Mengniu raises capital in Milkground again to overweight cheese market 04-07-2020

On March 24, the Chinese leading cheese enterprise Milkground announced to raise funds to RMB 890 million with the help of two companies, including the Chinese dairy leader Mengniu. This is the second time that Mengniu has increased its capital in Milkground. Dating back to January this year, Mengniu acquired already 5% share of Milkground and 42.9% share of one of its subsidiaries, which amounted to RMB 740 million. With the second acquisition, Mengniu will become the second biggest shareholder of the company. Because of the decision of fundraising, the stock price of Milkground hit a historical peak over one night, increasing from 9% to RMB 21.11.

Mengniu plans to support Milkground for more cheese projects with share of RMB 315 million

According to the fundraising plan of Milkground, the issue price is set to RMB 15.16 per share. No more than 5,871 shares will be issued, among which Dongxiu Industry will acquire 3,793 shares, which amount to RMB 575 million, while Mengniu will acquire 2,078 shares, which is RMB 315 million. The funds will be used for rebuilding and extension of Milkground’s second cheese factory in Shanghai and construction of a cheese processing project of its subsidiary.

Milkground has faith in cheese market with Mengniu’s support

Earlier in January this year Mengniu has already once gave support to Milkground by acquiring 5% share of the company and investing RMB 460 in one of its subsidiaries. As for the second fundraising, Milkground explains that it would help to make the company more competitive in the cheese market.

Cheese bar has been playing an important role in the product catalogue of the company. However, since the first launch in 2018, the supply of the product has been not adequate to the demand, which makes it hard for the company to go on in the cheese market. But with the help of the fundraising, Milkground sees a bright future in its market share and plans to develop itself into an advantage in the cheese section of dairy industry.

Cheese seen as high potential market in China with growing market share

Let’s take a look at the cheese market in China.

As some data shows, the terminal market of cheese retail has reached RMB 6 billion 550 million in 2019 in China. From the year of 2013 to 2019 it has increased to 16.13%, which makes cheese a quite potential section in the dairy industry. However, the consumption of cheese is still in a young stage. In 2018, the turnover of cheese has only taken up 1.50% of the sales volume of dairy products. But it is predicted that a growth to RMB 11 billion 200 million will be seen in the terminal market of cheese retail in 2024 in China.

At the moment, the Chinese cheese market still depends mostly on imported brands. It is shown in the statistics that the top five brands in 2018 in the Chinese cheese market came mainly from abroad with the market share of 52.6%. The top ten brands had a market share of 63.5%, among which some Chinese brands, such as Mengniu, Milkground and Brightdairy, were on the list with a market share of respectively 2.9%, 2.0% and 0.8%.

For more information on China’s cheese market, please check our Dairy Products China News.

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