The predicament of "King of Xinjiang Milk": The milk price has dropped, the cows have been sold, and the market outside Xinjiang is also shrinking.

In the first - quarter report of 2026, Tianrun Dairy can breathe a little easier. The net profit has turned from a loss to a profit year - on - year, the shock brought by the decline in milk prices has gradually slowed down, and the improvement of the profit fundamentals has begun to show results.

However, this brief respite can hardly cover up the costly expansion experiment in the past few years.

In 2014, Tianrun Dairy wrote "focus on expanding the market outside Xinjiang" in its annual report and was regarded as the regional dairy enterprise most likely to go out of Xinjiang and expand across the country.

So, what does a national dairy enterprise need to have?

The pre - conditions are sufficient milk sources, stable distribution channels, and deep - rooted brand recognition.

In the past more than a decade, every move of Tianrun Dairy has been towards this standard answer. However, judging from the subsequent financial report data, the resulting chain reactions have continuously brought new problems and pains.

Tianrun Dairy has taken more than a decade to learn this lesson, and the costs are still accumulating.

01. Two Trials, Two Strategies

Among the cases of regional dairy enterprises going out of Xinjiang, Tianrun Dairy is a relatively typical one: it has the geographical advantage of Xinjiang's milk sources and is located in the far - west, far from the eastern markets.

The predecessor of this enterprise was Xinjiang Tianhong Paper Co., Ltd. In 2013, it was transformed into a dairy processing enterprise and back - doored listed. It is controlled by the State - owned Assets Management Co., Ltd. of the 12th Agricultural Division of the Xinjiang Production and Construction Corps.

In the past more than a decade, Tianrun Dairy has made two attempts to "let good milk go out of Xinjiang".

From 2015 to 2017, it was Tianrun Dairy's first exploration of going out of Xinjiang. At that time, its main product, the Aikelin concentrated yogurt series, set a sales record for a single - item Xinjiang yogurt. This yogurt doesn't have a very clear "Xinjiang label". Instead, it uses novel packaging and differentiated flavors. At the same time, it creatively came up with homophone puns like "The ice - cream has melted!", "The chocolate has broken!", "The passion fruit has come!", etc., to create popular young - oriented products.

△Source: Screenshot from an e - commerce platform

At that time, the room - temperature milk market was monopolized by giants, and there were almost no concentrated and flavored bagged yogurts. Therefore, by relying on the check - in attribute, Tianrun Dairy, which took the young - oriented route, accurately targeted channels such as convenience stores run by couples and fruit stores, and quickly broke into the market. Its revenue increased significantly for three consecutive years (590 million yuan, 870 million yuan, 1.24 billion yuan) and for the first time exceeded one billion yuan. Among them, yogurt accounted for about 70%.

The interesting names and rich flavors made Tianrun Aikelin yogurt a popular online product. In 2018, the sales volume of the Aikelin series of yogurt exceeded 1 billion packs, becoming Tianrun's major single product. That year, yogurt revenue accounted for 63.4% of the total revenue.

During this period, Tianrun Dairy began to strengthen the construction of milk sources. It acquired Tian'ao Animal Husbandry, established Tianrun Fenghuotai Sub - company, built Fangcao Tianrun and Tianrun Beiting Pastures, and at the same time started to build a transportation and logistics network to prepare for modernizing production capacity and expanding outside Xinjiang.

By going out of Xinjiang with differentiated yogurt products, Tianrun Dairy achieved rapid growth. This can be regarded as Tianrun Dairy's first breakthrough in going out of Xinjiang.

However, the moat of a popular product is not long - lasting.

Since 2018, the room - temperature milk market has become highly competitive, and many competitors of Aikelin have emerged in the low - temperature milk field. The growth rate of Tianrun Dairy's low - temperature dairy products quickly dropped to single - digits. Tianrun Dairy began to consciously highlight the "Tianrun Dairy" brand, established a sales company, and explored mainstream fast - moving consumer goods channels such as large supermarkets, rather than just letting a single product compete in the market.

