Expanding market size
China's cheese consumption is still in a primary stage and the retail sales only accounted for 2% of China's dairy consumption in 2019 [1]. However, this segment has become a dairy product segment with promising growth potential, and showed a rapid upward trend. According to the Report on the Current Situation and Development Prospects of China's Cheese Industry in 2020 [1], the market size (retail sales) of China's cheese industry in 2019 reached 6.72 billion yuan, with a year-on-year growth of 15.27%. It is predicted that China's cheese market size (retail sales) will reach 7.86 billion yuan in 2020, with a year-on-year growth of 16.96%.
Source: Foodmate
A report released by Mintel in January this year [2] also showed that the compound annual growth rate of the Chinese cheese market has reached 30.1% in the past five years, ranking first in the world. In the European sophisticated cheese market, including the UK, Spain, Belgium, Switzerland, Finland, and Italy, the growth in recent years has been flat or slightly down.
Cheese consumption in China is dominated by processed cheese. In the consumption structure of China's cheese products in 2019, the consumption of natural cheese and processed cheese accounted for 14.6% and 85.4% respectively, and the consumption growth rate was 9.8% and 6.2% respectively.
A Wider range of application
China's cheese consumption used to be driven by high-end and ethnic minority groups, and there is still a big gap compared with mass consumption in western countries. With the upgrading of consumption and the increasing recognition of the nutritional value of cheese, China's cheese consumption group and per capita consumption volume continue to increase. Leading this charge is the younger generation of consumers, who are open to western-style food choice.
Most post-80s and post-90s generation parents choose cheese products as the protein and calcium supplement for their children, especially for those with lactose intolerance and cannot drink milk. Therefore, children's cheese, represented by cheese sticks, has become Chinese cheese market’s pillar segment.
In addition, cheese is a hot ingredient in the catering and snack sector due to its thick and creamy taste. For example, many store-made beverage brands including HEY TEA, China’s No.1 tea chain brand, have introduced cheese into milk tea and achieve massive success. Chinese dairy company Junlebao pioneered the cheese yogurt category in 2017, and the sales exceeded 1 billion packages in just two years [3]. Indonesia snack brand Richeese’s Nabati cheese wafer has been trending strongly among Chinese consumers in recent years. Chinese dairy giant Yili’s cheese brand Miaozhi (Wonderful Cheese) released a new product called Pocket Cheese in June this year, aiming at the adult ready-to-eat cheese market [4]. Cheese has been driving new product development for food brands.
Heated market competition
At present, China’s cheese market is led by imported brands. In 2018, the market share of CR5 brands was about 52.6% [5], all of which were imported brands. MILKANA occupied the highest sharepercentage of 27.2%, which was the absolute leader of the Chinese cheese market. In 2019, the CR5 brands changed a little with homegrown cheese enterprise Milkground squeezing in [6]. Milkground was the Top 1 domestic brand in sales and its cheese sticks were the most popular among young children. It accounted for 30% of the whole children’s cheese market in China in 2019. It is predicted that the market share of domestic brands will increase greatly in 2020 under the impact of COVID-19 epidemic.
Source: Euromonitor
Local dairy producers have begun to increase investment in this category. Take Mengniu as an example. In 2018, Mengniu set up the Cheese Division to develop three major businesses of cheese retail, dairy processing and cheese catering, with the annual growth rate reaching 66% [1]. In January of this year, Mengniu purchased a US $108 million (about 750 million yuan) stake in the cheese enterprise Milkground [7] to double down on cheese sector. In June, Mengniu set up a new joint venture with Danish dairy company Arla, going to be in charge of the cheese business in both retail and catering channels [8].
***Disclaimer: All images used in this article are from the internet.
