Ask AI · How did the Mengqiuer Food Safety Incident Shake the Brand’s Foundation?

Original First Release | Jinjiao Finance (ID: F-Jinjiao)

Author | Mai Yingzai

The “dairy giant” Mengqiuer, once with a market value exceeding 7 billion yuan, was ultimately torn down by a debt of less than 6 million yuan, losing its last dignity.

Not long ago, due to overdue equipment payments of over 5.95 million yuan, Mengqiuer was filed for bankruptcy liquidation by creditors. Although the company responded that “the legal conditions have not been met,” market doubts had already burst like a dam. Public information shows that, it has been listed as a dishonest person subject to enforcement, with a total case amount of about 171 million yuan since 2024.

For a long time, Mengqiuer was the “white moonlight” on the middle class’s dining table, praised as “middle-class milk” and “Maotai of milk” due to its Xinjiang milk source and rich flavor. During the 618 shopping festival in 2022, it once topped Tmall’s pre-sale list for ambient liquid milk products, surpassing Mengniu and Renyang Yitouniu.

However, the glorious illusion belonging to Mengqiuer was shattered in the cold spring of 2026 by a bleak financial report.

The first quarter of 2026 showed that its net profit attributable to the parent plummeted by 1976.2% year-on-year. This was the fifth year it had been mired in losses. From 2022 to now, Mengqiuer’s cumulative losses have approached 800 million yuan, nearly halving its peak size. The result was the stock abbreviation changing from “Mengqiuer” to the glaring “ST Mengqiu.”

| Mengqiuer Group Q1 2026 Report

From shouting “Build China’s best milk” in 2020 to stumbling towards bankruptcy now, Mengqiuer took less than six years.

Is it that middle-class consumers can no longer afford high-end milk, or did Mengqiuer itself “drink down” the high-end narrative?

Chairman’s annual salary drops to 14.4k yuan

In capital markets, losses are nothing new. Some are industry cycle pains, some are the cost of active expansion. Looking only at net profit often isn’t enough to judge whether a company is truly in danger.

But Mengqiuer’s problem is that almost all key operational indicators are deteriorating simultaneously. Compared to “how much money was lost,” the outside world cares more about whether this former “Maotai of milk” still has the strength to crawl out of the mire.

The first to collapse was revenue.

In 2021, Mengqiuer’s revenue peaked at 14.4k yuan. Since then, the company’s income has declined for four consecutive years, dropping to only 600.1 million yuan in 2025, nearly halving its scale. In the first quarter of 2026, revenue continued to decline year-on-year, indicating that the main business is not just experiencing short-term fluctuations but a sustained operational slowdown.

| Tonghuashun

More dangerous than profit decline is cash flow deterioration.

In the first quarter of 2026, Mengqiuer’s net cash flow from operating activities plummeted by 386.4% year-on-year, to -12 million yuan. Over the four years from 2022 to 2025, three years had negative operating cash flow, especially 2025, with a year-on-year plunge of 408.7%.

| Tonghuashun

For consumer companies, cash flow is often more directly important than profit. Profit can be smoothed through financial adjustments, but cash flow cannot be fooled. When operating cash outflows persist, it means the company’s core business earnings are no longer enough to cover daily operating expenses. The company may still appear to be running, but internally, it’s already bleeding.

To survive, Mengqiuer had to borrow externally. By the end of the first quarter of 2026, its total debt reached 838 million yuan, with an asset-liability ratio of 89.3%, far exceeding the 80% debt repayment warning line, meaning that, for every 1 yuan of assets, nearly 90 cents are borrowed.

| Tonghuashun

Under these circumstances, Mengqiuer can only rely on borrowing to maintain operations.

By the end of the first quarter of 2026, its total liabilities hit 838 million yuan, with an asset-liability ratio of 89.3%, far beyond the 80% warning line. In other words, now Mengqiuer has nearly 90 cents of debt for every yuan of assets.

Where did the money go?

From the financial reports, Mengqiuer is still trying to sustain growth through expansion. In the second half of 2025 alone, the company added 62 directly operated stores, which directly led to a 33.6% year-on-year increase in sales expenses in the first quarter of 2026; meanwhile, prepayments increased by 348% compared to the end of the previous year, mainly for goods payments.

The problem is, even though money was spent, products are selling less and less.

The 2025 financial report shows that the three core businesses—dairy products, baked goods, and festival foods—all declined in revenue, with decreases of 16.7%, 4.5%, and 20.8% respectively. Only other smaller businesses grew by 26.1% year-on-year.

This is a dangerous signal. Because for consumer brands, growth in marginal businesses cannot change the overall downward trend; what truly determines the company’s fundamental health is whether the core products still have market appeal.

Even more troubling is that revenue from distribution channels is also declining, down 10.5% year-on-year in 2025.

There’s an old saying in the consumer industry: “He who controls the channels controls the world.” Whether distributors are willing to continue pushing your products, stock shelves, or push back inventory, essentially reflects market confidence in the brand’s future.

