Contents

• Market Condition

• Company Dynamics

• Regulatory Compliance

Market Condition

1. China's coffee market is under pressure due to a sharp increase in global coffee bean prices. Large coffee chains manage price risks by adopting strategies such as signing long-term contracts with suppliers, bulk purchasing, and diversifying sourcing regions. Nevertheless, these companies have started narrowing the scope and regional coverage of their low-price campaigns. Specialty coffee shops, with weaker supply chain infrastructures, are feeling the brunt of these price surges. The rising cost of raw materials has forced these shops to increase product prices, leading to customer attrition.

2. Chinese chocolate brands are addressing the rising cost of cocoa beans with a "Chocolate+" strategy. This approach combines chocolate with diverse ingredients such as nuts, freeze-dried fruits, and marshmallows. By reducing reliance on pure cocoa butter, brands lower raw material costs while offering innovative taste and visual experiences, creating a distinct competitive edge.

3. From January to November 2024, China imported 2.35 million tons of dairy products, a 11.3% YoY decrease, valued at USD 10.07 billion, down 10.3% YoY. In November alone, dairy imports rose to 228,200 tons, up 6.4% YoY, with a corresponding import value of USD 989 million, marking a significant 28.8% YoY increase.

4. Camel milk powder is gaining popularity on Douyin. During the 2024 Double Eleven shopping festival, six of the top 10 camel milk powder brands achieved YoY growth, with some experiencing over tenfold increases. Targeting middle-aged and elderly consumers, the product emphasizes its rarity and health benefits, such as high protein, high calcium, and easy absorption, along with active nutrients like insulin-like factors and immunoglobulins. Notably, the upcoming GB standard for milk powder and modified milk powder, effective February 8, 2025, includes compliance requirements for camel milk powder and is expected to foster more orderly industry development.

5. According to the 2024 Functional Foods Industry White Paper, online sales of health functional foods reached CNY 92 billion from August 2023 to July 2024, a modest 0.9% YoY increase. Filed and registered health foods accounted for CNY 17.5 billion, up 39.3% YoY, led by By-Health with a 13.4% market share. Other functional foods generated CNY 74.5 billion in sales, a YoY decline of 5.2%, with Swisse leading the segment.

Company Dynamics

1. Yakult has closed its Shanghai lactic acid beverage production plant after 20 years of operation, shifting production to its facilities in Tianjin and Wuxi. The restructuring aims to improve production efficiency, reduce fixed costs, and optimize resource allocation to enhance sales and performance. Public data indicates a significant decline in Yakult's sales in China, although the brand remains a leader in the lactic acid beverage category.

2. Samyang Foods plans to invest KRW 201.4 billion to establish its first overseas factory in China by early 2027. As of September 2024, the Chinese market accounted for 30% of the company’s global export revenue, underscoring its role as a critical driver of international growth.

3. General Mills' financial report revealed double-digit declines in customer traffic at Häagen-Dazs stores in China. To address this, the company is accelerating the closure of underperforming stores and expanding its presence through retail, food service, and e-commerce channels.

4. PepsiCo has launched a marketing campaign for its sugar-free product line in collaboration with the hit Chinese video game Black Myth: Wukong. The company’s youth-focused strategy leverages young consumers' cultural and emotional preferences to create highly engaging marketing initiatives that drive brand growth.

5. Chi Forest reported double-digit revenue growth at its 2024 national distributors conference. Notably, its new brand Zizai Water, a Chinese traditional herbal beverage launched in 2023, has become its third growth pillar, with sales exceeding CNY 1 billion in 2024. This success follows its flagship brands, Chi Forest Sparkling Water and Alienergy Electrolyte Water.

6. Yili introduced seven professional dairy products targeting the food service sector, further expanding its B2B product portfolio. While the B2B market offers lower profit margins, its stable and scalable demand provides consistent sales. Amid saturation in the consumer dairy market, leading companies such as Yili, Mengniu, and Junlebao are increasingly prioritizing the B2B sector.

7. Mixue Ice Cream & Tea has partnered with dairy giant Junlebao to establish "Snow King Ranch." Spanning 800 acres, the ranch will house 8,000 high-yield Holstein cows, producing an estimated 42,000 tons of milk annually to supply Mixue's raw milk needs.

8. Ripe Fruit, an emerging beverage brand, completed its first self-built factory in December, with a total investment of CNY 1 billion and an expected production capacity exceeding 400,000 tons. Public data shows Ripe Fruit ranked fourth in the offline sugar-free tea beverage market from December 2023 to November 2024, up from eighth place the previous year. The new factory positions the brand to better address market dynamics and meet diverse consumer demands.

Regulatory Compliance

1. On December 13, 2024, China National Health Commission approved eight new food additives. This approval list includes three enzyme preparations, one food spice, one nutritional fortification substance, two food additives with expanded usage scope and one nutritional fortification substance with expanded usage scope. More information on ChemLinked.

2. On December 30, 2023, the State Administration for Market Regulation announced that Hainan free trade zone is allowed to import small quantity of FSMP and health food that have been sold in overseas while not granted domestic registration approval.

Disclaimer: All images used in the article are from the Internet.