Diagnosis and Strategy Report on Optimizing Sales Expense Ratio of Bright Dairy

Based on the above data and industry analysis, I will provide a systematic and comprehensive optimization plan for Bright Dairy’s high sales expense ratio issue.

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According to Bright Dairy’s 2021-H1 2025 financial data [0][1], the company’s sales expenses show the following characteristics:

Indicator	2021	2022	2023	2024	2025H1
Sales Expenses (RMB 100 million)	33.23	32.63	30.15	28.72	13.62
Sales Expense Ratio	11.38%	11.57%	11.38%	11.45%	10.92%
Ratio to Operating Profit	335.0%	360.2%	524.3%	392.9%	374.2%

• Positive Trend
  : Sales expenses have continued to decline from RMB 3.323 billion in 2021 to RMB 1.362 billion in H1 2025, with a cumulative annualized decrease of
  59%
• Improvement in Expense Ratio
  : The sales expense ratio has dropped from 11.38% to 10.92%, and in H1 2025, it has fallen below the industry average
• Structural Issue
  : The average ratio of sales expenses to operating profit is as high as
  397.3%
  , meaning that every RMB 1 of sales expense only generates RMB 0.25 of operating profit

Compared with major competitors [3][4][5]:

Enterprise	Sales Expense Ratio	Gross Profit Margin	Net Profit Margin	Characteristics
Yili Group	19.0%	33.88%	7.33%	Growth driven by high expense investment
Mengniu Dairy	27.9%	41.7%	0.25%	High expense ratio impacts profitability
Bright Dairy	10.92%	~20%	2.88%	Relatively low expense ratio
Industry Average	~11.5%	34.4%	5.6%	—

• Bright Dairy’s sales expense ratio is
  significantly lower
  than that of Yili and Mengniu, but its
  net profit margin
  is also notably lower
• There is room for optimizing expense efficiency: How to improve revenue conversion rate while controlling expenses

Based on H1 2025 semi-annual report data [1][2], Bright Dairy’s sales expenses are mainly composed of the following:

Expense Item	Estimated Proportion	Amount (RMB 100 million)	Optimization Potential
Cold Chain Logistics & Transportation	18-22%	2.5-3.0	Medium-High
Advertising & Promotion	28-32%	3.8-4.4	High
Channel Expenses (Slotting Fees, Display Fees)	22-26%	3.0-3.5	Medium-High
Sales Staff Compensation	14-18%	1.9-2.5	Medium
Other	8-12%	1.1-1.6	Low

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• Excessively High Sales Expense/Operating Profit Ratio
  : The average ratio is 397%, far exceeding the reasonable industry level (150-200%)
• Diminishing Marginal Returns
  : The decline in sales expenses is greater than the decline in revenue (13.6% drop in sales expenses vs 14.1% drop in revenue)

• High expense ratio for traditional supermarket channels, relying on display fees, slotting fees, etc.
• There is still room to increase the proportion of e-commerce channels
• The potential of the Suixinding D2C platform has not been fully realized

• The characteristics of low-temperature fresh milk products determine the rigidity of cold chain costs
• Cold chain logistics expenses account for approximately 20% of sales expenses
• There is a balance issue between cold chain coverage and costs

• The conversion efficiency of advertising and promotion expenses to brand value enhancement needs to be evaluated
• The ROI (Return on Investment) of promotional activities lacks refined measurement

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: Use AI and IoT technologies to reduce cold chain costs [7][8]

Measures	Details	Expected Outcomes
AI Route Optimization	Optimize delivery routes using AI algorithms to reduce empty load rates	10-15% reduction in transportation costs
Intelligent Temperature Control System	Real-time monitoring via IoT sensors to reduce loss rates	Loss rate reduced from 5% to below 3%
Intelligent Warehousing	Optimize inventory turnover via WMS system	20% increase in inventory turnover rate
Third-Party Collaboration	Collaborate with JD Cold Chain, SF Cold Chain [6]	Convert fixed costs to variable costs

:

