How Does Feihe Company Work?

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How does China Feihe Limited operate?

China Feihe Limited is a leading Chinese dairy company specializing in infant formula. In 2024, the company saw revenue grow by 6.2% to RMB 20.75 billion and net profit increase by 11.1% to RMB 3.65 billion. Feihe has been the top infant formula seller in China for six consecutive years and globally for four years as of 2024.

Feihe's operations are built on a foundation of research, development, production, and sales, with a strong focus on meeting the specific needs of Chinese consumers. The company's product range includes infant milk formula, adult milk powder, and liquid milk.

Feihe's business model is characterized by its vertically integrated supply chain, ensuring quality and safety from sourcing to finished product. This approach has helped the company maintain a significant market share, holding 21% of China's infant milk formula market as of December 31, 2023. Understanding Feihe's operational framework is key for stakeholders assessing its market position and future potential, especially in light of its consistent market leadership and commitment to product excellence, as seen in analyses like the Feihe Porter's Five Forces Analysis.

The Feihe company operations are centered around a vertically integrated supply chain, ensuring quality from pasture to product. This model allows for meticulous control over raw milk collection, processing, and distribution, forming the backbone of how Feihe works. The company's business model prioritizes products tailored for Chinese consumers, particularly infant milk formula designed to mimic the composition of breast milk specific to Chinese mothers.

Vertical Integration for Quality Assurance

Feihe manages its entire supply chain, from ranch operations to final product delivery. This comprehensive control is key to how Feihe company operates its business, ensuring high standards at every stage.

Product Specialization for Chinese Infants

The company's core offerings include infant milk formula with formulations developed in-house to closely match the breast milk of Chinese mothers. This focus is a central component of Feihe company's business model.

Advanced Manufacturing Processes

Feihe utilizes advanced, digitally upgraded manufacturing facilities for fully automated, aseptic production. This process ensures human contact is eliminated from raw milk to finished milk powder, highlighting the Feihe manufacturing process.

Extensive Distribution Network

As of June 30, 2024, Feihe boasts a nationwide distribution network with over 2,800 offline customers and more than 80,000 retail points. This robust reach is a critical element of Feihe company's strategy for market penetration and distribution.

Strategic Partnerships and R&D

Feihe actively engages in research and development, including a long-standing collaboration with Harvard. These initiatives aim to enhance product offerings and technological capabilities, showcasing Feihe company's research and development initiatives.

• Focus on simulating Chinese mothers' breast milk composition.
• Advanced, automated, and aseptic production lines.
• Nationwide distribution reaching over 80,000 retail points.
• Strategic R&D partnerships to drive innovation.
• Emphasis on raw milk quality exceeding international standards.

The operational workflow of Feihe infant formula production begins with raw milk sourced from ranches that reportedly yield milk with superior protein content and colony counts compared to international benchmarks. This high-quality raw material is then processed in state-of-the-art facilities. These facilities have undergone significant digital and intelligent upgrades, enabling fully automated and aseptic production. This means that from the moment the raw milk enters the processing plant to the final packaging of milk powder, there is no human contact, a critical factor in ensuring product safety and quality. This meticulous approach to manufacturing is a cornerstone of how Feihe company operates its business. The company's Feihe supply chain management is further strengthened by a single-layer distribution approach and precise inventory control, which contributes to its competitive edge. Understanding the operational workflow of Feihe infant formula reveals a commitment to excellence at every step. For a broader perspective on the market, one can explore the Competitors Landscape of Feihe.

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The primary revenue for the company is generated through the sale of its dairy products. In the fiscal year ending December 31, 2024, the company achieved total revenue of RMB 20.75 billion, reflecting a 6.2% year-on-year increase. This robust performance underscores the company's strong market position.

Infant Milk Formula Dominance

Infant milk formula (IMF) is the core revenue driver, making up nearly 92% of total revenue in FY2024. IMF sales saw a significant growth of 6.6%, surpassing RMB 19 billion.

Growth in Other Dairy Products

Revenue from other dairy products, including adult milk powder and liquid milk, experienced a substantial increase of 23.4% in 2023, reaching RMB 1.42 billion.

Nutritional Supplements Contribution

Sales from nutritional supplement products also contributed to the revenue mix, growing by 2.8% to RMB 231.7 million in 2023, representing 1.2% of the Group's total revenue.

Half-Year Performance 2024

For the first six months of 2024, the company reported revenue of RMB 10.09 billion, a 3.7% increase compared to the same period in 2023.

Offline Sales Channel Strength

Offline sales channels remain a significant contributor, accounting for 76.8% of total dairy product revenue in the first half of 2024.

Premiumization Strategy

The company focuses on premium and super-premium product segments to drive growth, capitalizing on increasing urbanization and rising consumer incomes.

Monetization Strategies and Market Positioning

The company employs strategic monetization strategies, including a strong emphasis on premium product offerings. This approach is designed to align with evolving consumer preferences for higher quality and healthier options, a trend amplified by increasing urbanization and disposable income in China.