This gave rise to Tianrun Dairy's second round of going out of Xinjiang: from "product - driven" to "strategy - driven".

At the end of 2020, Tianrun Dairy reorganized its market structure outside Xinjiang, clarifying key markets (Shandong, Jiangsu, Zhejiang, Guangdong, Fujian), cultivation markets, and potential markets. In the same year, Tianrun Dairy also signed a contract with Bachu Tianrun Pasture to gradually increase its overall production capacity.

△Source: Tuchong Creative

After the expansion of production capacity, Tianrun Dairy's dairy production volume reached 24,400 tons in 2021, a year - on - year increase of 22.56%. At the end of 2022, the inventory was 3,420.68 tons.

With the increase in production capacity, sales must also keep up. In 2021, Tianrun Dairy's sales volume increased by 22.70% compared with the previous year. The total revenue was 2.109 billion yuan, a year - on - year increase of 19.32%. The net profit attributable to the parent company was 150 million yuan, a slight year - on - year increase of 1.52%, and the gross profit margin was 16.36%. The revenue from markets outside Xinjiang accounted for less than 40%.

Since the population and consumption power in the Xinjiang market are limited, the pressure of inventory can only be relieved by expanding outside Xinjiang. Therefore, a special investment item in the financial report called "freight subsidy for products going out of Xinjiang" began to rise.

In 2022, the special investment in the "freight subsidy for products going out of Xinjiang" in Tianrun Dairy's financial report reached 7.9196 million yuan (1.6809 million yuan in 2021). In 2023, this subsidy increased significantly to 28.728 million yuan, more than 3.6 times that of the previous year.

Behind the high - amount freight subsidy is Tianrun's determination to accelerate going out of Xinjiang and digest inventory. The effect was immediate: in 2023, Tianrun Dairy's dairy inventory dropped to 2,983.83 tons, a year - on - year decrease of 31.96%.

Tianrun Dairy's "story of going out of Xinjiang" reflects a typical path for regional dairy enterprises to find a living space among giants: tear a gap with differentiated products, and then use strategic organizational capabilities to widen the gap.

02. Each Move is Heavier than the Previous One

If the first two rounds of going out of Xinjiang were the exploration period, then 2023 might be the year when Tianrun Dairy truly went all - in.

In this year, Tianrun Dairy promoted two major events: continued mergers and acquisitions of dairy enterprises and the addition of factories. One was to expand production capacity and product range, and the other was to move factories outside Xinjiang to shorten the transportation distance - which also means that Xinjiang dairy enterprises are no longer just selling Xinjiang milk.

In 2023, Tianrun Dairy spent 326 million yuan to acquire 100% of the equity of Alar Xinnong Dairy Co., Ltd. (hereinafter referred to as "Xinnong"), the first dairy enterprise in Xinjiang to obtain the "China Organic Product" certification.

△Source: Screenshot from an e - commerce platform

Although it is a dairy enterprise within Xinjiang, Tianrun Dairy's acquisition this time has a clearer orientation of going out.

Public information shows that Xinnong's main sales areas are Aksu and Alar regions, which can help Tianrun Dairy consolidate the southern Xinjiang market.

Its milk powder products and large - package products can supplement Tianrun Dairy's product structure and enter the senior milk powder market. But more importantly, Alar, where Xinnong is located, is the counterpart assistance area of Zhejiang Province. Its products have a certain sales volume and brand reputation in Zhejiang, and Zhejiang is one of Tianrun Dairy's key markets outside Xinjiang.

However, this "ticket" comes with a heavy debt. Xinnong brought more than 700 million yuan in debt and about 20 million yuan in annual interest. Some institutions estimate that Xinnong's annual revenue needs to reach 600 million yuan to avoid losses.

The financial report figures are quite honest. In 2023, Tianrun Dairy experienced its first significant decline since 2015, especially in the second half of the year when its profitability took a sharp turn for the worse. Its fixed - asset scrapping losses and asset impairments were about 56 million yuan and 36 million yuan more than the previous year respectively, and its cash flow was just enough to pay off short - term debts.