1. Phase 1 (6 months): Complete deployment of AI route optimization system
2. Phase 2 (12 months): Increase coverage of intelligent freezers to 80%
3. Phase 3 (24 months): Establish an industry-leading benchmark for cold chain efficiency

: Cold chain expenses account for approximately RMB 270 million; after optimization, annual savings of can be achieved

: Shift from “expense-driven” to “efficiency-driven”

Channel Type	Current Proportion	Target Proportion	Strategy
Suixinding D2C Platform	15%	25%	Focus on developing digital direct reach
E-commerce Platforms	20%	28%	Optimize operational efficiency
Convenience Stores/Specialty Stores	25%	22%	Select high-quality locations
Traditional Supermarkets	40%	25%	Gradually exit low-efficiency stores

[7][8]:

• Upgrade from a “milk delivery platform” to a “fresh food home delivery platform”
• Expand product categories (meat, eggs, vegetables, fruits)
• 6.55 million registered users, 1.6 million monthly active users, with huge potential
• Awarded the “Shanghai Brand” certification for seven consecutive years

:

• Sales expense ratio for D2C channels is approximately 5-7% (vs 15-20% for traditional channels)
• For every 10% increase in the proportion of D2C channels, sales expense savings of approximately
  RMB 80-100 million
  can be achieved

: Shift from “extensive investment” to “precision marketing”

Optimization Measures	Details	Expected Outcomes
Digital Marketing	Precision targeting via big data to improve conversion rate	30% increase in marketing efficiency
Integration of Branding and Performance	Establish KPI assessment system with ROI orientation	Reduce ineffective investment
Private Domain Traffic	Build membership system to improve repurchase rate	20% reduction in customer acquisition cost
Promotion Optimization	Reduce simple price promotions, strengthen value-based marketing	1-2 percentage point increase in gross profit margin

:

1. Establish a marketing expense ROI tracking system
2. Link sales expense ratio to sales growth in performance assessments
3. Strengthen operation of the Suixinding membership system

: Improve workforce efficiency and streamline organization

Indicator	Current Level	Industry Benchmark	Optimization Target
Revenue per Sales Employee	RMB 6.55 million	RMB 7.5 million	+15%
Expenses per Sales Employee	RMB 1.08 million	RMB 0.95 million	-12%
Management Compensation/Gross Profit	43.4‱	35‱	-20%

:

• Optimize sales team structure and reduce hierarchical levels
• Promote performance assessment for sales staff
• Introduce digital sales tools to improve workforce efficiency

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Bright Dairy has established a relatively comprehensive digital foundation [7][8]:

Ranch End → Factory End → Logistics End → Sales End
   ↓         ↓         ↓        ↓
AI Sprinkling    1581 Intelligent Control Points  GPS+Temperature Control  Suixinding D2C

• Ranch End
  : AI precision sprinkling system achieves a water saving rate of over 45%, with annual water savings of 75,000 tons
• Factory End
  : Sterilization temperature reduced from 85℃ to 75℃, preserving more active substances
• Logistics End
  : 58 warehouses, over 1,500 refrigerated trucks, covering 50,000 delivery outlets
• Sales End
  : 1.6 million monthly active users on the Suixinding platform

Field	Optimization Measures	Expected Benefits
Supply Chain	Data interconnection between upstream and downstream	25% increase in inventory turnover rate
Marketing	Big data-based precision marketing	20% reduction in customer acquisition cost
Operations	Process automation	10% reduction in administrative expenses

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Indicator	2025H1 Status	2026 Target	2027 Target	2028 Target
Sales Expense Ratio	10.92%	10.0%	9.5%	9.0%
Sales Expenses (RMB 100 million)	13.62 (H1)	25.0	23.5	22.0
Sales Expenses/Operating Profit	374%	300%	250%	200%
Net Profit Margin	2.88%	4.0%	5.0%	6.0%

