What a spat between China's top dairy brands tells us

June 24, 2019 10:28
A war of words between Yili Group and Mengniu in relation to 2022 Winter Olympics marketing activities underscores the fierce competition in China’s dairy industry. Photo: China.org.cn

Inner Mongolia Yili Industrial Group, China's largest dairy firm, has openly accused rival China Mengniu Dairy of buying its way into the marketing campaign for the 2022 Winter Olympics in Beijing.

Mengniu was criticized for paying a fee to Coca-Cola Company to become the joint global beverages sponsor of the International Olympic Committee (IOC). Yili said in an open letter that the move “has not only violated market rules and affected whole Winter Olympics, but also jeopardized the national interests.”

The 2022 Winter Olympics will be the biggest sporting event to be hosted by China under the current regime of Xi Jinping. Yili has reportedly spent billions of yuan to become the exclusive dairy products sponsor for the upcoming Winter Games.

After failing to secure sponsorship rights through auction, Mengniu is said to have piggybacked its state-owned parent Cofco’s relationship with Coca-Cola to participate in the Winter Olympics marketing activities.

It’s very rare that a leading Chinese company would openly fire at another big domestic firm, and that too a state-owned peer. Yili is an Inner Mongolia state-owned enterprise, while Cofco is a centrally-owned SOE.

The spat underscores the fierce competition in China’s dairy market.

In a separate case, Chinese air-conditioner giant Gree Electric Appliances accused smaller rival Aux Group of selling substandard products.

Aux has quickly emerged as China’s third-largest air-conditioner brand with aggressive marketing and pricing in recent years. That has put a lot of pressure on Gree.

The Gree and Aux case again indicates intense rivalry in the air-conditioner market.

Market competition in China has become pretty tough across a wide range of industries. Even if the country has to open more of its domestic market due to pressure from the US, domestic players should be ready to handle the challenge.

This article appeared in the Hong Kong Economic Journal on June 21

Translation by Julie Zhu

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Hong Kong Economic Journal columnist