Key Points:
The industry as a whole is under pressure, and Chinese dairy companies are actively seeking change, so what kind of vitality is their main business showing? How is the second growth curve unfolding? Performance is becoming differentiated, and a hierarchy is taking shape.
China's dairy industry is at a delicate turning point in 2026.
Recently, domestic dairy companies including Yili, Mengniu, Feihe, Sanyuan, New Hope Dairy, and Bright Dairy & Food have successively released their financial reports for the first half of this year.
Through these financial reports, we can see the changes in China's dairy industry: on the one hand, the industry has undergone deep adjustments over the years, with signs of supply contraction and demand stabilization increasing simultaneously; on the other hand, the financial reports of leading enterprises show that a simple scale competition is no longer sustainable, and a competition centered on "deepening value" and "second curve" is quietly heating up.
The next decade for China's dairy industry is no longer a question of "whether it can grow," but rather "what drives its growth." For companies, it also concerns how the market views their repositioning and upgrading, and whether they will remain a domestic dairy company or evolve into a global nutrition and health technology company.
The market is warming up, with revenue growth, but profit divergence due to various reasons.
In the first half of 2026, the overall operating conditions of the dairy industry showed significant signs of improvement. According to data from the National Bureau of Statistics, domestic dairy production reached 15.184 million tons from January to June, up 5.8% year-on-year, with the operating rate of processing plants rebounding and the pulling effect of terminal demand strengthening.
As the industry leader, Yili achieved total revenue of 64.49 billion yuan in the first half of the year, representing a year-on-year increase of 4.13%, with net profit attributable to the parent company of 5.759 billion yuan, down 20.02% year-on-year, presenting a situation of "increased revenue but not increased profit". However, if the one-time impact of goodwill impairment (mainly from Aoyou) and tax policy adjustments are excluded, Yili's core operating profit reached 8.38 billion yuan, up 10% year-on-year, with the core operating profit margin rising to 13%, a historic high.
Yili's revenue growth is mainly driven by the stability of its liquid milk business and the balance of its business structure. Currently, Yili's revenue structure for its three main businesses - liquid milk, milk powder and dairy products, and cold beverages - has been further optimized to 56.7%, 26.1%, and 14.0%, respectively, with the cold beverage business achieving double-digit growth.
It's not just Yili that's experiencing this full-category growth effect, as Mengniu Dairy is also seeing similar trends. According to its financial report, Mengniu Dairy achieved revenue of 44.8 billion yuan in the first half of the year, representing a year-on-year increase of 7.8%, and net profit attributable to its parent company of 2.37 billion yuan, up 15.9% year-on-year. On the "integrated" business side of Mengniu, all six major business segments saw growth, and with the strong performance of its innovative and international businesses, Mengniu described its mid-year growth as "eight horses galloping together", with the three major segments of liquid milk, milk powder, and cheese achieving growth rates of over 30%.
Feihe, the leading baby formula company, is facing the headache of "defending its territory". In the first half of this year, Feihe's revenue was 9.362 billion yuan, up 2.3% year-over-year, ending the previous consecutive decline, but its net profit attributable to the parent company fell 16.3% to 837 million yuan. According to analysis, Feihe's revenue stabilization is due to the marginal improvement in newborn policies and the penetration of the lower-tier market, which has driven the increase in revenue from infant formula and other dairy products. However, the decline in profit reflects the cost of channel rebates and marketing expenses that the company has to pay to maintain its market share, with the sales expense ratio rising to 36.6%.
Unlike the gradual warming up of national giants, regional dairy companies have shown a different trend. New Dairy's revenue in the first half of the year was 5.813 billion yuan, up 5.20% year-on-year, with net profit attributable to the parent company increasing by 17.24%, demonstrating strong cost control capabilities and the effectiveness of its low-temperature fresh milk strategy.
Bright Dairy's total revenue for the first half of the year was 11.873 billion yuan, down 4.81% year-on-year, with net profit attributable to the parent company at 251 million yuan, up 15.34% year-on-year. However, if calculated based on net profit attributable to the parent company excluding non-recurring items, the result shows a year-on-year decline of 13.39%.
