Mengniu has been ordered by the Jiangsu Provincial Higher Court to pay 5 million yuan in damages after being found guilty of unfair competition for mimicking the packaging of Yili's “Classic” pure milk with its own “Premium Ranch” product. This lengthy legal battle, which endured both first and second trials, concluded recently with the court ruling in favor of Yili, requiring Mengniu to cease using the disputed packaging immediately.
The court's judgment revealed that Yili provided evidence of multiple instances of infringement by Mengniu over the past decade. Based on two cases cited by Yili, along with this latest compensation, Mengniu's total liability to Yili exceeds 8 million yuan. Inner Mongolia Yili Industrial Group Co., Ltd. (600887.SH) and Mengniu Dairy (2319.HK) are both leaders in China's dairy industry; the increasing competition between them has led to several disputes, sparking questions about their competitive dynamics. Independent dairy analyst Song Liang believes that Yili is being somewhat pedantic about this issue while Mengniu does not seem to take it as seriously, considering the overall impact to be minimal and common in the industry. Despite the ruling against Mengniu, Yili has itself occasionally imitated Mengniu’s packaging, as both companies offer extensive product lines with many similar items.
According to Song, consumers are largely indifferent to these packaging disputes, highlighting that the real concerns for Mengniu are related to safety and quality. In comparison, Yili has performed better in these areas over the past two years, prompting Mengniu to work hard to improve its image.
As of the market close on October 17, Yili's shares were priced at 27.35 yuan each, down 1.65%, with a total market cap of 173 billion yuan. Mengniu's stock closed at 14.09 HKD, down 2.36%, with a total market cap of 55.004 billion HKD (approximately 50.499 billion yuan).
Judicial Proceedings on Compensation of 5 Million for Mengniu The civil judgment from the Jiangsu Higher Court detailed that Yili first launched its “Classic” pure milk product in 2006, and the related packaging began being used for commercial sales in August 2020. Within a month of its market release, Yili applied for a design patent on the packaging and received the authorization announcement on February 23, 2021. However, because it was deemed “previously public,” this patent was declared invalid. For instance, the timestamps on photos uploaded by consumers of the involved packaging products on platforms show that Yili's “Classic” pure milk was publicly available starting from September 2020.
Despite the patent being ruled invalid, Yili’s “Classic” pure milk packing has built substantial market recognition due to continuous and extensive use and promotion, enhancing its ability to identify the source of its products. Before Mengniu's “Premium Ranch” was set to hit the market in December 2023, Yili’s “Classic” pure milk had already been extensively sold nationwide, achieving over 40 billion yuan in sales and capturing approximately 10% of the liquid dairy market, with advertising expenditures reaching tens of billions.
Mengniu argued that it launched the “Premium Ranch” brand in 2014 and started producing and selling similar products, claiming that their products were distinct and not similar to Yili's “Classic.” However, Yili noted that Mengniu's 18 attempts to register “Premium Ranch” were all rejected and stated that the packaging of the accused infringing products bore a high similarity to Yili's products.
The judgment also showed that Yili’s “Classic” pure milk (thin brick and Tetra Pak versions) amassed total sales of about 6.458 billion yuan from 2021 to the first half of 2024. The sales of Yili's products accounted for 11.33%, while Mengniu's sales represented only 0.13%. This led to a calculated sales figure of approximately 74.1038 million yuan for Mengniu's “Premium Ranch” 12-pack bricks for the first half of 2024.
It was further revealed that, from December 2023 until September 1, 2024, Mengniu's products had been on sale for nine months, resulting in an estimated infringement profit of about 34.8251 million yuan, and about 19.2299 million yuan based on Yili's operating profit margin.
Yili demanded compensation totaling 20 million yuan for economic losses and reasonable costs incurred in terminating the infringement actions, as well as a statement published in designated newspapers to mitigate the impact. However, the court determined that this case was classified as an unfair competition dispute, primarily involving property rights, and Yili failed to provide evidence to prove that the alleged infringing actions harmed its commercial or product reputation. Therefore, the court only supported the cessation of infringement and damages compensation without endorsing Yili's publication request.
By 2024, the first-instance judgment deemed that Mengniu’s “Premium Ranch” packaging was substantially similar to Yili’s “Classic” packaging, which could easily confuse consumers or lead to misidentification. It ordered Mengniu and a local supermarket to immediately halt the unfair competition actions effective from the date of the ruling; Mengniu was to compensate Yili 5 million yuan within 15 days of the ruling. If Mengniu failed to fulfill this financial obligation on time, it would be required to pay double the interest on the delayed payment. The first-instance case processing fees amounted to approximately 141,800 yuan, with Yili responsible for 61,800 yuan and Mengniu for 80,000 yuan.
