The management team of China Mengniu Dairy Company Ltd poses for a photo during the firm's 2022 earnings release news conference on March 30. (Provided to China Daily)

China Mengniu Dairy CEO Lu Minfang underscored the criticality of building a trustworthy brand image to extend the country's dairy industry worldwide following the dairy producer's earnings release news conference on Thursday.

Gaining global consumer recognition of Chinese food and dairy products is crucial to Mengniu's internationalization strategy, Lu said, adding that “Simply building factories or conducting business in different locations is not enough to establish a successful global presence.”

Lu highlighted that the quality of the product itself primarily determines whether consumers favor a product, and quality consistency is critical. “Can the quality of the product be consistently recognized by consumers over time, regardless of whether it is five, 10, or 20 years? However, this is easier said than done,” he said.

Mengniu reported a net profit of 5.3 billion yuan ($77 million) in 2022, recording a 5.5 percent growth year-on-year. Last year’s operating revenue reached 92.59 billion yuan, increasing 5.1 percent from the previous year. 

Sales of high-end brands and room-temperature pure milk experienced robust growth, while sales of fresh milk and ice cream outperformed the industry. The company's revenue from the ice cream business surged 33.3 percent from the previous year.

Each share earned a profit of 1.342 yuan, with a final dividend of 0.402 yuan, up from 0.381 yuan in the same period last year.

Lu expects the profit margin to expand by 30 to 50 basis points this year and remains upbeat about the firm’s growth potential over the next two to three years amid the gradual recovery of domestic consumption and the improvement of logistics efficiency.

He said the ice cream business has seen significant expansion, particularly in Southeast Asia, while the cheese business is still in its early stages of development.

China Mengniu Dairy CEO Lu Minfang speaks at the company’s earnings release news conference on March 30. (Provided to China Daily)

The company’s chief also pointed out that the yogurt business faces unresolved issues such as yogurt value and consumer recognition, and the company has pledged to work harder this year to address these concerns.

Mengniu has been investing in long-term initiatives to build up its brand equity, rather than relying solely on annual marketing campaigns, according to Lu. This has included long-term sponsorships of events like the FIFA Word Cup and partnerships with national departments like the China National Space Administration, which Mengniu has worked with for over two decades.

Lu noted the key to success in expanding into new markets is producing products that local people like and developing teams that understand the local market. He mentioned Mengniu has cultivated local teams in Indonesia, the Philippines, Vietnam, and Australia.

When discussing the Hong Kong Special Administrative Region, Lu stated that the company's product categories in the city differ from those on the mainland due to distinct business environments. The enterprise made significant investments in the supply chain, he added. 

As of Dec 31, the dairy producer had a total of 47,329 employees on the mainland, in Hong Kong, Oceania, and Southeast Asia, representing a 6 percent increase year-on-year.