Mengniu Advances Under Pressure Toward 2025: Slight Decline in Operating Profit Margin, Awaiting Industry Turning Point in 2026

Mengniu’s latest 2025 earnings forecast shows the company’s total annual revenue is expected to decline by 7% to 8% year-over-year, which is consistent with the revised guidance at the mid-year performance meeting. Despite ongoing pressure on revenue, the management’s previously set operating profit margin target has not been fully achieved. According to the announcement, the operating profit margin for 2025 is expected to be between 7.9% and 8.1%, slightly down from 8.2% in 2024.

Looking back at the release of the 2025 semi-annual report, management was optimistic about the profit outlook for the second half of the year. At that time, it was expected that although revenue growth would face pressure, the decline in raw milk prices would improve gross margins, combined with continued efforts to reduce costs and increase efficiency, making it possible for the full-year operating profit margin to stay level with 2024. However, the latest forecast indicates a slight gap between actual performance and management’s expectations.

To respond to industry cyclical adjustments, Mengniu has further intensified asset optimization. The company announced plans to recognize impairment losses of 2.2 to 2.4 billion yuan on idle production equipment and some financial assets with recovery risks. This figure is lower than the 4 billion yuan recognized in 2024 due to goodwill impairment of Bellamy. Based on this, Mengniu has set its full-year net profit forecast between 1.4 billion and 1.6 billion yuan.

Positive signals are emerging at the business level. Thanks to stabilized raw milk prices and a rebound in consumer demand, liquid milk revenue in the second half of 2025 has increased month-over-month. Non-liquid categories such as fresh milk, milk powder, and cheese maintained double-digit growth throughout the year, with product diversification becoming more evident. Notably, Mengniu is deepening its B2B supply chain layout for tea drinks and coffee through the “Milk Cube” division, aiming to build new growth drivers.

The industry as a whole has not yet exited the adjustment period. Channel feedback indicates that the dairy market during the 2025 Spring Festival was lackluster, with both Yili and Mengniu experiencing single-digit revenue declines, with Mengniu’s decline being relatively larger. Wang Xuewei, partner at Siyuan Hengyue, pointed out that, besides the ongoing supply-demand imbalance, the increasing diversification of holiday gift markets is also strengthening the substitution effect on traditional dairy products, which is an important factor.

There are positive changes upstream in supply. Wang Xuewei revealed that in January 2025, the price of raw milk in bulk rose to about 3 yuan per kilogram, roughly in line with contract milk prices, significantly reducing the cost advantage of small and medium-sized dairy companies. Currently, the industry has largely ceased powder storage, indicating that supply and demand are approaching balance. Based on current herd sizes and culling rates, capacity clearance is expected to be completed by the first half of 2026. Coupled with the industry’s rational expansion, milk prices may enter a longer upward cycle.

However, short-term fluctuations still exist. Wang Xuewei warned that after the Spring Festival, raw milk prices fell back below 2.7 yuan, reflecting weak market demand. This volatility prompts Mengniu to adopt more cautious operational strategies, including cutting unnecessary investments, strictly controlling capital expenditure, and accelerating asset depreciation, in order to prepare for a potential industry turning point.