Improving dairy quality to build a global Chinese brand

There are two photographs you won't fail to notice at the office of Pan Gang, CEO of Inner Mongolia Yili Industrial Group Co Ltd, China's biggest dairy producer.

One shows him communicating with farmers and herdsmen at a pasture about cow breeding. The other one shows him interacting with Tim Cook, CEO of Apple Inc, and Ellen Kullman, former CEO of DuPont Co, in 2015.

The common theme they signify is that for Pan, quality means a lot, be it educating farmers on how to care for cattle in a way that they produce top-quality milk, or associating with leaders of companies known for making quality products.

For a long time, Pan has been focused on the quality of Yili's products. His goal is to make Yili one of the most trusted providers of healthy food globally. To achieve his goal, he wants to integrate various resources at his disposal and help Yili compete with dairy giants worldwide.

Currently, Yili Group is the largest dairy producer in Asia, and the eighth-largest in the world.

In the past decade, Yili has been selected for case studies at Harvard Business School twice. No other Chinese food company has received such attention from a top business school. Pan has also been invited to teach Harvard's MBA students twice.

"If there is no innovation, then there is no future for a company." That's one of Pan's famous quips, and Yili's motto.

In the eyes of Pan, there are only two kinds of people in the world: those who drink milk and those who don't. Yili's mission is to convert those who don't to milk-drinkers.

Back in 1999, Pan introduced liquid milk production line in China, and extended the quality guarantee period of milk to six months. The move has helped the milk produced in Inner Mongolia to be sold to far-flung areas in China, and drive the dairy industry's growth in the country.

Many years ago, Pan found that a large portion of Chinese consumers has lactose intolerance. So, Yili invested significant resources to develop China's first lactose hydrolyzed milk, which enabled such consumers to drink milk without facing problems.

Such consumer-oriented strategies helped Yili to earn more than 60 billion yuan ($9.15 billion) in sales revenue in 2016, with almost 23 percent coming from new products. Yili commands a 20-percent market share in China's dairy industry, topping the list, according to the company.

In 2016, sales of its flagship Greek-style yogurt Ambrosial, which it co-developed with the Greek Academy of Agricultural Sciences, surged 106.7 percent year-on-year. In the first six months of 2017, Yili's net profit rose 4.5 percent year-on-year to 3.37 billion yuan.

Besides promoting innovation in products, Pan insists on every member of the management team having a sense of innovation, as only that will help Yili to take the lead in a fiercely competitive market.

To this end, Pan has been taking Yili's management team on overseas visits so they could communicate with their counterparts at other leading companies, such as DuPont, Philips, Google, Facebook and LinkedIn, and gain some new experiences from other industries.

During such visits, Pan was impressed by the Silicon Valley's spirit of innovation. He has been constantly looking for new opportunities and strategies abroad to raise the global impact of Yili and China's dairy industry.

Currently, China's per-capita consumption of dairy products is 36 kilograms a year, while it is about 50 kg in Japan and South Korea.

"The trend of consumption upgrade in China indicates there is still a significant growth potential for the dairy market, especially for unique products," Pan said.

"We will speed up our layout globally, grasping the business opportunities presented by the Belt and Road Initiative, and enable Chinese enterprises to have a bigger voice," he said.

Together with Wageningen University and Research in the Netherlands, Yili established a dairy research and development center in Europe. In 2014, the company founded the world's largest integrated dairy production center in New Zealand, named Yili Group Oceania Dairy Ltd, with an investment of 3 billion yuan.

In the United States, it also cooperates with a number of top universities and institutions in certain areas like food safety, product development and nutritional research.

As one of the representatives who attended the 19th CPC National Congress in October, Pan said enterprises can achieve sustained and vigorous growth only if they pay heed to quality, and needs of consumers. In this context, Yili shall endeavor to create a national brand and serve more people, he said.