This week, the Qilu Food and Beverage team organized sales exchanges and terminal store visits in Shengmu, China in Shanghai. Overall, China's Shengmu's organic milk concept represents the future high-end consumption trend of the dairy industry, and Shengmu's unique organic farm resources and organic certification provide high industry barriers to the company's organic milk business. At this stage, the company uses terminal system construction and word-of-mouth marketing to drive high business growth at this stage. Under the current situation where the dairy product price war is heated, the use of a large number of promotional methods has affected its profitability, but as the market size expands and consumer recognition continues to increase, the cost rate will gradually decline. According to the company's plan, the continuous expansion of channels and the introduction of new product systems is the main driving force for future growth, and ultimately, a sales volume of more than 10 billion dollars. Leading organic milk company in B2B to B2C transformation: “Desert full organic industry chain” is the core business philosophy of Shengmu in China, and it is also a necessary condition for Shengmu to establish its own sustainable ecosystem. As the largest organic dairy company in China, the company is gradually shifting from B2B business focusing on raw milk supply to large liquid milk companies to developing its own brand, digesting organic raw milk production capacity, and providing B2C business for end consumers. From 2012 to the first half of 2015, the company's share of liquid milk business revenue increased from 4.85% to 48.77%; gross profit increased from 6.41% to 52.51%; and the share of internal sales of organic raw milk also increased from 8.70% to more than 60%. Meanwhile, in the first half of 2015, the company's liquid milk sales volume reached 80697 tons, which is more than the total volume for the whole year of 14 years. Currently, the production of Shengmu raw milk is 1,600 tons/day, of which 1000 tons are organic raw milk and 600 tons are non-organic raw milk. Of the 1000 tons of organic raw milk, 650 tons are consumed by the company's own terminal products, and the rest is supplied to liquid milk producers such as Mengniu and Yili. Of the 650 tons of organic raw milk the company itself consumes, 450-480 tons of white milk and children's milk and 200 tons of room temperature yogurt. Development path planning: (1) Product side: Introduce new product systems to improve the digestibility of organic raw milk own brands. In the future, Shengmu, on the one hand, will increase consumption of raw milk through endogenous development of existing products; on the other hand, it will also launch a new series of products (fresh milk machines, etc.) to increase the amount of raw milk used. Fresh milk machines are expected to use 150 tons of raw milk every day. According to the plan, within 2-3 years, the company will achieve self-production and self-consumption of organic raw milk, and will no longer provide B-side organic raw milk supply business. In the long run, the company plans to develop international cooperation to turn China Shengmu into a dairy product manufacturing company with annual sales exceeding 10 billion dollars. (2) Channel side: Strengthen terminal system construction, and drive sales growth by word-of-mouth marketing+dealers. Shengmu invests very little in the media. At this stage, it mainly expands the number of dealers and the revenue space of existing dealers through the construction of a network terminal system, and drives terminal consumption through word-of-mouth marketing of the organic quality of the products. In the future, after the production and sales of organic raw milk is balanced, prices will gradually increase, increasing profit margins. The main future focus: Focus on the trade-off between the company's product positioning and short-term sales revenue goals. Thanks to unique organic products and a lower revenue base, the dairy industry was still able to achieve a growth rate of 52.8% in the first half of 2015 when the revenue scale of the dairy industry only increased by single digits. However, due to fierce competition in the dairy industry, the target sales price system of 80 yuan/box for high-end organic products has not been maintained. Instead, after large-scale promotion, the terminal price is comparable to that of major competitors. The company's main task now is to gradually survive and gain a foothold in the liquid milk market. How to make certain trade-offs before achieving short-term revenue goals and maintaining product positioning directly affects later stage companies to enhance the company's profitability through price increases after market competition weakens.