The days are not going well for Dairy Product companies.

Recently, rumors have spread online that "MENGNIU DAIRY may lay off more than 6,000 employees to fulfill its commitments to COFCO," causing concern.

A person close to MENGNIU DAIRY confirmed to reporters that there have indeed been layoffs recently, but the number differs significantly from the rumors, and there has been no pledge regarding layoffs to COFCO; the company has been adjusting personnel over the last two years, with both departures and new hires.

In fact, since last year, there have already been signs of a decrease in the number of employees at MENGNIU DAIRY.

According to the Earnings Reports data, by the first half of 2024, MENGNIU DAIRY had approximately 43,000 employees, a decrease of over 3,000 from the end of 2023 and a decrease of over 4,000 from the end of 2022.

This morning, MENGNIU DAIRY's stock opened lower, dipping more than 1% at one point, but then rebounded, rising slightly by 0.45% as of the time of writing.

In the first half of the year, both revenue and profit have declined.

The simultaneous decline in revenue and net income is the main catalyst for layoffs.

In the first half of 2024, MENGNIU DAIRY's revenue and net income both fell to a four-year low. The earnings reports show that in the first half of the year, MENGNIU's revenue was 44.671 billion yuan, a year-on-year decline of 12.6%; the net income attributable to shareholders was 2.446 billion yuan, a year-on-year decline of 19.03%.

Due to consumer demand falling short of expectations, MENGNIU's business is experiencing a "full decline." Among them, in the first half of the year, MENGNIU's liquid milk, milk powder, ice cream, and cheese revenues were 36.226 billion yuan, 1.635 billion yuan, 3.371 billion yuan, and 2.211 billion yuan, respectively declining year-on-year by 12.9%, 13.7%, 21.8%, and 6.3%.

To cope with the difficult situation, MENGNIU DAIRY is both laying off employees and increasing borrowings, while simultaneously reducing sales expenses, especially advertising expenses.

By the end of the first half of 2024, the number of employees at MENGNIU DAIRY was 0.043 million, while at the end of 2023, the company employed approximately 46,064 people. In half a year, MENGNIU DAIRY laid off around 3,000 employees.

Cost reduction is very evident, with the company's wage expenditure in the first half of 2024 being approximately 4.2 billion yuan, a decrease of about 5%.

In the first half of this year, MENGNIU DAIRY's sales and distribution expenses were 12.68 billion yuan, a decrease of 8.8% compared to 13.906 billion yuan in the same period last year. Among them, product and brand promotion and marketing expenses dropped from 5.12 billion yuan in the same period last year to 4.499 billion yuan, a year-on-year decrease of 12.1%.

It is noteworthy that the "old rival" Yili also faced difficulties in revenue growth.

The Earnings Reports show that in the first three quarters of 2024, Yili's revenue was 89.039 billion yuan, a year-on-year decline of 8.59%; the Net income attributable to shareholders was 10.869 billion yuan, an increase of 15.87% year-on-year.

In the third quarter, Yili's liquid milk, milk powder, and Dairy Product series recorded revenue of 20.637 billion yuan, 6.821 billion yuan, and 1.022 billion yuan respectively, with a year-on-year decline of 10.31%, an increase of 6.56%, and a decline of 16.61%.

The contradiction between supply and demand in the Industry is prominent.

The contradiction between supply and demand in the Dairy Product industry is prominent, as consumer demand falls short of expectations, putting pressure on the performance of dairy companies.

Since 2020, affected by the shortage of milk source supply, the dairy farming industry has entered a period of rapid investment growth, with large pasture projects starting construction one after another. As newly built pastures gradually enter the production phase, raw milk production continues to grow. Entering 2023, it has become difficult to balance the gradually increasing supply with the stabilizing demand.

According to data from the National Bureau of Statistics, from January to June 2024, the domestic milk production was 18.56 million tons, a year-on-year increase of 3.4%; the output of Dairy Products from large-scale dairy companies was 14.33 million tons, a year-on-year decrease of 3%.

The growth rate of milk production exceeds the growth rate of Consumer demand, which gives some small enterprises the opportunity to acquire Low Stock Price milk sources and sell products at Low Stock Price, thus having a certain impact on the terminal milk price.

MENGNIU DAIRY stated that the challenges faced by room temperature liquid milk due to the downward trend in raw milk prices and demand falling short of expectations are the most prominent. Although the company has anticipated the arrival of a cold winter in the Industry, the severity of the cold winter leaves the company with only overall inventory management and cost reductions.