• Premium Pricing: In 2024, the average price of the company's formula milk increased by over 40 yuan, with ultra-high-end product lines priced exceeding 450 yuan per kilogram, reflecting a commitment to value-added products.
• Market Leadership Investment: A significant investment of RMB 1.2 billion was allocated to a maternity subsidy program launched in April 2025, providing free infant formula to eligible families. This initiative aims to solidify market leadership and expand the consumer base, even with potential short-term impacts on profitability.
• Understanding Consumer Behavior: The company's operational workflow is deeply intertwined with understanding consumer needs and market trends, as detailed in the Brief History of Feihe.
• Distribution Network: The reliance on offline sales channels highlights the importance of a robust distribution network in reaching a broad consumer base across various regions.

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Feihe's journey is defined by significant achievements and strategic maneuvers that have cemented its market leadership. The company has consistently held the top position in the Chinese infant formula market for six consecutive years and globally for four consecutive years as of 2024. This success is underpinned by a strong commitment to innovation, evident in the acquisition of 153 new domestic and foreign authorized patents in 2024, bringing their total to 659.

Market Dominance and Innovation Milestones

Feihe has maintained its status as the leading infant formula provider in China for six years and globally for four years as of 2024. The company's dedication to R&D is highlighted by the addition of 153 new patents in 2024, expanding its total to 659.

Product Portfolio Expansion and Technological Advancements

The company introduced its milk protein fresh extraction technology in January 2025, aiming to elevate product quality and nutritional value. Feihe also launched Xingfeifan Zhuorui, China's first customized infant brain nutrition product, which quickly became a top seller.

Strategic Moves and Market Adaptations

Feihe has broadened its offerings to include adult functional nutrition products like Aiben. To counter the impact of China's low birth rate, the company initiated a significant childbirth subsidy program in April 2025, offering free formula to eligible families.

Financial Impact of Strategic Initiatives

The aforementioned subsidies, coupled with inventory adjustments and reduced government grants, have led to a profit warning for the first half of 2025. Revenue is projected to decrease by 8-10%, with net profit expected to fall by 36-47%.

Feihe's Competitive Edge and Operational Strengths

Feihe's competitive advantages are rooted in its strong brand perception as being 'More Suitable for Chinese Babies,' a result of its in-house R&D focused on replicating Chinese breast milk composition. This is further supported by a vertically integrated industrial chain, established in 2006, ensuring robust quality control and operational efficiency. The company's 'rooted globalization' strategy is exemplified by its C$380 million investment in a Canadian plant in Kingston, enhancing international production and setting industry standards.

• Strong brand image and consumer trust.
• In-house R&D simulating Chinese breast milk composition.
• Vertically integrated industrial chain for quality control.
• International production capabilities through investments like the Canadian plant.
• Extensive distribution network with over 80,000 retail points of sale.
• High consumer awareness and refined management strategy.

Understanding the operational workflow of Feihe infant formula involves recognizing its commitment to research and development, as seen in its extensive patent portfolio. The company's approach to product development and manufacturing prioritizes adapting to the specific nutritional needs of Chinese infants. Feihe company's strategy for market penetration and distribution relies on its vast network of over 80,000 retail points of sale, ensuring wide accessibility. The main stages in Feihe company's production process are meticulously managed to uphold quality standards, from raw material sourcing to final product delivery. How Feihe company operates its business is a testament to its integrated approach, covering all aspects of the value chain. This comprehensive strategy, detailed in the Marketing Strategy of Feihe, highlights how Feihe works to maintain its market leadership.

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Feihe maintains a leading position in the Chinese infant formula market, holding the top spot for six consecutive years as of 2024. Its brand promise of being 'More Suitable for Chinese Babies' and a focus on scientifically formulated products have cultivated strong customer loyalty. The company also ranks as the top seller globally in the infant formula market for four consecutive years.

Industry Position

Feihe has been the leading domestic player in China's infant milk formula market for six consecutive years, holding a 17.5% market share in 2024. This places it ahead of major competitors like Danone, which has a 14% share.

Key Risks Faced

The company faces significant headwinds from China's declining birth rate, which has impacted market size and led to profit declines in 2023. Intense competition and the need for continuous adaptation to stricter regulatory standards also present challenges.

Future Outlook and Strategy

Feihe plans to sustain revenue by focusing on technological innovation, such as its 'milk protein fresh extraction technology' launched in 2025. The company is also expanding its product portfolio to cover the entire life cycle, moving beyond infant formula.

Strategic Initiatives

The company aims to solidify market leadership by accelerating penetration in upper-tier cities and expanding into Southern China. Feihe projects a low single-digit revenue increase for 2025 and announced a share repurchase plan of at least RMB 1 billion.

Operational Workflow and Financial Confidence

Understanding the operational workflow of Feihe infant formula involves its commitment to product quality and innovation, such as its milk protein fresh extraction technology. Despite short-term profit warnings in early 2025, the company's confidence in its long-term development is underscored by a share repurchase plan of at least RMB 1 billion and expected total dividends of no less than RMB 2 billion for FY2025.

• Leading market share in China's infant formula sector.
• Expansion into new product categories beyond infant formula.
• Focus on technological advancements for product differentiation.
• Strategic market penetration in key geographical areas.
• Commitment to shareholder returns through dividends and repurchases.

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