Milk and Dairy Beverages - China - April 2021

OVERVIEW
What you need to know
Key issues covered in this Report
Covered in this Report
Excluded
Definitions
EXECUTIVE SUMMARY
The market
Figure 1: Retail market value of milk and dairy beverages (including lactobacillus drinks), China, 2015-25
Companies and brands
Figure 2: Leading companies’ value share of milk and flavoured milk segment, China, 2019-20
Figure 3: Leading companies’ value share of the lactobacillus drinks segment, China, 2019-20
The consumer
Opportunities and challenges coexist for chilled plain milk
Figure 4: Consumption frequency, January 2021
Occasion marketing can help unlock new growth potential
Figure 5: Consumption occasions, January 2021
Nutrition and milk source quality are unchanged key premium points
Figure 6: Premium product features, January 2021
Only one in four know if they are lactose intolerant or not
Figure 7: Perception of lactose, January 2021
Consumers buying into TCM have higher expectations of healthy milk
Figure 8: Percentage points difference of functions, by preference of different ingredients type, January 2021
Still a long way to go before the majority perceive chilled milk as a superior choice
Figure 9: Attitudes towards nutritional value of different processing milk, January 2021
What we think
ISSUES AND INSIGHTS
Consumers knowledge of chilled milk is at early stage
The facts
The implications
Figure 10: Zhi Chun five-hour chilled milk from Wei Gang, China, 2021
Tap into the bigger beverage market by leveraging dairy’s health halo
The facts
The implications
Bedtime, dessert time
The facts
The implications
Figure 11: Pasteurised malt flavour bedtime milk from Dairy Home, Thailand, 2020
Figure 12: Examples from ice cream brands to target hometainment occasion, 2020
Strengthen the connection of gut health and mental health
The facts
The implications
Figure 13: Glow Bar’s Naked unflavoured moon shake adaptogenic protein powder, UK, 2020
THE MARKET – WHAT YOU NEED TO KNOW
The milk market is overall stabilised
Consumer demand and policies drive future growth
Chilled plain milk enjoys the highest growth rate
MARKET SIZE AND FORECAST
Growth of the milk market is more contributed by volume
Figure 14: Retail market of milk and dairy beverages (include lactobacillus drinks), China, 2016-20
Figure 15: Retail market of milk and dairy beverages (exclude lactobacillus drinks), China, 2016-20
Still strong growth potential compared to other countries
Figure 16: Milk volume consumption per capita, China, Japan, US and UK, 2015-19
Stable growth for the following five years
Figure 17: Retail market value of milk and dairy beverages (including lactobacillus drinks), China, 2015-25
MARKET FACTORS
Consumption trade up to yogurt poses a threat
Figure 18: Changes to consumption after COVID-19 – % bought more, 26 April-2 May
Figure 19: Changes in food and drink spending after COVID-19, % spent more, 27 May-3 June
Plant-based drinks lurk as well
Private label milk products from fresh food ecommerce
CPI of dairy stays stable compared to that of food category
Policy support
MARKET SEGMENTATION
Chilled milk is the fastest-growing segment, while ambient is resilient
Figure 20: Retail market value of chilled plain milk, China, 2015-25
Figure 21: Retail market value of ambient plain milk, China, 2015-25
Lactobacillus drinks still growing but losing momentum
Figure 22: Retail market value of lactobacillus drinks, China, 2015-25
Flavoured milk keeps decreasing, facing threat from bigger beverage market
Figure 23: Retail market value of flavoured liquid milk, China, 2015-25
KEY PLAYERS – WHAT YOU NEED TO KNOW
Whole industry keeps centralising 
Expanding from multiple directions
Active global and domestic innovations 
MARKET SHARE
CR2 keeps increasing, whole industry more centralised
Figure 24: Leading companies’ value share of milk and flavoured milk segment, China, 2019-20
Chilled lactobacillus brands are losing share temporarily
Figure 25: Leading companies’ value share of the lactobacillus drinks segment, China, 2019-20
Four competitive cohorts in chilled milk market
COMPETITIVE STRATEGIES
Mergers and acquisitions
Snatching upstream milk source is level up
Mengniu cooperates with Coca-Cola to win bigger in chilled milk
IPO fever
Product strategy
A2 liquid milk is emerging
Dairy giants enter the market of lactobacillus sparkling water
Figure 26: Example of lactobacillus sparkling water from dairy giants, 2021, China
Chilled milk for seniors
Figure 27: Functional chilled milk from Bright, China, 2020
Channel strategy
Chilled milk is betting on door-to-door service
Figure 28: Bright cooperated with Tmall to promote Sui Xin Ding service, China, 2020
Figure 29: Official fresh grocery store of New Hope, 2020
Build quality perception through foodservice
Figure 30: Example of marketing dairy and dairy-alternative products in premium coffee houses, Shanghai, 2021
WHO’S INNOVATING?
