As reported by 2022 China Agricultural Outlook Conference, the total dairy consumption in 2021 amounted to 59.27 million tons, with a year-on-year (YoY) increase of 11.8%. The per capita dairy consumption was 42.29 kg, hitting the record high. The total and per capita dairy consumption are expected to reach 63.74 million tons and 45.1 kg1 in 2022, respectively. However, the figures lagged far behind the world average, implying a huge potential in the dairy market. In addition, stimulated by improved health awareness and upgraded dairy categories, the per capita dairy consumption in China is expected to increase continuously.
In terms of supply, the output of dairy products in China totalled 30.32 million tons in 2021, up 9.4% YoY2. Specifically, the output of liquid milk increased by 9.7% over the same period, reaching 28.43 million tons. Milk powder output rose by 1.76% to 979,400 tons3. From January to July 2022, the dairy products output amounted to 17.62 million tons, basically flatted over the same period last year.
Meanwhile, according to the General Administration of Customs of China, in 2021, the import volume of dairy products grew by 18.5% YoY to 3.95 million tons, with the value reaching 89.4 billion yuan4. From January to July 2022, the import volume dropped by 19% YoY, but the import value maintained single-digit growth to 54.7 billion yuan.
Regarding market size, according to Zhongshang Industrial Research Institute, in 2021, China had 589 scaled dairy enterprises (whose annual revenue is over 20 million yuan), yielding a total revenue of 468.74 billion yuan with a YoY increase of 11.7%. The total revenue is predicted to reach 498.06 billion yuan in 20225.
As for the market concentration ratio (CR), Yili and Mengniu Dairy formed a stable duopoly in Chinese dairy market. In 2021, Yili and Mengniu Dairy ranked the top two in the dairy industry with a market share of 25.8% and 22.8%, respectively6.
As for the market size by category, UHT milk and yoghurt outperform the rest. In 2021, the retail sales of yogurt & milk beverage, UHT milk, pasteurized milk, milk powder and cheese reached 153.6, 109.24, 41.46, 21.96, and 12.27 billion yuan, respectively. In retrospect, from 2016 to 2021, the retail sales of UHT milk and milk powder maintained low single-digit growth; yogurt & milk beverage's retail saw a compound annual growth rate (CAGR) of 7.7%; pasteurized milk's retail CAGR was 9.8%; and the figure of cheese reached 23.2%. According to Euromonitor, cheese's retail will continue its strong momentum with an expected CAGR (2021-2026 E) of 15.1%7.
The distribution channels of dairy enterprises consist of direct sales channels (mainly home delivery), primary channels (mainly KA marketplaces), secondary channels (mainly wholesale markets), and e-commerce channels. In the liquid milk market, supermarkets contribute to more than half of the sales, but the sales growth has slowed in recent years. With the progress of cold chain technology, new retail channels such as fresh product e-commerce and community-based group purchases have been emerging quickly. Sales through online shopping grew rapidly, especially after the breakout of COVID-19. According to Soochow Securities, in H1 2021, sales of liquid milk through online shopping increased by 39.5% YoY, while sales through supermarkets dropped by more than 5%8.