KFC Ditches Nestle, Teams up with Mongolian Sour Cow

I love fast food, and I love celebrity marriages. Better still, I love celebrity divorces.

This week’s announcement about the tie-up between KFC and Mengniu Dairy has everything I need.

In June, Mengniu also pushed out Nestle in a deal with Starbucks.

Mengniu is the largest milk producer in China, a country not traditionally known for dairy products. But today, Xinhua reports, China is the third-largest dairy producer in the world – following the United States and India.

In part, it was foreign brands such as KFC – which has over 2000 outlets in China – that helped change that. I’m thinking of KFC’s soft-serve ice cream, for example. Or Starbuck’s lattes. Or the slices of cheese on McDonald’s hamburgers.

According to the state-owned China Daily, the deal is a demonstration of faith in China product quality.

This past January, Mengniu became the “Official Dairy Product of the NBA in China.” Last summer, Hong Kong Disneyland named Mengniu as its dairy supplier.

Mengniu literally means “Mongolian cow.” I remember the company for its sponsorship of the Supergirl contest, a copy of foreign talent shows like “American Idol.” The show was officially known as the “Mongolian Cow Sour Yogurt Supergirl Contest”.

The contest has since been banned by the Chinese government for being, as far as I can tell, too non-conformist – but it did help catapult Mengniu to national prominence

In other countries, dairy companies are very conservative. Cheeses are made based on centuries-old formulas. Occasionally, someone will come out with an innovation like 2 percent milk, or a new flavor of yogurt, or organic cheese but, in the end, what can you really do?

My in-laws were dairy farmers in Massachusetts. The farm went out of business a couple of decades back – as a mature industry, milk is a commodity product. It’s hard to make a business at it, except through vast economies of scale.

China proves that it doesn’t have to be that way.

By allying itself with Supergirl, with the NBA, with Disneyland and Starbucks and KFC, Mengniu is nothing if not the epitome of cool. The Chinese daily industry in general is cool – fast growing, innovative, popular with the youth market.

And new dairy products are coming out at a rapid pace. Flavored milks and milk with chunks of real fruit, novelty ice creams, even “breakfast cheese.”

But, as Li Bin writes in this week’s feature about China’s dairy industry, China still has a long way to go.

Despite being one of the world’s leading producers of daily products, China averages 10 kg of dairy consumption per capita – a tenth of the consumption of the world average. Japanese consumption is 18 times higher. US consumption is 30 times higher. And the French – no surprise here, given their love of cheese – consume 50 times as much dairy as Chinese do.

If the pace of growth in China’s dairy industry continues, China may soon eclipse the US in milk production. But it is already eclipsing it in innovation.