The thirty-year history of China's dairy industry is largely a story of the intense rivalry between Yili and Mengniu. From battles over milk sources and price wars to marketing competitions, and from the race for 100-billion-yuan revenues to the contest for global dairy rankings, these two leading companies have long been framed within the narrative of a "dairy duopoly." However, the general consumer may not realize that the strategic gap between them has been widening significantly.
Financial reports indicate that Yili is deepening its path as a value-oriented leader across the entire industry chain, while Mengniu has pivoted to become a cyclical player focused on profit recovery. The chasm of over 100 billion yuan in market capitalization and a nearly seven-fold difference in profits between them is not merely a matter of scale but reflects a fundamental divergence in their underlying business logic.
I. The Real Divide Behind the Numbers
On March 20, Mengniu released its 2025 annual results announcement via the Hong Kong Stock Exchange, presenting a set of contrasting figures that quickly sparked market discussion. Official data showed that Mengniu's annual revenue for 2025 reached 82.245 billion yuan, a year-on-year decrease of 7.3%. However, its net profit attributable to shareholders surged to 1.545 billion yuan, a staggering 1378% increase from the 104.5 million yuan recorded in 2024, marking the largest year-on-year profit growth since its listing.
This paradox of declining revenue alongside soaring profits was not due to a fundamental improvement in core operations but resulted from a one-time financial clearance leading to a numerical reversal. In fact, after excluding the impact of 2.32 billion yuan in asset impairment losses and losses from associates, Mengniu's adjusted net profit for 2025 was 3.96 billion yuan, still representing a 10.7% year-on-year decline. This indicates that the profit surge was essentially a financial recovery from shedding historical burdens, rather than a substantive enhancement of operational capabilities.
In contrast, Yili demonstrated a fundamentally different growth quality with its performance in the first three quarters of 2025. Reports showed that the company achieved a total operating revenue of 90.564 billion yuan during this period, achieving positive year-on-year growth despite overall industry pressure. Net profit attributable to shareholders was 10.426 billion yuan, with non-GAAP net profit exceeding 100 billion yuan for the first time, reaching 10.103 billion yuan, an increase of 18.73% year-on-year. The net profit from just the first three quarters alone was 6.7 times Mengniu's full-year net profit.
A more critical divergence lies within their business structures. In 2025, Mengniu's liquid milk business generated revenue of 64.939 billion yuan, an 11.1% year-on-year decline, still accounting for 79% of total revenue. This indicates that, two decades on, Mengniu remains heavily reliant on this single category, making its overall performance directly vulnerable to fluctuations in the industry cycle.
Yili's business structure, however, has completed a thorough transformation from "single-wheel drive" to "multi-engine parallel operation." In the first three quarters of 2025, the revenue contribution from Yili's liquid milk business decreased to 60.66% from 77.89% in 2021, while the combined contribution from milk powder, dairy products, and cold beverage businesses approached 40%. Specifically, the milk powder and dairy products segment achieved revenue of 24.261 billion yuan, a growth of 13.74% year-on-year.
Yili's 2025 interim report revealed that its retail sales market share for overall infant formula milk powder (including cow and goat milk powder) reached 18.1%, ranking first nationally. Consequently, Yili has successfully achieved a "grand slam" in both adult and infant milk powder segments.
Notably, in 2025, the average price of fresh raw milk in China's main producing provinces was approximately 3.06 yuan per kilogram (Ministry of Agriculture and Rural Affairs data), a decrease of 7.8% year-on-year, hitting a near-decade low since 2016, leading to widespread losses for large-scale farms. Meanwhile, the market size for domestic ambient liquid milk showed minimal growth, entering a phase of competition for existing market share.
It is precisely this industry backdrop that has magnified the core difference between the two companies: while Mengniu's fundamental liquid milk business experienced a double-digit decline, dragging overall revenue into negative territory, Yili's second growth curve perfectly offset the industry's downward pressure, achieving stable growth in both revenue and profit.
Capital market valuations have long reflected this divergence. As of the market close on April 17, 2026, Yili's total market capitalization stood at 162.43 billion yuan, while Mengniu's was 61.75 billion HKD. Converted at that day's exchange rate of 0.931, this is approximately 57.5 billion yuan, resulting in a market cap gap exceeding 100 billion yuan. In terms of PE valuation, Yili's TTM PE remains stable around 15x, indicating long-term market recognition of its profit certainty. In contrast, Mengniu's TTM PE is significantly distorted by non-recurring gains and losses, showing high volatility, with the market's valuation premium still anchored to cyclical expectations of "profit recovery elasticity."
