Coca Cola and Mengniu Group sign contract for a high end low temperature milk project in Wuhe County of Anhui 08-21-2020

On August 4, The Coca-Cola Company, the world’s largest beverage company, and Mengniu Group, one of the leading dairy companies in China, signed a contract for a high-end low-temperature milk project. The signing ceremony was held in Hefei city, Anhui province. The CEO of Mengniu Group and the marketing general manager of Coca-Cola both attended the signing ceremony.

According to a report, the total four-phase investment of the low-temperature milk project is RMB 2.1 billion, with a first-phase investment of RMB 500 million. The project is estimated to be put into production and sold in the third quarter of 2021, bringing a whole new brand of low-temperature milk to consumers over the country.

Collaboration to increase dairy market presence for both Coca Cola and Mengniu

According to a Chinese analyst in the food industry, the collaboration between Coca-Cola and Mengniu group will yield benefits for the two companies in terms of their brands, consumers, and markets. It will also have an important effect on both companies’ future development.

Taking full advantages of both companies’ dairy processing technology, brand influence, and distribution channel, the collaboration will increase consumption of Chinese dairy products. According to a news report, in early January 2020, Coca-Cola announced its acquisition of the remaining shares of Fairlife LLC from its joint venture partner Select Milk Producers. According to Fairlife’s previous website, Fairlife was established in 2012 with it’s headquarter located in Chicago. The company’s main business was to produce dairy beverages such as fa!rlife YUP! and CORE Power.

The high profit of low-temperature dairy products attracts many companies to join in the low-temperature diary industry. In 2013, Mengniu Group and the French company Danone established a joint-venture company to do business in the low-temperature yogurt industry. After that, Mengniu Group continued to launch other new low-temperature dairy products such as Guanyiru milk with BB-12 and YoyiC. According to Mengniu’s 2019 financial report, the sales volume of Mengniu’s low-temperature dairy products has continued to rank first in the low-temperature dairy industry for 15 years.

According to a report on market management and competition strategy of China's dairy industry from 2020 to 2026, the growth of low-temperature pasteurized milk in 2018 is higher than UHT milk, with a steady growth of around 5% in the sales volume. An analyst in the dairy industry believes that with the limited increase in traditional carbonated drinks, Coca-Cola’s move to the dairy industry is to seek better growing space for its market.

Coca Cola already established in Chinese market through COFCO Corporation

A successful collaboration between Coca-Cola and Mengniu Group is possible because of COFCO Corporation. COFCO Corporation is one of Coca-Cola’s main packaging companies in mainland China. The relation between COFCO Corporation and Coca-Cola can be traced back to 1978 when Coca-Cola returned to China’s market after 30 years with the help of COFCO Corporation. On April 14, 2000, COFCO COCA-COLA Beverages Ltd. (COFCO COCA-COLA), the joint venture company of Coca-Cola and COFCO Corporation, was established. COFCO Corporation holds a 65% share of COFCO COCA-COLA, while Coca-Cola holds a 35% share. In 2016, Coca-Cola separated 19 regional markets from COFCO COCA-COLA.

Data shows that the profit of COFCO COCA-COLA in 2019 exceeds RMB one billion, with nine new joint packaging factories fully achieving profitability. By 2019, Coca-Cola’s market coverage rate in cities reached 100%, and the number of Coca-Cola customers has increased to more than 1.5 million, with a growth of 100 thousand customers within three years, from which COFCO Corporation can enjoy 65% of the benefits. 


For more information, please check our resources on China’s Life Science market or email with your target product name. 

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