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Innovation Leads to Mengniu's Success
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At 8:30 pm (Beijing time) on October 22, 2006, Jim Begg, president of the International Dairy Federation (IDF), announced: "This year's top innovation award goes to Deluxe branded milk by Mengniu."


It was the first time that a Chinese dairy maker beat heavyweight rivals from Australia and England - where the industry is much more developed - to win this top award from IDF, the most authoritative institution in the world's dairy industry.


Innovation is the mantra that lies behind Mengniu's stupendous success.


The Mengniu Dairy Industry (Group) Co Ltd, based in Inner Mongolia, has been continuously emphasizing research and development initiatives, and developing more innovative, high-quality and nutritious dairy products to meet more discerning consumer tastes.


The company now applies for a new patent every nine days and invents a new product every six days.


Last November, the company launched a new series called "Fruit Milk Drink", which involved three invention property rights, in Beijing, Shanghai and Guangzhou. The premium milk drink won instant popularity in these cities.


At the beginning of this year, the upgraded yogurt drink "Suan Suan Ru" was put on the market, featuring better nutrition and better capacity of being absorbed by the human body.


These are a few instances of Mengniu's pioneering spirit, which might explain why a small dairy firm established in 1999 has grown into one of the world's largest UHT (ultra-high temperature) milk producers, and has been China's No 1 dairy company for four consecutive years.


Admiration for its innovative spirit is not confined to the dairy industry.


In late 2006, Mengniu was named among the top 50 innovative private enterprises, along with hi-tech companies such as Huawei and Vimicro, by domestic authoritative organizations including the Chinese Academy of Social Sciences, the State Development Research Center and All-China Federation of Industry & Commerce.


Mengniu was the only representative of the dairy industry to make it to the top-50 list.


Yang Wenjun, president of Mengniu, said the company will continue to add muscle to R&D.

Research institute


Just over a month ago, 16 technology providers in the dairy business and research institutes from home and abroad came together to partner Mengniu in its hi-tech dairy research institute in Hohhot, capital of the Inner Mongolia Autonomous Region.


The company plans to build the research institute into a top R&D base for China's dairy industry.


While strengthening its own capacity for innovation, Mengniu has also cooperated with the world's leading dairy producers to introduce better and more products to Chinese customers.


In 2005, it set up a joint venture with Europe's largest dairy producer Arla Foods to manufacture premium milk powder products. And late last year, it formed a joint venture with France's Groupe Danone for yogurt production.


But while seeking such strategic partnerships, Mengniu founder and Chairman Niu Gensheng adheres to two principles.


One is that Mengniu must cooperate with the best companies so that it can bring the most advanced technology to serve domestic consumers.


The other is that the company must have a controlling stake in joint ventures, to ensure the market domination of Chinese brands.


Going abroad


Till 2004, the overseas market remained untapped for the dairy giant. Since then, Mengniu has made inroads into China's Hong Kong Special Administrative Region and Taiwan Province, as well as some Southeast Asian nations.


Last year, Mengniu was the largest exporter among the nation's dairy enterprises.


In Hong Kong, it accounted for about half of the market shares for normal temperature milk and has been listed among the 10 most popular brands.


It has also consolidated its presence in some Southeast Asian countries like Malaysia and the Philippines and entered developed markets such as Canada.


From the beginning of this year, Mengniu has joined forces with overseas players to further explore their markets.


On January 12, Mengniu signed a three-year contract with Malaysia's Hai-O Group, which will act as its sole agent in that country, where Mengniu hopes to gain a 10 percent market share. Ten days later, Mengniu became the official partner of NBA. It is the only dairy company among NBA's 19 official partners.


The company is now trying to progress from a domestic dairy giant to an international one.


In October, the first batch of Mengniu milk products will enter the Moscow market, the first time that Chinese dairy products will enter Europe.


The company has set a series of targets for the 2007-2010 period, and its top priority is to enter the international top 20 dairy producers' list by 2010. Not only that, Mengniu is striving to be among the first 10 on the list.


Yang said the company plans to set up an overseas R&D center, laying a technological foundation for overseas expansion.


(China Daily September 7, 2007)


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