II. Divergent Paths: From Head-to-Head Competition to Different Trajectories
The strategic divergence between Yili and Mengniu did not happen overnight. Throughout three decades of development, the two companies long competed on similar dimensions: both originated in Inner Mongolia, both focused on the liquid milk sector, both relied on channel expansion and marketing investment for growth, and both sought second growth curves through mergers and acquisitions.
However, after 2015, their strategic choices began to show fundamental differences, ultimately leading them down entirely separate paths.
The first core divergence lies in the essence of their profit models: deep cultivation of value across the entire industry chain versus profit recovery dependent on cyclical fluctuations. Yili's core strategy, consistently maintained for twenty years, has been a full-industry-chain layout. From upstream milk source construction to midstream production and R&D, and downstream channel and brand building, Yili has achieved deep self-control over the entire dairy chain. By 2025, Yili controlled large-scale farm clusters nationwide, with 100% controllable milk sources, ensuring raw milk quality and supply chain stability from the source.
This comprehensive layout's advantage was magnified following the implementation of two major industry policies in 2025. On September 16, 2025, the updated GB 25190-2024 "National Food Safety Standard - Sterilized Milk" came into effect, explicitly stating that raw materials for sterilized milk can only be raw milk, prohibiting the use of reconstituted milk. This policy directly reshaped industry competition rules, permanently widening the gap between companies with stable, self-controlled milk sources and those reliant on external milk powder procurement.
On December 26 of the same year, China's Ministry of Commerce issued a preliminary ruling imposing temporary countervailing measures on imported dairy products like cheese and cream originating from the EU. On February 27, 2026, a final ruling confirmed a five-year countervailing duty on these products, with rates up to 42.7%. This policy created a clear window for import substitution in the domestic deep-processing dairy segment, an area where Yili had already established technological and production capacity, breaking foreign monopolies with its self-developed whey protein concentrate technology.
Mengniu's profit model, conversely, has struggled to escape dependence on the industry cycle, shifting its strategic focus from early "scale priority" to the current "profit recovery." To achieve a profit turnaround, Mengniu recorded a one-time asset impairment loss of 2.319 billion yuan in 2025, clearing idle production equipment and land assets, while also reducing sales expenses and optimizing the supply chain for cost efficiency, pushing its gross margin to a record high of 39.9%.
However, this profit recovery is not built upon core barriers within a full industry chain. Mengniu's milk supply heavily relies on its associate, China Modern Dairy. According to Modern Dairy's 2025 results, it reported a net loss of 1.136 billion yuan, indicating that upstream milk source volatility remains a latent risk for Mengniu's supply chain.
The second core divergence is the fundamental difference in growth logic: multi-engine endogenous growth versus passive contraction reliant on a single category. The ultimate challenge for the dairy industry is clear: the ambient liquid milk market has peaked. In this era of competition for existing share, the winner will be whoever can build a sustainable second growth curve to weather cycles.
Yili's choice has been a dual-drive approach of "independent cultivation plus M&A integration," spending twenty years building milk powder and cold beverages into two multi-billion-yuan profit engines. In the cold beverage sector, Yili's three decades of independent cultivation, from product innovation to channel penetration, have built an unshakable industry barrier. In the first three quarters of 2025, its cold beverage revenue was about 1.75 times Mengniu's full-year ice cream revenue. In the milk powder sector, Yili achieved deep technological and channel synergy through the acquisition of Ausnutria, achieving full category coverage from infant to adult formula, culminating in its top market share position in 2025, breaking the foreign brand monopoly in the premium segment.
Mengniu's efforts to build a second curve, however, have remained trapped in a model of extensive expansion through acquisitions. Its 2013 acquisition of Yashili for 12.4 billion HKD and the 2019 purchase of Bellamy's for 1.46 billion AUD (approx. 7.8 billion HKD) ultimately became financial burdens due to integration failures, leading to cumulative goodwill impairment exceeding 5 billion yuan, with Yashili delisting in 2023. Mengniu also fully divested its stake in Junlebao in 2019, missing the golden development period for milk powder. Currently, the only bright spot in Mengniu's second-curve strategy is the cheese business from its controlling stake in Miaokelando, which generated revenue of 5.266 billion yuan in 2025, representing only 6.4% of total revenue.
