Partner >>
Dynamic >>
Industry >>
Location:Home > News > Industry
Market Situation and Development Trend of China's Dairy Industry

Market Situation and Development Trend of China's Dairy Industry
Production Status of Dairy Products in China
In 2009, the Ministry of Industry and Information Technology, together with the National Development and Reform Commission, launched the new policy for the dairy industry, raising the product standard and strengthening production supervision. The industry barriers increased, and enterprises gradually shifted their focus to product quality. The overall industry growth rate slowed down significantly. In 2018, China's dairy output was 26.871 million tons, a decrease of 2.479 million tons from 2017. Due to the future upgrade of product structure, the price will increase, which is expected to drive the industry market scale to grow.
Dairy Consumption Situation
In 2017, China's dairy consumption was 32.593 million tons. The per capita consumption was about 32.3 kg (including infant formula), which contained about 19.8 kg of liquid milk and 12.3 kg of dried dairy products. The increase in the consumption per head of dairy products in China is mainly due to the increase in rural consumption levels, the development of urbanization and product diversification.
In terms of category, the consumption of skimmed milk powder in China is mainly imported. The proportion of imported whole milk powder (WMP), skimmed milk powder (SMP) and liquid milk to domestic dairy consumption is 92.7%, 25.4% and 2.1% respectively. For the high transportation cost, liquid milk only accounts for a small proportion of international trade. The domestic market of SMP remains relatively small. In 2018, its consumption was only 275,000 tons, which was 15% of the consumption of WMP. In addition, the demand for butter, the by-product of SMP is insufficient in China. At present, domestic dairy companies have few production lines of SMP, making a still low output of the products. Besides, from the perspective of domestic consumption trends, the imported whole milk powder and skimmed milk powder are more popular in recent years.
Domestic Dairy Market Segmentation
In 2018, the registration system was officially implemented in the infant formula industry. Therefore, a large number of less known and inferior brands exited the market, leaving the vacated market space seized by various large-scale dairy companies. As of the end of November 2018, there were 589 dairy enterprises above designated size in China, which was twenty-two fewer than the end of 2017, and the market concentration was further improved.
In recent years, Yili and Mengniu rely on their advantages of brand, channel, milk source and products to focus on distribution channels. The revenue growth of both is higher than that of the industry, and the market share is gradually increasing. However, China's infant formula market is currently dominated by international brands. In the past five years, local brands continued to invest in brand promotion and product research and development, while the registration system for infant formula has accelerated the industry reshuffle. Among the more than 2,000 domestic brands of infant formula, over 70% will be eliminated, and the domestic milk powder companies will seize the opportunity to raise their market share. It is expected that the market share of local milk powder brands will rise to 48% in 2021.
Dairy Industry Development Trend
China Is Currently Focusing on Sterilized Milk
As early as 2000, the domestic dairy market was dominated by pasteurized milk, with a market share of about 80%. However, due to the high requirements for storage and transportation, and the limited sales area, pasteurized milk was gradually replaced by sterilization milk, which is suitable for long-distance transport with a long shelf life. According to the national condition that its milk sources mainly distribute in the north, China will continue to develop sterilized milk for a long time.
Controlling the Industry Upstream Is the Development Core of Dairy Enterprise
Coupled with consumption upgrade, the domestic supply of fresh milk is in a short. The pasture construction cycle and the introduction and breeding cycle of dairy cows are often too long to keep up with the demand growth. Therefore, it is estimated that the price of fresh milk will rise slowly and fluctuate in the future. For liquid milk companies, controlling farms, the stabilize production cost, helps ensure the supply of fresh milk. For milk powder manufacturers, mastering quality milk sources means the company's brand strength and product attraction, and it is also the key goal of milk powder enterprises.
Potential Low-line Market Will Push the Growth of Dairy Products
At present, the penetration rate of liquid milk in China’s first- and second-tier cities, and eastern China’s partial third-tier cities is relatively high, while the rate in inland third- and fourth-tier cities and rural areas is relatively insufficient. With the urbanization process and the economic development of the central and western China, and the continuous improvement of people's income, it is expected that the future growth of dairy products in China mainly distribute in the central and western regions and the rural areas of the third- and fourth-tier cities.
The Market of High-quality White Milk and Yogurt Is Developing Rapidly
With consumption upgrading, the dairy market is constantly pursuing high-end products, covering fresh milk and fruit-flavored dairy products. From the perspective of categories, the growth rate of high-end white milk is greater than that of the normal one. The growth rate of room temperature yogurt and lactobacillus drinks keeps nearly 30%, while functional milk and children's milk show negative growth.