Contents

• Market Condition

• Company Dynamics

• Regulatory Compliance

Market Condition

1. The 30th Annual Meeting of the China Dairy Industry Association reviewed the state of China’s dairy industry in 2023. The total production of dairy products by enterprises above the designated size reached 30.55 million tons, a year-on-year (YoY) increase of 3.08%. This included 28.60 million tons of liquid milk, up by 2.79%, 0.87 million tons of milk powder (with infant formula accounting for about 50%), down by 1.38%, and 1.08 million tons of other solid dairy products (such as condensed milk, cheese, and butter). China imported 3.09 million tons of dairy products, valued at $12.69 billion, representing a YoY decrease of 9.94% and 12.56%, respectively. The conference also discussed current challenges in China's dairy industry, such as the surplus of raw milk and sluggish growth in consumer demand. The short-term focus will be on optimizing product structures, improving raw milk development plans, and fueling consumer demand.

2. According to Winwin Network, an offline retail monitoring agent, the sugar-free RTD tea segment maintained strong growth from April to May 2024, with sales increasing by 14.26% compared to the same period in 2023. The market share of this segment within the overall beverage sector also increased significantly.

3. China imported a total of 875,200 tons of dairy products from January to April 2024, a YoY decrease of 14.3%, with an import value of $3.524 billion, down by 27.2%. By category, cheese, butter, condensed milk, protein, and cream saw an increase in import volume, while bulk milk powder, infant formula, whey, packaged milk, and yogurt declined.

Import of dairy products from January to April 2024

4. According to MKTIndex, an online retail monitoring agent, the online sales of health foods in Q1 2024 exceeded 25 billion yuan, a YoY increase of 2%, primarily driven by the Douyin platform. Categories such as eye care, sports nutrition, liver protection, bone health, and chronic disease prevention saw notable growth. Additionally, the online sales of infant formula and children's milk powder reached 10.6 billion yuan, up by 10.6% YoY. Infant nutrition achieved online sales of 2.7 billion yuan, up by 16.5%, with key ingredients being calcium, iron, zinc, probiotics, DHA, vitamins, lactoferrin, and lutein.

5. Smoked plum soup, a traditional Chinese herbal tea, has gained popularity among young people due to its affordability, refreshing taste, and health benefits, particularly during the summer. The Zhejiang Provincial Hospital of Traditional Chinese Medicine sold 1.15 million servings in a single day and ran out of stock within a few days. The viral success of smoked plum soup has also boosted sales of other herbal tea drinks, such as anti-hair loss tea, liver protection tea, and eye protection tea. This trend highlights the increasing popularity of traditional Chinese health practices among the younger generation.

Smoked plum soup and other popular herbal drinks are out of stock at Zhejiang Provincial Hospital of Traditional Chinese Medicine

Company Dynamics

1. Nestlé has obtained the authorization to produce and sell Oreo ice cream in the Chinese mainland, launching three classic products: ice cream cones, cups, and family share tubs, priced at 9 yuan, 15 yuan, and 29.9 yuan respectively. These products are positioned as high-end, targeting young consumers and families with children.

2. Nescafé has entered into a strategic partnership with the Training Bureau of the General Administration of Sport of China. The "Absolute Deep Black Coffee" and "Gold Medal Black Coffee" will become training partners. As reported, the caffeine in black coffee can help improve alertness, attention, and endurance, thereby enhancing training performance.

3. Mars has launched its third pet food factory in Tianjin, China, which is also the largest in Asia. The dry food production line is already operational, with plans to start the snack production line later this year, followed by the wet food line in the future. With the opening of the Tianjin factory, Mars' high-end pet food brand Nutro has realized localized production of its wholesome essentials cat food in China. The Chinese pet food market is showing trends of diversification and premiumization, and localized production will enable Mars to accelerate product innovation and respond more flexibly to diverse local demands.

4. Danone NUTRICIA has introduced an upgraded amino acid formula product, "Neocate Syneo HMO" to the Chinese market through cross-border e-commerce channels. Neocate Syneo HMO is an amino acid formula product that includes both HMO and the patented SYNEO prebiotic and probiotic combination, with a total prebiotic content of 6.6 grams per liter. As an infant formula food for special medical purpose (FSMP), Neocate Syneo HMO can help regulate the gut microbiome of children with food allergies.

5. Yakult has introduced a peach-flavored product in China, marking its first fruit-flavored offering in this market. Over the past 20 years, Yakult had only introduced three new products before this launch: the original flavor, a low-sugar option, and a high-probiotic variety. As China’s probiotic food market continues to diversify, Yakult is expected to accelerate product innovation to boost competitiveness.

6. Coca-Cola's juice brand Innocent has ceased operations in the Chinese market, ending its catering service with Starbucks China, closing its e-commerce flagship store, and halting updates on its official social media accounts. Industry insiders indicate that Coca-Cola aims to focus its resources on its more prominent juice brand, Minute Maid, which is more likely to achieve scale and profitability in the competitive Chinese juice market.

7. McDonald's launched a limited-edition toy, "McDonald Walkie Talkie," for Children's Day in China, available with any purchase plus 38 yuan. The toy's unique design and gameplay quickly made it a hit, selling out shortly after its release. In recent years, fast-food chains have been introducing eye-catching toys during special occasions to boost exposure and foster fan loyalty.

High prices of McDonald's walkie talkies in the second-hand market

8. Yili has launched two low-carbon products, making further attempts to reduce carbon and methane emissions. The new carbon-reducing packaging utilizes eco-friendly technology to reduce aluminum foil and ink, which is certified by SGS to effectively reduce the carbon footprint by 30.81%. Additionally, low-carbon feed is used during the cows' feeding period, decreasing methane emissions from the cows' rumen by 20% to 30%.

9. Yili's Jinlingguan Tofer series, featuring two infant formula FSMP products, Early Care and Early Excellence, have received official approval from the State Administration for Market Regulation (SAMR). The Tofer series marks Jinlingguan's debut in the infant formula FSMP market and is the first to apply patented Chinese formulas in the industry.

Regulatory Compliance

1. On May 27, 2024, General Administration of Customs of China (GACC) issued a notification, proposing to optimize the approval procedures of quarantine permits for forbidden imported animals and plants for special purposes such as scientific research. More information on ChemLinked.

2. On May 11, 2024, China SAMR released Clinical Trial Quality Management Standard for Foods for Special Medical Purpose, which applies to the clinical trial conducted for FSMP registration in China. This new regulation has been effective starting from the date of promulgation, and its previous trial version issued on October 13, 2016 has been repealed since then. More information on ChemLinked.

3. On May 10, 2024, China National Center for Food Safety Risk Assessment (CFSA) opened four new food additives for public feedback. This includes one enzyme preparation, two nutritional fortification substance, and one nutritional fortification substance with expanded usage scope. More information on ChemLinked.

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