividend payout ratio of 91.4% in 2024, while Mengniu increased its payout ratio to 45% [14][17].