Under multiple pressures, Mengqiuer’s asset scale has also begun to shrink rapidly. By the end of the first quarter of 2026, total assets were only 938 million yuan, down nearly 40% from the peak of 1.15B yuan at the end of 2021.

This all-encompassing operational crisis has ultimately condensed into a highly absurd detail:

Mengqiuer Group Chairman Li Yong, once the helmsman of a company with a market value of 7 billion yuan, saw his pre-tax annual salary drop from 388.3k yuan in 2022 to just 14.4k yuan in 2025.

Note: this is annual salary, not monthly.

In an era when even food delivery riders can earn over 10,000 yuan a month, a listed company’s chairman earning only a thousand yuan a month—Is this due to heavy debt forcing a “self-sacrifice” tactic, or does the company’s accounts really no longer even afford a decent business meal?

“Poison milk controversy”

Mengqiuer didn’t suddenly collapse.

Looking back, its real turning point actually appeared as early as 2022. Before that, Mengqiuer had almost caught all the red lights of China’s consumer upgrade era.

Founded in 1989, Mengqiuer started with baked goods. Over the next decade, it gradually crossed into the dairy industry, forming a “dairy + baked goods” dual main business model. In 2014, the company listed on the Shenzhen Stock Exchange; by 2015, its market value once exceeded 7 billion yuan.

At that time, Mengqiuer was telling a very typical and successful “high-end consumption story.”

As stated in its financial reports, the company “targets the high-end and ultra-high-end dairy market nationwide,” with the target customer group directly aimed at high-consumption groups. Based on this positioning, Mengqiuer built a complete narrative around “natural, healthy, high-quality”: Xinjiang golden milk source, 100k acres of natural pastures, 50k Holstein cows, and products with “rich milk flavor” and “full-bodied taste,” hitting the imaginations of urban middle class consumers seeking quality life during the peak years of consumption upgrade.

Especially in 2021, when live-stream e-commerce entered its most frantic phase, Mengqiuer also caught a wave of new traffic dividends.

That year, the company invested 9 million yuan in live-streaming e-commerce, quickly gaining nationwide popularity with top hosts like Li Jiaqi. During the 618 shopping festival in 2022, its pre-sale volume even topped Tmall’s ambient liquid milk pre-sale list, surpassing Mengniu and Renyang Yitouniu.

As traffic-driven growth accelerated, Mengqiuer increasingly resembled a “marketing-driven company.”

From 2021 to 2022, its sales expenses grew by 20% and 32.6% respectively, reaching 123 million and 163 million yuan, most of which was spent on live streams and KOL promotions. Meanwhile, R&D expenses only amounted to 5.188 million and 6.64 million yuan, with marketing costs roughly 24 times R&D expenses.

Until the “Propylene Glycol Incident” in 2022, everything changed.

In June of that year, Zhejiang Quyang County Market Supervision Bureau announced that two batches of Mengqiuer pure milk tested positive for propylene glycol, with contents of 0.318g/kg and 0.321g/kg respectively.

The “Food Additive Use Standards” under the “National Food Safety Standard” clearly prohibit the use of propylene glycol in dairy products, as it is a low-toxicity additive that, when consumed in excess over time, can cause kidney damage. Additionally, propylene glycol can act as a thickener, emulsifier, and other roles, improving food texture.

And “rich milk flavor” and “full-bodied taste” are precisely among Mengqiuer’s core selling points.

Thus, public opinion exploded. Questions like “Does the浓奶味真的因为奶品质好吗？” (Is the浓奶味 really because of good milk quality?)** arose one after another. For a long-standing “natural, high-end, healthy” dairy brand, such doubts were almost destructive.

Within a month, Mengqiuer lost billions in orders, with online and offline channels rapidly shrinking. Meanwhile, market regulators issued a fine of 73.15 million yuan. In comparison, Mengqiuer’s net profit in 2021 was only 18.45 million yuan.

In other words, it earned less in a year than the fine imposed.

In the following years, Mengqiuer did try to save itself. It attempted to adjust its product structure, shifting more resources to baked goods to ease the pressure on dairy. But the reality was that the baked goods industry’s competition had long since changed.

In 2025, industry leader Taoli Bread achieved revenue of 5.45 billion yuan, with an industry average of 2.69 billion yuan. In contrast, Mengqiuer’s revenue of about 600 million yuan, in scale, channels, and supply chain capacity, was already hard to establish advantages.

Meanwhile, financial pressure further propagated to operations.

Since 2026, besides the overdue equipment payment of 5.95 million yuan leading to bankruptcy, its subsidiary “Xinjiang Western Ecology” was also ordered by court to pay about 26.27 million yuan for project disputes, with Mengqiuer bearing joint liability.

And these might just be the tip of the iceberg.

According to media reports, the total amount of lawsuits and arbitration cases that Mengqiuer has not yet met disclosure standards for still amounts to 43.89 million yuan. The company’s chairman Li Yong has also been restricted from high consumption.

To some extent, the “Propylene Glycol Incident” did not just break Mengqiuer’s profit statement but also shattered the brand’s long-constructed trust.

