How Does China Modern Dairy Holdings Company Work?

The company pioneered the 'Zero-distance Integration of Forage Grass Planting, Cows Breeding and Milk Processing within Two Hours' production model, the first of its kind in China certified by SGS. This model ensures efficiency and quality throughout the dairy value chain.

CMD's value proposition lies in its commitment to modern agricultural practices, digitalization, and ecological initiatives. This approach aims for high yields and cost efficiency, resulting in consistent product quality and market differentiation.

The operations cover the entire dairy value chain, including breeding, forage grass cultivation, feed production, large-scale dairy farming, and the utilization of intelligent digital platforms. This comprehensive approach supports their business objectives.

CMD serves both business-to-business clients with raw milk and end-consumers with branded dairy products like UHT and fresh milk. Their pure milk has consistently won Monde Selection Quality Awards gold medals for eleven consecutive years.

Established in 2005 and listed on the Hong Kong Stock Exchange in 2010, China Modern Dairy Holdings has marked significant growth. A key strategic move involved acquiring Aiyangniu, a digital platform, and developing related businesses such as Liangyuan Technology, Modern Feed, Modern Grassland, and Meng Yuan Genetics. This expansion broadened its operations beyond traditional dairy farming into a complete industry chain ecosystem.

The company's dedication to quality is evident in its pure milk brand, which has received gold medals at the Monde Selection Quality Awards for eleven consecutive years. Operationally, the Chinese dairy industry faced challenges, including raw milk oversupply leading to low prices. This resulted in projected net losses for the company between CNY 1.3 billion and CNY 1.5 billion in 2024.

In response to market pressures, the company implemented cost-reduction and efficiency measures, achieving a 7.3% year-on-year decrease in total cost of sales in the first half of 2024. Its competitive advantages are rooted in its pioneering 'Zero-distance Integration' model, an extensive farm network, and strong brand recognition, contributing to its position in dairy farming China.

The company demonstrates leadership in sustainability, with its MSCI rating upgraded to BBB and inclusion in the S&P Global Sustainability Yearbook (China Edition) 2024. A partnership with DSM-Firmenich to implement Bovaer for methane emission reduction further highlights its commitment. China Modern Dairy Holdings continues to adapt by focusing on cost discipline, asset optimization, and diversifying its business segments, reflecting its approach to Modern Dairy Holdings operations.

As of 2023, China Modern Dairy Holdings stands as a leading dairy farming enterprise and the second-largest raw milk producer in China. By the end of 2024, the company managed 47 dairy farms and housed over 490,000 dairy cows, demonstrating significant scale. Its strategic alliance with China Mengniu Dairy Company Limited, which held 56.36% of its issued share capital as of June 30, 2024, provides a stable customer base and reinforces its market standing.

The company confronts substantial risks, notably the ongoing oversupply in China's raw milk market, which caused a 17% decrease in the average fresh milk price in 2024. This downturn has led to projected net losses for the company in 2024 and the first half of 2025, with nearly 90% of upstream dairy farms experiencing losses as of January 2025. Regulatory shifts, new market entrants, and evolving consumer preferences also present ongoing challenges.

Management anticipates a recovery in raw milk prices starting in the third quarter of 2025, with further improvements projected for 2026 due to a more balanced supply-demand dynamic as smaller farms exit and demand for products like yogurt and cheese grows. The company aims to reach a herd size of approximately 500,000 by the end of 2025, targeting 13% volume growth for the year.

Strategic priorities include maintaining cost discipline, optimizing assets, and diversifying operations. An organic milk strategy is in place, targeting a 10% sales contribution in 2025 to boost gross margins. The company is also committed to digital intelligence and ecological practices, with a goal to reduce carbon emissions by 7% by 2025, aligning with long-term sustainable development objectives.