China Innovation trends
Ingredients related claims growing faster
Figure 31: Top 10 fastest growing claims in milk market, China, 2016 (April)-2021 (March)
Flavour: influenced by tea house but Chinese style is rising
Figure 32: Top 10 Fastest growing flavours in milk market, China, 2016 (April)-2021(March)
Figure 33: Yi Li Gu Li Duo with TCM ingredients, China, 2020
Core nutrition: Protein grows the fastest while sugar down
Figure 34: Average core nutrition of milk, China, 2016-20
Global Innovation Trends
Animal and plant mixed milk drinks
Figure 35: Live real farms lactose-free dairy + plant-based milk blend, USA, 2019
Broader functions beyond bone health
Figure 36: Examples of milk with function of mental health
Figure 37: Milk with collagen, Japan, 2019
Packaging: Eye-catching signs to communicate function
Figure 38: Examples of milk with function of mental health
THE CONSUMER – WHAT YOU NEED TO KNOW
Chilled milk faces bright future but threats at same time
Emerging occasions help generate future growth
Potential space to shape consumers’ perception
CONSUMPTION FREQUENCY
Overall popularity ranking remains unchanged, but chilled plain milk sees small increase  
Figure 39: Consumption frequency, January 2021
Chilled milk still needs to do more to highlight its advantage
Figure 40: Consumption frequency, 2019-21
Figure 41: Percentage change in medium users of ambient yogurt and chilled plain milk between 2019 and 2021, by age and gender
Dairy products have more growth potential in South and Mid-West
Figure 42: Percentage of heavy users, by region, January 2021
CONSUMPTION OCCASIONS
Plain milk’s strong occasion association is a double-edged sword
Other dairy beverages are similarly seen as flavour drinks for leisure time
Workout is still a niche occasion
Figure 43: Consumption occasions, January 2021
Opportunities for chilled milk to target different age groups
Figure 44: Consumption occasions of chilled plain milk, by age groups, January 2021
OPPORTUNITY FOR PREMIUMISATION
Nutrition and milk source quality communication carry more weight
Figure 45: Premium product features, January 2021
Figure 46: Preference of premiumisation, January 2017 and 2021
Education about typical cows needs diving deeper
Figure 47: Attitudes towards different breeds of cows, by selection of premiumisation product feature, January 2021
PERCEPTION OF LACTOSE
Only one quarter of respondents know if they have a lactose issue or not
Figure 48: Perception of lactose, January 2021
Even lactose-aware consumers have limited product knowledge
Figure 49: Perception of lactose, by consumer group, January 2021
Plant-based dairy alternatives are getting ahead in competition
IDEAL WELLBEING MILK
Beauty for female, physical health for male
Figure 50: Ideal functions of healthy milk, January 2021
Figure 51: Ideal healthy milk, by gender, China, February, 2021
Build association with anti-ageing function and milk
Figure 52: Signs of ageing, by gender, March 2021
TCM ingredients help to target consumers with higher health expectations
Figure 53: Percentage points difference of functions, by preference of different ingredients type, January 2021
ATTITUDES TOWARDS MILK
Still a lot of opportunities to shape consumers’ perception
Figure 54: Attitudes towards nutritional value of different processing milk, January 2021
Figure 55: Attitudes towards pasteurized milk and UHT milk, by consumer group, January 2021
Figure 56: Attitudes towards nutritional value of different breeds, January 2021
Being local doesn’t matter unless people trust you 
Figure 57: Attitudes towards factors influencing freshness of chilled milk, January 2021
Different consumer segments to target
TCM vs Western; both have fans
Figure 58: Attitudes towards different type of ingredients, January 2021
Figure 59: Attitudes towards different type of ingredients, by gender and age, January 2021
Figure 60: Perception of milk – CHAID – Tree output, March 2021
Health vs taste-driven for lactobacillus drinks
Figure 61: Reason to drink lactobacillus beverages, January 2021
APPENDIX – MARKET SIZE AND FORECAST
Figure 62: Total market value of milk and dairy beverages (including lactobacillus drinks), China, 2015-25
APPENDIX – MARKET SEGMENTATION
Figure 63: Retail market value of chilled plain milk, China, 2015-25
Figure 64: Retail market value of ambient plain milk, China, 2015-25
Figure 65: Retail market value of lactobacillus drinks, China, 2015-25
Figure 66: Retail market value of flavoured liquid milk, China, 2015-25
Figure 67: Retail market value of white powder milk, China, 2015-25
APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
CHAID analysis methodology
Abbreviations