Bright Dairy's revenue decline was mainly due to the underperformance of market expansion outside of East China and a year-over-year decrease in liquid milk revenue. The change in net profit was due to the gain from the sale of New Zealand's North Island assets of its overseas subsidiary Newmarch and the compression of sales expenses, while the company's core business profitability was actually declining.
Sanyuan Shares' net profit attributable to its parent company in the first half of the year was largely due to investment income from its stake in Beijing McDonald's. The company's financial report showed that revenue for the period was 4.468 billion yuan, up 4.11% year-on-year, although it rebounded from a decline, the largest proportion of liquid milk revenue fell 4.76% year-on-year. Net profit attributable to the parent company was 185 million yuan, up 1.15% year-on-year. If the 147 million yuan in investment income is excluded, Sanyuan's dairy business earned only about 38 million yuan in the first half of the year.
The entire industry is betting on "freshness" despite taking different approaches.
As the industry shifts from incremental competition to a battle for market share, domestic dairy companies' main business strategy is no longer simply about promotions and channel expansion, but rather has unconsciously turned to "high-endization, functionalization, and freshness".
In the first half of this year, the dairy industry also continued to exhibit characteristics of structural differentiation. Against the backdrop of a mild recovery in demand, the supply and demand landscape for liquid milk improved, with overall pressure easing and structural opportunities becoming more pronounced. Low-temperature fresh milk, with its dual advantages of "freshness" and "nutrition", continued to gain market favor, leading the growth of the liquid milk sector, while the freshness of milk powder raw materials also received more attention from consumers, a change that directly influenced the business strategies of dairy companies.
For Yili, in the liquid milk segment, the Jindian brand launched its "Fresh" product, using process innovation to redefine the freshness boundary of ambient milk. In chilled milk, Jindian introduced organic fresh milk, while the Miaoxian brand leveraged its 0.09-second instant freshness-locking technology to deliver a rich, natural taste profile—creating differentiated synergy between the two. In powdered milk, the company established a "Five-Dimensional Freshness Leadership System" covering raw milk sources, ingredients, powder formation, processing, and packaging, cutting e-commerce delivery times from one to three months down to 28 days.
Mengniu's fresh milk segment, with its high-end fresh milk quality based on seven benchmarks across the entire chain, has achieved over 30% rapid growth through innovative breakthroughs in "online + offline" channels, continuously improving coverage and penetration rates, making it the fastest-growing sub-category in the company's liquid milk business. Furthermore, Mengniu is also applying its researched "active freshness-locking technology" to all of its milk powder products, and is undergoing digital upgrades across the entire chain, including the milk source, production, inspection, and tracing segments.
It must be said that the entire industry's bet on fresh products is a correct choice in line with consumer trends, and all companies' financial reports have emphasized its role in driving overall performance growth. However, there are also hidden concerns: firstly, the intensification of homogeneous competition, when all dairy companies are producing fresh milk and telling "freshness" stories, products may fall into homogeneous competition, and the risk of price wars is accumulating. Secondly, the high cost of cold chain logistics, as low-temperature milk has extremely high requirements for cold chain logistics, with limited transportation radius and scale effects that are not as good as room-temperature milk. For national dairy companies, how to efficiently layout low-temperature production capacity across the country is a significant challenge. Thirdly, the "moat" of regional dairy companies is being breached. In the past, low-temperature milk was a advantageous category for regional dairy companies, as national dairy companies were limited by cold chain logistics and found it difficult to penetrate deeply. However, now that companies like Yili and Mengniu are increasing their investment in low-temperature products, the survival space of regional dairy companies is being squeezed, as can be seen from the decline in liquid milk revenue of companies like Guangming Dairy and Sany
How solid is the second growth curve?
For domestic dairy companies, finding a second growth curve is no longer an option, but a matter of survival, given the sluggish growth of the liquid milk market and the decline in infant formula sales due to a decrease in birth rates. The first-half 2026 financial reports will be a crucial test of the viability of each company's second growth curve.
