Summary of Key Points
Meiji has decided to sell its drinking milk, yogurt, B2B business, as well as its factories in Tianjin and Suzhou, to Shanghai Aoya Food, a subsidiary of澳亚 Group, for between 320 million and 350 million yuan, due to three consecutive years of losses in its dairy products business in China. By doing so, Meiji aims to shed its loss-making operations and focus on its core businesses such as chocolate. On the other hand,澳ya Group will expand its downstream processing chain and connect with both B2B and C2C markets by leveraging its own upstream dairy farm capabilities to reduce costs.
1. Why is Meiji eager to sell?
Meiji’s dairy products business in China has been suffering losses for the past three years: it lost 491 million yuan in 2023, 144 million yuan in 2024, and is expected to lose 155 million yuan in 2025. The reasons for the losses include:
- High prices that deter sales: Meiji targets a mid-to-high-end market; for example, its 950ml bottle of milk sells for 19.9 yuan, which is twice as expensive as Hema’s own brand (10.89 yuan) and Sanyuan’s (9.9 yuan). The same price for three 180g bottles of yogurt also makes it more costly than Hema’s four-bottle pack (14.9 yuan), leading to slow sales.
- Conservative market investment: Local dairy companies like Mengniu and Junlebao invest heavily in advertising and promotions to capture the market, but as a Japanese brand, Meiji is reluctant to spend on marketing, resulting in a lower brand awareness and lower sales volumes.
- Small scale and high costs: Companies like Yili and Mengniu have annual sales of over 100 billion yuan, allowing them to negotiate better prices for raw milk, thereby reducing their production costs. In contrast, Meiji’s annual sales are only around 400 million yuan, leaving it with less bargaining power and higher production costs.
2. Why is澳ya Group interested in the acquisition?
For澳ya Group, this acquisition represents a strategic opportunity:
- Closed-loop operation for cost reduction: With its own dairy farms,澳ya can create a self-sufficient supply chain from farming to processing and sales, mitigating the impact of raw milk price fluctuations.
- Access to mature production capacity and channels: Meiji’s factories in Tianjin and Suzhou are well-established bases that serve both the North and East China regions. By acquiring these facilities,澳ya can expand into the C2C retail market (such as selling milk and yogurt directly to consumers) and the B2B market (supplying products to businesses like MANNER and Piyee Coffee), diversifying its revenue streams.
- Improved capacity utilization: Meiji’s factories were not fully utilized; by integrating澳ya’s operations, they can achieve better cost efficiency and increase profits.
3. Details of the transaction:
- What was sold: Meiji’s drinking milk, yogurt, B2B business, and the factories in Tianjin and Suzhou.
- What wasn’t sold: The factory in Guangzhou, although it has some dairy operations, is not part of the deal.
- timelines: The process will begin with the establishment of a “target company” in August 2026 to restructure the business, with the completion of the transaction by the end of 2026.
- Price: The initial price is set at 320 million yuan, with an upper limit of 350 million yuan, subject to adjustments based on business performance.
4. Future prospects:
- Meiji’s focus on chocolate: By shedding its loss-making dairy operations, Meiji can concentrate on its profitable chocolate business.
- Challenges for澳ya Group: To make Meiji’s products profitable, several issues need to be addressed:
- Whether to lower prices to increase sales;
- How to boost sales through promotions in partnership with retailers;
- How to reduce costs by using its own dairy milk;
- How to penetrate the market with Meiji’s B2B products in larger chain restaurants (such as Xicha and NaiXue).
These challenges will depend on澳ya Group’s future strategies, which are still undecided at this time.
5. The broader context of China’s dairy industry:
China’s dairy market is highly competitive, dominated by giants like Yili and Mengniu, which use their scale to reduce costs and invest in advertising. Smaller brands, such as Meiji, face difficulties competing due to limited resources and higher production costs. This transaction reflects the challenges faced by foreign brands in the Chinese dairy industry.
(The entire analysis is written in plain language, making it easy for non-financial professionals to understand.)