The third core divergence lies in organizational governance: long-term stable strategic focus versus strategic inconsistency amid management changes. The sustained development of consumer giants is inseparable from stable governance and consistent strategic focus. This is the most easily overlooked, yet most fundamental, underlying difference in the thirty-year trajectories of Yili and Mengniu.
Since Pan Gang was elected Chairman of the Yili Group in 2005, the core management has remained stable for two decades. The core strategy of "full industry chain development + diversified layout + innovation drive" has been consistently applied, never swaying due to industry cycles or short-term performance pressures. Whether persisting with milk source construction during early industry price wars or continuously cultivating the second curve as liquid milk peaked, Yili's every move has followed a long-term strategic logic.
Following COFCO's takeover, Mengniu experienced frequent changes in core management, with two rounds of leadership changes since 2019, and adjustments to the CEO and Chairman positions in both 2021 and 2024. Each management change brought significant shifts in strategic direction—from the early "double 100-billion" scale expansion, to later "focus on core categories," to the current "One Body, Two Wings" strategy introduced by Chairman and CEO Gao Fei in 2024. Mengniu's strategic focus has repeatedly shifted, with frequent adjustments to M&A integration, channel systems, and marketing policies.
This difference in governance is directly reflected in performance outcomes. The strategic stability from consistent management allowed Yili to maintain R&D investment and full-chain layout even during industry downturns, achieving counter-cyclical growth. In contrast, the strategic inconsistency from management changes caused Mengniu to repeatedly miss opportunities, ultimately trapping it in a cyclical loop of "contraction-clearance-recovery" in the era of存量 competition.
III. The Final Showdown: Value vs. Cycle — A Duopoly or a Dominant Leader?
The dairy industry reached a critical inflection point in 2026. According to Haitong International, following a deep clearance in 2025, the industry experienced a "four-bottom resonance" of demand, cost, competition, and capital in Q1 2026, marking a formal cyclical turnaround.
However, this cyclical reversal will not alter the fundamental path divergence between Yili and Mengniu; instead, it may further widen their core gap. Because cyclical benefits only favor the prepared.
For Yili, the advantages of its full-industry-chain layout and balanced multi-category development will be fully unleashed during the industry recovery. The implementation of the new sterilized milk standard will continue to amplify its supply chain advantage from self-controlled milk sources. The EU countervailing measures provide a 2-3 year import substitution window for its deep-processing businesses like milk powder and cheese. Continued leadership in categories like cold beverages and low-temperature milk will further consolidate its leading position.
Haitong Securities believes that Yili, as a full-chain leader, is the primary beneficiary of the dairy cycle reversal, with growth certainty and anti-cyclical capabilities unmatched in the industry.
For Mengniu, the core challenge in 2026 remains the sustainability of its profit recovery. As raw milk prices bottom out and asset impairment clears, Mengniu's net profit may potentially double in 2026, returning to historical highs. However, this profit growth still heavily relies on cyclical tailwinds.
More importantly, this strategic divergence could end the two-decade-long "duopoly" structure of China's dairy industry. Previously, industry structure was defined primarily by revenue scale. But now, with Yili's profit scale exceeding Mengniu's by over six times, and with fundamental differences in business structure, profit models, and growth logic, defining their positions as a "duopoly" has lost its meaning.
China's dairy landscape is shifting from a "two-power struggle" to a "dominant leader + strong competitors" model, measured comprehensively by revenue, profit, and market share. Yili, with its full-chain advantage and balanced category development, firmly holds the absolute leading position. Mengniu, along with regional leaders like Bright Dairy and Xinhuang, occupies the second tier, seeking growth opportunities in niche segments.
The outcome of this thirty-year rivalry was never determined by a single marketing campaign, a price war, or even a scale race, but by the two companies' differing understandings of business essence. Mengniu consistently sought optimal solutions within the industry cycle, using scale expansion to capture market share and financial clearance to repair profits, always playing a cyclical game. Yili, however, consistently sought long-term answers within the industry's fundamentals, spending twenty years deepening its full industry chain, building technological barriers through sustained R&D, and patiently cultivating its second growth curve, ultimately investing in value over time.
The story of the two dairy giants will ultimately demonstrate to the market that in the final showdown between value and cycle, the winner is always time, and long-termism.
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