The Report on Nutrition and Chronic Disease Status of Chinese Residents shows that over 42% of adults in China are lactose intolerant. Shifting demand is pushing the industry from standardized supply toward precise, functional nutrition services. Against this market backdrop and development logic, dairy companies are racing to build out functional nutrition strategies.
Yili's second growth curve is currently unfolding in two main directions, one being the in-depth development of functional nutrition, and the other being the extension of its industrial chain upstream into deep dairy processing.
The first direction has already shown initial results, with infant and adult nutrition products ranking first in market share, and functional health food business achieving doubling growth. In the deep processing of dairy products, the Yili Modern Wisdom Health Valley 5G Cheese Global Intelligent Manufacturing Benchmark Base processes 600 tons of fresh cow milk daily, covering production lines for whipped cream, various cheeses, and whey protein powder. With the production line in place, Yili's autonomy in the high-value dairy raw materials field has been further enhanced, extending from C-end consumption to the B-end industrial chain. Additionally, Yili's ice cream and cheese are also accelerating their expansion into the C-end market, covering multiple scenarios such as leisure snacks, children's snacks, and catering ingredients.
Beyond its main liquid milk business, Mengniu's second growth curve is not a single line, but rather a growth matrix comprising infant formula, cheese, fresh milk, innovative businesses (deep processing, sports nutrition, and special medical foods), and international business, building an ecosystem that spans B-end dairy raw materials and C-end nutritional products, with a growth rate of over 30% in the first half of the year, but accounting for only about 24.4% of the total. In particular, the cheese business, led by Mochi Blue, has gradually become an important component of the second curve. According to the financial report, Mengniu's cheese segment revenue reached 3.148 billion yuan in the first half of 2026, with a year-on-year growth of 32.6%, achieving a new high in both revenue and profit scale since the acquisition of Mochi Blue.
San Yuan Co., Ltd.'s second growth curve is mainly focused on actively deploying new retail and new scenarios, with ice cream becoming the largest contributor to the company's revenue growth, with a year-over-year growth rate exceeding that of its main liquid milk business.
The financial report shows that in the first half of the year, the revenue of San Yuan Ice Cream and other business segments was 916 million yuan, up 17.30% year-on-year, with a net increase of 135 million yuan. This means that the decline in San Yuan's liquid milk business has been almost completely offset by the growth of ice cream, with the high-end ice cream brand Bayin continuing to deeply cultivate its niche market, launching stick bars and mousse series products, and perfecting its high-end dairy product matrix.
What may prove most disruptive is Feihe’s newest growth curve: a shift from selling formula to selling ingredients. This year it launched the “Zhichun FURIMMO” protein ingredient brand, exporting high-quality domestic dairy protein ingredients globally. The logic: China has long relied on imports for core ingredients such as whey protein and lactoferrin. Leveraging its full upstream supply-chain advantage, Feihe now produces 16 core milk protein ingredients with 100% self-developed and self-manufactured capability, entering the B2B ingredient supply chain. That addresses the domestic bottleneck in protein ingredients while opening an entirely new growth space beyond infant formula.
In addition, Feihe's second curve also includes: extending from infants and young children to teenagers, adults, and the elderly with full-age nutrition products, as well as internationalized businesses in North America and Southeast Asia. However, in terms of performance contribution, Feihe's second curve is still in the investment phase and has not yet generated significant revenue, and it remains to be seen whether it can form a truly commercial closed loop.
In contrast to the proactive transformation of the aforementioned dairy companies, Guangming Dairy's pace of innovation has been somewhat slow. The company has not been seen in popular areas such as cheese, adult nutrition, and functional foods. Product innovations like Mosilian low-GI yogurt and Youbi 5.0 fresh milk are still "iterations within the main business scope," and businesses outside of liquid milk have yet to have a significant impact on overall growth.
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Conclusion
In the 2026 mid-year report, China's dairy industry handed in a report card marked by a "turning point having arrived and increased differentiation".
China's dairy industry is undergoing a deep transformation—shifting from drinking to eating, from ambient to fresh, and from domestic to global. Within this shift, the competitive logic among dairy companies is being fundamentally rewritten. Pure revenue scale is no longer the sole benchmark; profit quality and structural growth are the core advantages for navigating industry cycles.
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