Profitability and Revenue Grow Against the Trend, Hidden Concerns Lurk Behind New Dairy's "Fresh" Strategy

Does AI DTC business expansion increase accounts receivable pressure?

In an industry where liquid milk sales are generally under pressure, New Dairy delivered a double growth in profits and revenue for the year. On the evening of March 22, New Dairy announced its annual results, achieving operating revenue of 11.233 billion yuan, a year-on-year increase of 5.33%; net profit attributable to shareholders of the parent was 730 million yuan, up 35.98%. Behind these impressive results, high accounts receivable and goodwill impairment at New Dairy cannot be ignored, potentially posing risks to its future development. After the financial report was released, as of the close on March 23, New Dairy’s stock price fell 4.6% to 17.85 yuan per share, with a total market value of 15.363 billion yuan.

Revenue Growth of 5.33%

According to New Dairy’s 2025 annual report, both revenue and net profit attributable to shareholders grew, a unique achievement among dairy companies’ financial reports released during the same period.

The report attributes the 5.33% year-on-year revenue growth mainly to focusing on the “Fresh Cube Strategy” and a product strategy centered on “Fresh Value.” The financials show that New Dairy continued to adhere to the “Fresh and Sour Dual Strength” category development strategy, increasing product innovation. During the reporting period, both chilled fresh milk and chilled yogurt achieved double-digit growth. High-end fresh milk and “Today’s Fresh Milk Shop” also saw double-digit increases. Specialty yogurt grew over 30% year-on-year, with functional yogurt brands like the “Huorun” series leveraging trends such as value-for-money, meal replacements, and zero sugar to iterate and innovate. Asahi Weipin launched several best-selling new products, driving rapid growth. The revenue share of new products has maintained double digits for five consecutive years, with ongoing improvements in product efficiency, supporting stable company performance.

According to Kantar data, dairy consumption is gradually shifting from general nutritional supplementation to more refined, personalized choices based on scenarios, functions, and emotions. Overall liquid milk sales faced pressure, but demand differentiation and structural growth trends are evident in segmented tracks. On one hand, basic white milk growth has slowed; on the other, niche categories aligned with new consumption trends performed well. Chilled fresh milk, perceived as “fresher and more nutritious,” maintained good growth; functional dairy products rich in lactoferrin and probiotics are favored due to consumer concerns about “health + immunity.” Additionally, categories like specialty yogurt, dessert-style dairy, and light cheese that meet leisure and self-indulgence needs are emerging as new growth points.

Beijing Business News noted that during the reporting period, New Dairy’s marketing expenses increased. Its sales expenses for 2025 were about 1.81 billion yuan, up 9.05%, with advertising and promotion costs reaching 316 million yuan, a 30.08% increase, accounting for 17.47% of sales expenses, up from 14.65% in 2024. In response, New Dairy stated, “The company has strengthened brand building and increased advertising investments to enhance market brand recognition.”

Accelerating DTC Business Expansion

Under the “Fresh” strategy, in recent years, New Dairy has made DTC (Direct to Consumer) business a core growth engine.

During the reporting period, New Dairy’s DTC expansion showed a “multi-pronged” approach. For example, rapid organization setup and coverage of base and urban cluster markets through “Lightning Warehouses” enabled rapid growth in instant retail. The company enhanced operations for different channels such as membership stores and snack discounts, and deepened cooperation with tea and catering channels to lead growth in emerging channels. New regional expansion focused on the “urban cluster” strategy, optimizing channel structures, increasing brand investment, and breaking through in core categories, resulting in sales growth in these markets.

While promoting DTC, New Dairy also optimized traditional distributor channels. During the period, the number of distributors decreased by 383, with a net reduction of 266 in East China, 91 in North China, 16 in Northwest China, 107 in Central China, and 13 in other regions. Regional revenue analysis shows that growth in Southwest and Northwest was nearly stagnant, North China even declined by 0.5%, while only East China achieved a 14.95% increase. New Dairy explained, “During the reporting period, the number of distributors in North China decreased by 31.6%, mainly due to optimizing low-yield, underperforming distributors to improve overall channel health.”

“New Dairy has abandoned investments in traditional distributors and supermarket channels, increasing投入 in online, private domain, instant retail, and community platforms, promoting flatter sales structures, and vigorously developing DTC. Coupled with product innovation, digital marketing systems enable direct consumer engagement,” said Song Liang, senior dairy industry analyst. “For a mid-sized company like New Dairy, community retail and an integrated online-offline approach are suitable strategies. After gaining traffic, they can feed back into offline sales. However, this model is less applicable to large dairy companies like Yili or Mengniu.”

Risks of Accounts Receivable and Goodwill Impairment

Alongside the financial results, New Dairy announced plans to distribute a cash dividend of 3.8 yuan per 10 shares (tax included), with no bonus shares or capital reserve conversion. Despite strong performance and high dividends, the company also revealed structural risks such as increasing accounts receivable and goodwill impairment.

Song Liang noted, “The push into DTC may cause a short-term surge in accounts receivable. Previously, sales were mainly cash-based through distributors with shorter payment cycles. Moving directly to retail extends payment periods, tightening cash flow.”

The financial report shows that as of 2025, New Dairy’s accounts receivable reached 671 million yuan, up 4.6%, accounting for 91.76% of net profit attributable to shareholders during the same period. The top five customers’ receivables totaled 38.52% of total accounts receivable.

Shen Meng, executive director of Sangfor Capital, said, “High receivables are common in fast-moving consumer goods, indicating possible slow-moving inventory issues at the distributor level, leading to low capital turnover and delayed payments. While some of this may be due to liquidity issues among distributors themselves, it’s unlikely to be a widespread problem.”

More concerning is that the company’s goodwill on the books is as high as 1.01 billion yuan, accounting for over 11% of total assets. The audit firm has listed this as a “key audit matter,” warning of potential impairment risks. KPMG’s annual audit report states that the goodwill from the acquisition of Ningxia Huamei Dairy Development Co., Ltd. (hereafter “Huamei Dairy”) and its subsidiaries, acquired on July 1, 2020, totaled 831 million yuan. The acquisition included intangible assets such as trademarks valued at 279 million yuan, which management considers to have indefinite or uncertain useful life due to low deferred costs and the ability to extend usage indefinitely. Huamei Dairy mainly operates in Ningxia, Gansu, Shaanxi, and Henan, with projected 2025 revenue of 1.718 billion yuan and a main business profit of 442 million yuan.

Previously, at the end of 2024, New Dairy was warned by the Sichuan Securities Regulatory Bureau for incomplete and inaccurate disclosures in its 2023 semi-annual report due to delayed impairment testing of its Chongqing Hanhong subsidiary’s goodwill, raising concerns about internal control lag.

Shen Meng stated, “Goodwill often results from acquisition premiums. Its value depends on the acquired company’s profitability. If profitability declines sharply and irreversibly in the short term, the goodwill premium may be inflated and require impairment.”

The Beijing Business News contacted New Dairy via email regarding the accounts receivable and goodwill risks but had not received a response as of publication.