An enormous modern glass and concrete palace complete with fountains and a well-appointed guest house rises out of the arid plains less than an hour's drive from Hohhot, the provincial capital of Inner Mongolia. This is the house that milk built. Or more exactly, the house that China Mengniu Dairy's Hong Kong initial public offering proceeds paid for.
Under the tutelage of maverick director and president Niu Gensheng, who likes to quote Mao Zedong and runs his company like an army, Mengniu has grown from nowhere to become the largest dairy company in China in just six years.
Like Mr Niu, who began his career 20 years earlier as a bottle cleaner at state milk company Yili, the company had an inauspicious start. It was established with just one million yuan by Mr Niu and other former Yili colleagues after he was ousted as vice-president over policy disagreements.
Today, despite serious concerns over the quality of milk products in China, Mengniu is riding the crest of a digestive revolution. As incomes rise, and China continues to open to the world, eating habits are changing rapidly.
Mainland per capita dairy consumption has grown 30 per cent for the past four years and is expected to grow at least a further 15 per cent this year. Despite the rapid growth, per capita dairy consumption in China is still about 10 kg a year, compared with the world average of about 100 kg. That has got everyone very excited about prospects, and brought every dairy company in the world looking for a slice of the cheese.
Mengniu's first-half net profit grew 34 per cent to 247 million yuan, well ahead of its mainland-listed peers Bright Dairy, whose profits grew 3 per cent to 151 million yuan, and Yili, which grew 12 per cent to 171 million yuan.
