CCM: Beijing Sanyuan enters Hunan market 10-17-2016

On 25 September, Beijing Sanyuan Foods Co., Ltd. (Beijing Sanyuan) held a ceremony to showcase its strategic partnership with multiformat retailer Better Life Group (BLG - also known as BuBuGao), signalling its official move into the Hunan market. Chen Lijun, General Manager of Beijing Sanyuan and Chen Zhiqiang, President of BLG, were both present.

Source: Baidu

“We will focus on UHT milk and yoghurt firstly, selling through BLG’s supermarket and store chains,” stated Beijing Sanyuan; “In future, we will launch fresh milk, infant formula and adult milk formula.” Further details of the cooperation have not been disclosed.


Beijing Sanyuan is very centred on the Beijing area, which according to its H1 financial report makes up 46% of its turnover. In recent years, however, many national / regional dairy companies such as Yili, Mengniu, Junlebao Dairy, New Hope Dairy and Wondersun Dairy have been competing in this market more than before, exerting increasing pressure on Beijing Sanyuan in its "home market".

The company has long sought to develop a more nationwide business and has made moves to open markets by acquiring local dairy companies or establishing branches there. For instance,

  • 9 May, 2002: acquisition of the 2nd largest dairy company in Shanghai, Shanghai Best Milk Products Co., Ltd.
  • 2004: acquisition of Liuzhou Milk Industry Co., Ltd. (in Guangxi Zhuang Autonomous Region) and the establishment of Liuzhou Sanyuan Tianai Dairy Industry Co., Ltd. (Liuzhou Sanyuan)

However the results of these moves have not been satisfactory. Liuzhou Sanyuan made sales of USD24.9 million (RMB166.7 million) in H1, down by 19.6% YoY.

In addition, it has made efforts to expand its production capacity. In 2014, it integrated the processing plant of its fully-owned subsidiary Hebei Sanyuan Food Co., Ltd. and started construction of a 1,000 t/a dairy processing, R&D and logistics centre with a total investment of USD238.8 million (RMB1.6 billion) in the economic development zone in Xinle County-level City, Shijiazhuang City. On 16 May, 2016, the plant was put into operation: its capabilities cover milk powder, UHT milk, fresh milk and yoghurt.

The cooperation with BLG to penetrate the Hunan market in central-southern China can be seen in this context. “Hunan has its unique geographical advantages, offering a base to Beijing Sanyuan from which it can progress south to Guangdong Province and Guangxi Zhuang Autonomous Region and west to Chongqing and Chengdu. This business scope gets near to Better Life's store / supermarket distribution,” noted Zhu Danpeng, a food research analyst.

Better Life is a key business for BLG. In H1, Better Life opened 12 new supermarkets and 3 new general stores, taking it to 203 supermarkets and 42 general stores by 30 June. From this network, Hunan made up 66% of the total figure. Beijing Sanyuan hopes to tap into this channel advantage to expand its own business.

“It is not just a geographical expansion,” commented a trade source: “Through BLG’s sales channels, Beijing Sanyuan will quickly achieve slotting, display, promotion and wide-scale sales. The direct cooperation with BLG will also help save money and time.”

So far no dairy companies have dominated in Hunan. Local companies including Hunan New Hope Nanshan Liquid Milk Co., Ltd. and Hunan Jinjian Dairy Co., Ltd. are far behind Beijing Sanyuan in terms of product range and business scale.


Another reason for Beijing Sanyuan’s move into Hunan may be to revitalise its local subsidiary Hunan Taizinai Biological Technology Co., Ltd. (Taizinai).

In 2011, Beijing Sanyuan partnered with Macrolink Culturaltainment Development Co., Ltd. to restructure Taizinai. However, Taizinai has proven a drag on Beijing Sanyuan’s financial performance. Its H1 sales of USD11.5 million (RMB77.0 million) were down 20.4% YoY, whilst its net loss of USD5.1 million (RMB34.2 million), down by USD4.9 million (RMB33.1 million) YoY - this reflected the company's restructure and expansion of its distribution and increased marketing expenses.


This article comes from Dairy Product China News 1610, CCM

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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