Mengniu and Its Most Urgent Issue

Current Event Article

For most Chinese people, July 2008 is the month that they would never forget, because of a serious milk scandal that aroused everyone’s anger. At that time, a lot of leading Chinese dairy companies were caught into this scandal for illegally adding melamine into milk, which is a health hazardous chemical, to raise apparent protein content in their products. However, because of these companies’ cheating moves and lack of accountabilities, there were over ten infants died from kidney diseases and hundreds thousands of babies were sent to the hospital. Mengniu, as one of the biggest dairy products manufacturer at that time, was also widely criticized and distrusted by public for adding melamine and so its shares fell dramatically soon. Apparently, to regain trust from consumers, Mengniu had to resolve the most material issue, which was products safety. With the guidance and assistance from local government, Mengniu immediately took action and its solution for recovering from scandal was a thorough business model innovation.

At first, Mengniu altered its enterprise production mode, from traditional dairy farming to recourse saving, green dairy farming model in order to ensure products’ quality and environmental friendliness. Instead of feeding cows with synthetic food such as nutrition pills, Mengniu firstly implemented a “green cycle” concept which is to establish a “planting grass-feeding cattle-fertilizing land using feces-collecting milk-planting grass” green cycle farming model. In such a milk production model, cattle excrement will be recycled and then utilized as soil and forage fertilizers instead of using chemical fertilizer. Meanwhile, Mengniu also built the world largest (at that time) biomass electricity plant so that extra feces will be then used for biogas electricity generation. Also, in order to recycle water and properly dispose water wastes, a ton class sewage treatment plant was built and the purified water will then be used for agricultural irrigation and production. These measures successfully resolved Mengniu’s pollution and disposal problems and the green products also helped rebuild a positive company image, enhanced company reputation and regained public’s trust. In the following 5 years after the milk scandal, Mengniu’s milk sales always ranked first in the market and Mengniu was awarded with "China Low Carbon Energy Enterprise Award" for 5 consecutive years.