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China Mengniu Dairy teaming with Alibaba on rural distribution

Producer taps online solution to address nation's growing demand for fresh milk

  © AP

HONG KONG -- China Mengniu Dairy will partner with domestic e-commerce giant Alibaba Group Holding to capture untapped dairy demand in rural areas.

Mengniu CEO Jeffrey Lu Minfang disclosed those plans while reporting first-half earnings. Not only will Mengniu collaborate with various Alibaba group online portals starting this month, the dairy company will gain access to the tech group's wealth of customer data to maximize sales.

Milk treated to stay fresh even at room temperature has dominated China's market. But that unrefrigerated milk sacrifices taste for shelf life, and consumers in urban centers with developed supply networks have flocked to chilled milk.

A health-consciousness trend also underpins demand for yogurt, lactic acid beverages and other dairy products.

However, logistics channels that support refrigerated products are slow to materialize in rural parts of China. Instead of constructing such a network from scratch, Mengniu looks to adopt the one already developed by Alibaba.

Mengniu's January-June sales climbed 8% on the year to 29.46 billion yuan ($4.5 billion). Net profit rose 5% to 1.12 billion yuan.

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