YiliThe scale of Yili and Mengniu gives them superior access to capital markets with significantly lower financing costs. In addition, their purchasing volume enables them to negotiate preferential prices for key inputs such as livestock feed. This lower cost structure means that the duopoly’s breakeven point is far below that of their competitors, ensuring that—even in an environment of historically low prices—they can withstand the pressure and continue operating profitably while small and medium-sized enterprises (SMEs) become insolvent.
Following the 2008 melamine-tainted milk scandal, the Chinese state imposed regulations that dramatically raised operating costs for small and medium-sized companies. Consequently, the current collapse of SMEs due to low prices is the economic manifestation of a long-standing political objective: the elimination of marginal players and the concentration of the market in the hands of large companies capable of guaranteeing quality, control, and supply at scale.
