Xin Ou
Research expert covering Greater China
Dairy industry in China - statistics & facts
Once a niche market, the dairy industry in China is now reaching more consumers through effective marketing and advertising. This was a marked difference from the belief of traditional Chinese medicine where dairy was considered rather unhealthy, in addition to most of the population being lactose intolerant. Over the last three decades, however, rising consumer incomes and technological advancements in dairy farming, storage and transportation have driven a surge in the Chinese dairy industry, making it one of the largest dairy consumers in the world.
The current dominators Inner Mongolia Yili Industrial Group (“Yili”) and China Mengniu Dairy Company (“Mengniu”) have grown together rapidly over the past three decades while competing with each other. Both have a robust supply chain in place and mature techniques that enable them to offer a broad range of products at attractive prices. They primarily earn their income from UHT milk, but they are also highly competitive in the yogurt market. Moreover, Yili holds a significant market share, whilst Mengniu is a leader in the cheese market.
Main dairy products
Fluid milk and infant milk formula are the most popular dairy products in China, with cow milk being the most consumed milk. All fluid milk legally sold on the Chinese market has been treated via either ultra-high-temperature pasteurization (UHT milk) or low-temperature pasteurization (pasteurized milk), with UHT milk accounting for over four fifths of the total fluid milk consumption, a share much higher than elsewhere in the world. Yogurt also has a large consumer base. In 2009, Bright Dairy introduced ambient yogurt (yogurt at room temperature), which quickly captured market share and became a new battlefield for domestic giants. Notably, cheese and cream are increasingly used, not only in cooking and baking, but also as a luxury ingredient in new style tea drinks.Key market players
In 2008, the widespread melamine scandal severely disrupted China’s milk production as well as consumer confidence and trust in domestic dairy producers. Since then, the government has taken steps to enforce new regulations and gain better control over the quality and safety of domestic dairy products. In response to these restructuring processes, many small farmers exited the market, resulting in a highly concentrated market.The current dominators Inner Mongolia Yili Industrial Group (“Yili”) and China Mengniu Dairy Company (“Mengniu”) have grown together rapidly over the past three decades while competing with each other. Both have a robust supply chain in place and mature techniques that enable them to offer a broad range of products at attractive prices. They primarily earn their income from UHT milk, but they are also highly competitive in the yogurt market. Moreover, Yili holds a significant market share, whilst Mengniu is a leader in the cheese market.
Reliance on imports
Although dairy production product offerings have picked up, dairy imports to China remained at a high level. New Zealand is the leading dairy supplier for the Chinese market, accounting for over one-third of all imports. Milk powder, packaged milk and whey were the main-imported dairy products in terms of import volume. Despite the increase in dairy imports and sales, dairy consumption per capita is still much lower in China than in the rest of the world. Since more urban Chinese consumers are willing to spend money on niche, high-end, organic, and healthier products, a transition of the dairy industry from scale growth to product upgrade is pending.