In 2025, during the appeal, the court found that the color, style, layout, characters, and overall artistic design of Mengniu’s “Premium Ranch” packaging bore significant resemblance to Yili’s packaging for “Classic” pure milk. The court rejected Mengniu's appeal and upheld the original ruling. The appeal processing cost was around 47,800 yuan, with Yili responsible for 1,000 yuan and Mengniu for 46,800 yuan.
Mengniu’s Third Loss in Packaging Disputes Against Yili The final ruling from the higher court noted that Yili has experienced multiple infringements by Mengniu over the past decade, including a case in 2015 regarding the "Future Star Yogurt Drink" packaging, which resulted in Mengniu being ordered to compensate Yili 2.15 million yuan for unfair competition. In 2023, Yili filed a case against Hefei Mengniu Modern Dairy for its "Modern Dairy Pure Milk" packaging, which ended in a settlement after Mengniu altered its packaging and paid 980,000 yuan.
Besides milk products, Yili pointed out that Mengniu applied to register the trademark “Crispy Zeal” in 2010, which was deemed very similar to Yili's registered product “Crispy Love.” Yili contested this trademark, leading to it being denied registration, which Mengniu unsuccessfully sought to challenge.
Additionally, Yili accused Mengniu of concealing its distinctive “Mengniu” trademark, making the packaging a sole identifier and increasing the potential for confusion. They also asserted that Mengniu altered the originally black-and-white “Premium Ranch” logo to a green background identical to Yili’s design for usage, accusing it of intentional copying.
Song Liang believes that Yili also has products that mimic Mengniu’s packaging, but the reasons why Mengniu does not litigate are unclear. He suggests that if Mengniu files a lawsuit against Yili, it could also have a winning chance based on existing advertising laws that define a resemblance as acceptable with a similarity rate of over 90%, including images, text, or prominently similar marks.
He further stated that, in business, competitors typically adapt and refine their products based on successful offerings from others. Particularly for leading companies, there is a tendency to follow products across various segments, a common phenomenon within the industry. Due to the broad and competitive milk market, where consumers often overlook distinctions, it is common for both companies to invest heavily in packaging to enhance sales.
Intensifying Industry Competition; Experts Urging Cooperative Relations Between Giants The legal battles between Yili and Mengniu reflect the increasingly fierce competition within the industry. For instance, Royal Group Co., Ltd. (002329.SZ) stated in its 2024 annual report that China's dairy sector is transitioning to higher quality development amid dual pressures: a decrease in raw milk prices resulting in temporary oversupply and tightening consumer budgets reducing the growth rate of dairy consumption, which poses challenges to market growth. In this context, many dairy brands are turning to pricing strategies to stimulate consumption through sales promotions.
This competitive strain is also evident in the financial reports of the two leading dairy firms. Mengniu's 2025 midterm report highlighted that due to a phase of surplus raw milk supply and lower than expected recovery in demand, it experienced revenues of RMB 41.5672 billion, a 6.9% year-on-year decline, though gross margins improved by 1.4% to 41.7% and operational profit reached 3.538 billion yuan with an operational profit margin increase of 1.5% to 8.5%.
In contrast, Yili's revenue for the first half of 2025 was about 61.777 billion yuan, reflecting a 3.49% year-on-year growth. However, its net profit attributable to shareholders dropped 4.39% to around 7.201 billion yuan. This data indicates that Yili's revenue outpaced Mengniu's by 20 billion yuan for the period. For the first half, Yili’s liquid dairy business recorded revenues of 36.126 billion yuan and its powdered milk and dairy product segment achieved 16.578 billion yuan, both ranking first in market share. Yili noted impressive growth rates in key categories during this period, like a 14.4% increase in revenue from overseas cold drink sales and a staggering 65.7% rise from infant goat milk powder sales.
From the results of the first half of this year, it's evident that Yili's revenues exceeded Mengniu's by 20 billion yuan. Song attributes this gap, formed over ten years, to three critical categories: heat-treated yogurt, ice cream, and powdered milk, with powdered milk particularly standing out in recent years. Nonetheless, although Mengniu and Yili haven’t widened the competitive distance significantly, Mengniu holds a higher market share in low-temperature products, albeit with lower profitability compared to Yili.
Looking toward future trends, Song observes that the leading firms have displayed divergent strategic plans over the past five years, making product packaging conflicts like the current one more likely. He emphasizes that since five years ago, Mengniu has stopped focusing solely on Yili.
Historically, Song points to the competition between Coca-Cola and Pepsi, which eventually led to the establishment of a cooperative body to moderate disputes, paving the way for healthy competition. Song advocates that similar cooperation between Yili and Mengniu could lead to mutual benefits. He highlights the need for both giants to build a cohesive relationship amidst current market chaos, laying a solid foundation for future growth as they aspire to be recognized globally as leading dairy companies, akin to Coca-Cola and Pepsi. To achieve this, resolving domestic disputes and reaching an understanding in product design and R&D within a clear legal framework is essential to prevent further conflicts.
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