From beggar to billionaire, from deity to bottom

If it hadn’t taken the wrong step, Mengqiuer might have become a legendary example in China’s dairy industry.

Li Yong’s father, the founder Li Yuhu, is himself a story of “beggar’s revenge.”

In 1962, at age 24, Li Yuhu faced discrimination in his hometown in Shandong due to his family background, even struggling to meet basic needs. To survive, he cut down the last tree in his backyard for 5 yuan and traveled from Tengzhou, Shandong, to Xinjiang.

It was almost like a fleeing experience.

He slept at stations, dug herbs, did hard labor, and when he couldn’t afford food, he tried freight trains and begged along the way. In Xinjiang, due to language barriers, he could only work as a farmhand. Once, a hunting rifle bullet grazed his body, nearly killing him.

He struggled for survival for 27 years. Until 1989, when the spring breeze of reform and opening up reached Xinjiang, Li Yuhu scraped together 5,000 yuan, and established a small food workshop with two rooms and an old oven, making cakes and cookies, called “Mengqiuer.”

The young man who first entered the business world, Li Yuhu, showed sharp judgment and strong execution.

In early baking, to improve product quality, he was willing to take loans and send employees to Shanghai for training; in 1997, when many regional food companies still lacked brand awareness, he already tried marketing with music, inviting Dao Lang to sing “Mengqiuer Song.”

Around 2002, Li Yuhu realized that Xinjiang, located at 45° north latitude, was the golden milk source belt, with low disease rates among dairy cows, and high fat and protein content in raw milk compared to the national average. But local dairy companies were generally small-scale and dispersed, with untapped opportunities.

Li Yuhu immediately decided to develop dairy products, investing 60 million yuan to introduce top international equipment and develop ultra-high-temperature sterilized milk. It was a gamble at the time, and by 2014, when listed, Mengqiuer’s net profit was only 41.42 million yuan.

It’s clear that, in its early days, Mengqiuer was a company advancing in both R&D and marketing. Its corporate DNA contained foresight, exploration spirit, and a fierce drive. Looking back at Mengqiuer’s past success, it’s no surprise.

Relying on solid market trust and technological foundation, Mengqiuer survived China’s darkest dairy period. After the 2008 melamine scandal, controversy over “poison milk” spread in public opinion, consumer trust collapsed, industry regulation tightened, and the industry entered a cold winter. Many dairy companies’ IPO plans were halted, delayed, or sold.

Mengqiuer persisted and, after six years, successfully listed on the A-share market, becoming one of the earlier leading companies to recover. Based on its first-day market value of 388.3k yuan, Li Yuhu’s family’s holdings were worth over 1.8 billion yuan. The young man who begged with 5 yuan in his pocket in Tengzhou finally became a billionaire.

This is also the cruelest part of the food industry.

Consumers may forget a marketing mishap, but it’s hard to forgive a food company’s safety issues. Especially when “rich milk flavor” is a core selling point, the “Propylene Glycol Incident” almost directly destroyed the most vital trust foundation of the brand.

What’s more intriguing is that Mengqiuer was not entirely without warning.

Around 2014, “self-supply of raw milk” had become an important trend in the dairy industry. Yili, Mengniu, Tianrun, and others were ramping up upstream pasture construction, aiming to keep milk sources firmly in their hands. Mengqiuer also mentioned in its listing application plans to raise funds for fresh milk production lines and dairy cattle farms.

But until 2018, these projects still hadn’t been completed, and the company even received inquiries from the Shenzhen Stock Exchange. Yet, at that time, few paid much attention.

Looking back today, Mengqiuer’s slowdown was caused by both the operational collapse after food safety issues and the realities of cash flow deterioration and channel shrinkage.

But the deeper problem might be a backlash against a narrative of the times.

During the most intense years of consumption upgrade, many “new middle-class brands” emerged in China. They excelled at telling origin stories, creating identity, and leveraging live-streaming and traffic algorithms to quickly reach the altar.

The problem is, traffic can shape a brand’s perceived value but cannot rebuild a company’s industrial capacity. The food industry, in particular, is one of the most demanding sectors for supply chain, quality control, and long-term trust.

What’s truly sad about Mengqiuer is that it was once among the most “industry-oriented” companies, understanding “serving the country through industry,” but ultimately lost its way under the influence of capital and traffic.

Reference materials:

Shenzhen Business Daily · Duchen “2025 Losses Exceed 14.4k, Q1 Performance ‘Dives’! Mengqiuer’s Dilemma Continues: The Company Has Become a Dishonest Person Subject to Enforcement, with Additional Major Litigation and Enforcement Risks”

Yingxiaoli “Huge Loss of 100k, Forced into Bankruptcy, Is the Popular Milk Drink Brought by Li Jiaqi Also Fading?”

Rongzhong Finance “Li Jiaqi’s Xinjiang Internet Celebrity Milk Is About to Go Bankrupt”

Shijie “Behind Mengqiuer, This Family’s Wealth Is 600 million”

Author’s note: Personal opinions only, for reference.