From Loss to Profit: Maeil Dairy’s Special Formula Milk Finds Market in China

Maeil Dairy, one of Korea’s top three dairy product companies alongside Seoul Milk and Namyang Dairy, has been selling products for a specific consumer base.

Despite suffering losses due to low demand, good news has arrived that could turn the tide.

On May 13th, Maeil Dairy announced that it entered into a partnership agreement with AliHealth, a healthcare subsidiary of the Alibaba Group, to supply their special Absolute MPA Stages 1 and 2 formula to the Chinese market.

The special Absolute MPA Stages 1 and 2 formula is formulated for infants with inborn metabolic disorders.

This is a rare disease in Korea, affecting one in 50,000 people. It’s a genetic metabolic disorder where the body lacks or fails to produce specific enzymes needed to break down essential nutrients such as proteins, carbohydrates, fats, and amino acids.

Since 1999, Maeil Dairy has been producing this special formula for these few afflicted infants.

A representative from Maeil Dairy stated, “Based on our corporate philosophy that every child should be able to grow up healthily without exclusion, Maeil Dairy continues to strive for the health of infants with inborn metabolic disorders.”

However, due to the low demand, losses were inevitable. Maeil Dairy’s infant formula production team has stated in the past, “The market for special formula is small, and due to the complex production process, we have been suffering losses of KRW 300 to 400 million (approximately $267,000 to $357,000) for over 20 years.”

The factory has to stop twice a year to produce this special formula. Unlike regular infant formula, the complex process takes a long time to mix ingredients, and since the ingredients vary by product, it takes a whole day to clean the production equipment.

The situation was even more challenging due to high prices and a decline in infant milk consumption due to a low birth rate.

This agreement, which emerged like a comet under difficult conditions, was reportedly concluded at the request of a family in China hoping for a stable supply of special formula.

AliHealth plans to feature Maeil Dairy’s special formula on its online commerce platform in China, indicating an optimistic outlook for the profitability of the specialty formula business.

Viewers online who heard the news reacted with comments such as “What a great company,” “That’s why I only drink Maeil soy milk,” and “I’ll continue to support Maeil Dairy.”

Maeil Dairy’s performance last year on a consolidated basis showed revenue of KRW 1.7829 trillion (approximately $1.59 billion), and operating profit of KRW 72.2 billion (approximately $64.4 million), an increase of 5.7% and 19% respectively from the previous year.

Last year, Maeil Dairy CEO Kim Seon Hee made headlines by voluntarily cutting her salary as the company tightened its finances.

The operating profit for the first half of the year was KRW 34.1 billion (approximately $30.4 million), a 20.5% decrease compared to the same period two years ago due to rising costs of raw materials, labor, and logistics.

As a result, CEO Kim received an annual salary of KRW 570 million (approximately $507,000), a 50.4% reduction from the previous year’s KRW 1.15 billion (approximately $1.03 million).