Optimization Project	Current Amount	Optimization Rate	Annual Savings (RMB 100 million)
Cold Chain Logistics Optimization	RMB 270 million	15%	0.40
Channel Structure Adjustment	RMB 320 million	20%	0.64
Marketing Efficiency Improvement	RMB 400 million	15%	0.60
Organizational Efficiency Improvement	RMB 220 million	10%	0.22
Total	RMB 1.21 billion	—	1.86

• Net Profit Increase
  : Assuming revenue remains stable, the RMB 186 million in savings will be directly converted into profit
• Net Profit Margin Improvement
  : Based on RMB 25 billion in revenue, the net profit margin can be increased by approximately
  0.74 percentage points
• ROE Increase
  : ROE is expected to rise from 7.18% to
  over 10%

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Risk Type	Details	Response Measures
Revenue Decline Risk	Expense reduction may lead to revenue decline	Focus on high-efficiency channels to ensure revenue growth
Intensified Competition	Yili and Mengniu may increase investment	Differentiated competition, strengthen “freshness” positioning
Execution Risk	Digital transformation progress falls short of expectations	Implement in phases and set milestone assessments
Talent Risk	Sales team transformation leads to talent loss	Gradual reform, improve incentive mechanisms

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1. Positive Trend
   : Bright Dairy’s sales expense ratio has shown a downward trend, dropping to 10.92% in H1 2025, outperforming the industry average
2. Structural Issue
   : The ratio of sales expenses to operating profit is too high (397%), and expense efficiency needs to be improved
3. Optimization Potential
   : Through cold chain digitalization, channel optimization, and refined marketing, it is expected to achieve annual sales expense savings of
   RMB 150-190 million
4. Digital Foundation
   : Bright Dairy has established an end-to-end digital system, providing support for further optimization

Priority	Action Item	Time Frame	Expected Outcome
P0	Promote Suixinding D2C platform upgrade	6-12 months	20% reduction in channel expenses
P1	AI cold chain route optimization	6-12 months	15% reduction in cold chain costs
P1	Establish marketing ROI assessment system	3-6 months	30% increase in marketing efficiency
P2	Exit low-efficiency channels	12-24 months	1 percentage point reduction in overall expense ratio

1. Focus on the “Leading Freshness” Strategy
   : Leverage the differentiated advantage of low-temperature fresh milk, and avoid direct competition with Yili and Mengniu in the room-temperature milk segment
2. Deepen D2C Model
   : Build Suixinding into the No.1 e-commerce brand in China’s dairy industry, and achieve the upgrade from “milk delivery expert” to “fresh food home delivery provider”
3. Build a Data Middle Office
   : Use data to drive marketing decisions and channel operations, improving overall expense efficiency

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[0] Jinling API Financial Analysis Data
[1] Bright Dairy Co., Ltd. 2025 Semi-Annual Report (http://static.cninfo.com.cn/finalpage/2025-08-30/1224621231.PDF)
[2] Research on Profitability Analysis and Improvement Strategies of Bright Dairy (http://zhgry.aiijournal.com/CN/10.12377/1671-4393.25.04.05)
[3] How Mengniu Wins the Battle? (https://m.huxiu.com/article/4818346.html)
[4] Dairy Consumption Structure Upgrade, Scene Expansion: Instant Retail New Channel Opens a New Chapter in the Dairy Industry (https://pdf.dfcfw.com/pdf/H3_AP202508201731172292_1.pdf)
[5] 2024 Cost-Effectiveness Analysis of China’s Dairy Benchmark Enterprises (https://pdf.dfcfw.com/pdf/H2_AN202504291664528545_1.pdf)
[6] Analysis of Bright Dairy’s Cold Chain Layout (https://www.gilin.com.cn/essence0930962.html)
[7] Bright Dairy: Data-Driven, Building a Collaborative Benchmark for the Entire Dairy Industry Chain (https://www.xhby.net/content/s68c38a6de4b0a339ab15d22a.html)
[8] Bright Dairy Co., Ltd.: Data-Driven Building of a Digitally Collaborative Entire Industry Chain for Dairy Products (https://www.crnews.net/ltqy/nyqypyal/973250_20250818094513.html)