By 2025, the "after - effects" of the acquisition of Xinnong were still fermenting. Two pasture projects planned by Tianrun Dairy for Xinnong (the 5,000 - head ecological dairy cow pasture project in the Shaya Industrial Park for the integrated development of the military and local areas and the expansion project of the 5,000 - head pasture in the Fourth Regiment) were reported to be in a state of suspension or slow construction. The company made an impairment provision of 10.3495 million yuan for construction - in - progress projects and recorded it in the current profit and loss.

In addition, three subsidiaries of Xinnong entered bankruptcy liquidation. Among them, Xinkeng Supply Chain and Kuche Xinnong Dairy have been out of business for many years. Moreover, the accounts receivable from the Zhejiang channels that were originally highly expected - Suzhou Xinnong Dairy Sales Co., Ltd. and the Jiaxing General Warehouse - could not be recovered, resulting in bad debts.

So, was the acquisition of Xinnong a losing deal? Or was Tianrun Dairy's strategy too hasty at that time? At least for now, this deal has not achieved a positive return.

The second important event is that Tianrun Dairy issued 990 million yuan in convertible bonds to increase its layout of new factories.

In February 2023, Tianrun Dairy announced that it planned to publicly issue A - share convertible bonds with a total issuance amount of no more than 990 million yuan. The funds raised would be used for a project with an annual production capacity of 200,000 tons of dairy processing and to supplement working capital. Regarding this expansion, Tianrun Dairy stated that this project was based on the actual situation that the current production capacity utilization rate of the company's dairy business was relatively high and could not meet the needs of the company's business scale growth.

△Source: Tuchong Creative

In fact, in that year, Tianrun Dairy was using aggressive freight subsidies to expand the market outside Xinjiang, and its sales expenses reached 147 million yuan, a record high. Combining the newly opened 200,000 - ton project, at that time, Tianrun Dairy might have thought that high production, high subsidies, and high sales were a positive - cycle growth flywheel.

At the end of the same year, Tianrun Dairy's Shandong Qiyuan Factory was officially put into operation, with a first - phase production capacity of 100,000 tons. This factory was jointly funded by Tianrun Dairy and Shandong Qiyuan Development Group Co., Ltd. with 300 million yuan. Tianrun Qiyuan Dairy Co., Ltd. was specially established, in which Tianrun Dairy holds a 51% stake.

The raw materials used in this factory come from large - scale pastures in local cooperation, and it mainly produces high - end A2 - type milk products. The product brand used is "Jiali" under Tianrun Dairy.

In 2024, Tianrun Dairy's revenue from markets outside Xinjiang (1.365 billion yuan) exceeded that from within Xinjiang (1.359 billion yuan) for the first time. This should have been a good sign, but the company could hardly be happy.

Because the direct result of multiple rounds of production expansion was a doubling of inventory. At the end of 2024, Tianrun Dairy's dairy inventory was 6,102.08 tons, a year - on - year increase of 104.50%. However, "due to the decrease in the average market price of bulls and fresh milk compared with the previous year", the gross profit margin decreased by 69.26% year - on - year. At this time, the domestic milk production had exceeded 40 million tons, and the pace of clearing the pasture production capacity was accelerating.

Before the new pastures and new factories had been in operation for long, the market situation changed. Tianrun Dairy had to follow the industry trend and join the ranks of "selling cows" to reduce production capacity.

Tianrun Dairy once told Times Finance that the company increased the culling of low - yielding cows and bulls in the first half of 2024, which also led to Tianrun Dairy being in a loss state in the first half of 2024. The net profit attributable to shareholders of the listed company was - 27.9078 million yuan.

From the popularity of a popular online yogurt to large - scale national expansion, Tianrun Dairy's "story of going out of Xinjiang" has reached a crossroads. And this third round of going all - in will further test its survival resilience in the face of heavy assets, high debts, and weak business cycles.

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