"Milk Powder Leader" Feihe Slows Down: Profit Drops Over 40%

Ask AI · Why Has Feihe’s High Marketing Spend Failed to Boost Performance?

Is Feihe—not so “suitable for Chinese babies’ body types”—selling well? In 2025, Feihe’s sales expense ratio surged, and in the average price per can of infant formula, nearly 40% is being paid for advertising.

On the evening of March 26, Chinese dairy company Feihe (06186.HK) released its 2025 annual report.

Against the backdrop of fluctuations in the birth rate and intensifying competition in the infant formula industry, as the “number one infant formula brand,” Feihe’s performance faced clear pressure, with full-year revenue of 18.11 billion yuan, down 12.7% year over year; attributable net profit was 1.94B yuan, down 45.68% year over year.

Because all core metrics fell across the board, investors have described this annual report as “the worst performance in recent years.” The company’s revenue scale has even retreated to the level of 2020, and its net profit has also hit the lowest point since 2018.

Compared with the 2020 annual report, Feihe’s “weakness” is even more obvious. In that year, its revenue scale (18.59 billion yuan) was roughly the same as last year, but it generated more than 7.4 billion yuan in profit—3.8 times that of the previous year. Its net profit margin also fell from 40% in that year to 11.56% last year.

In the past, Feihe captured consumers’ attention with its ad slogan “more suitable for Chinese babies’ body types” and large-scale marketing. It became the largest brand in the infant and young children’s formula market, entered the market through a premium positioning, and catered to the consumption mindset of most parents—“buying their child something expensive.”

A premium positioning gave Feihe access to more profit space. A reporter’s statistics show that Feihe’s profit margin has long ranked first among listed companies in the dairy products industry.

From a business-structure perspective, Feihe’s ability to withstand risks is weak. In the past, more than 90% of its revenue depended on infant formula, but this situation changed subtly last year.

Feihe’s dairy business (including adult milk powder, liquid milk, rice porridge and other prepared food products, etc.) achieved revenue of 2.06 billion yuan last year, up 36.1%. Its share of internal revenue rose to 11.4%, but its gross margin was only 1% and its scale was limited, providing no substantive help to improving the company’s profits. Its “second growth curve” has yet to take shape.

The original “profit pillar”—infant formula—saw a significant drop in performance. Last year, its revenue was 15.87B yuan, down 16.8% year over year, dragging down overall growth and, for the first time, reducing its internal share to 87.6%.

In addition to factors beyond control such as fluctuations in the birth rate, Feihe’s performance decline was also hit by fierce market competition. In recent years, leading dairy companies such as Yili and Junlebao have continuously increased investment in their formula businesses and followed up by implementing the birth-subsidy policy that Feihe launched earlier.

Feihe’s position as the “infant formula #1” has been threatened. After the release of the 2025 mid-year annual report, both Yili and Feihe stated that they are the #1 brand in market share for infant formula.

At that time, Yili said that the overall retail market share of its infant formula (including milk powder and goat milk powder) reached 18.1%, jumping to the #1 spot nationwide in retail market share. Feihe, meanwhile, said that it is “#1 in omnichannel sales volume and market share” for infant formula.

Both sides’ “#1” claims were certified by third-party institutions and derived from data research. There is a possibility that their statistical methodologies are not perfectly consistent, but there is no denying that Feihe’s business has indeed been impacted.

Water Hibiscus / photo

From the two indicators in the annual report, it can be seen that Feihe is not as easy to sell as it used to be.

One indicator is that the sales expense ratio has surged. Last year, the company’s sales and distribution expenses totaled 7.16B yuan, nearly equal to 2024. However, with revenue shrinking in scale, the sales expense ratio (sales expenses / total revenue) rose from 34.6% to 39.5%. Another indicator is that the company’s inventories increased from 2.15B yuan to 2.51B yuan last year.

Currently, the annual report has not disclosed R&D spending. Based on previous annual reports, Feihe’s R&D expenses have never exceeded 3.2% of total revenue.

This also implies that if consumers buy a can of Feihe infant formula priced at 200 yuan, then nearly 80 yuan is being paid for the company’s marketing expenses, while R&D costs are less than 6.4 yuan.

Sun Wanquiu / photo

Reporter: Shui Hibiscus

Text editor: Zuo Yu