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In 2022, China's dairy products market size amounted to CNY 482.95 billion, with a modest growth of 2.4% YoY. Projections indicate an expansion, with the market anticipated to reach CNY 504.69 billion in 2023 and a promising trajectory expected to surpass CNY 590.00 billion by 2026. In addition, the Chinese Dietary Guidelines (2022) recommends a daily intake of 300 to 500 grams of dairy products per person. However, the 2022 China Dairy Industry Index Report reveals that the actual daily intake is only 24.2% of the recommended standard. Moreover, China's per capita consumption of dairy products remains significantly below global averages, indicating substantial untapped potential for growth in the Chinese dairy market.
China's dairy market boasts a diverse array of offerings, encompassing white milk, dairy beverages, yogurt, milk powder, cheese, butter, and more. Notably, white milk and yogurt dominate, with UHT milk and yogurt emerging as key players. According to Haitong International Securities, UHT milk has entered a mature stage, characterized by steady development, and is expected to see growth in the low-to-mid single digits in 2023. Pasteurized milk, having experienced rapid growth, is now encountering a slowdown in growth. The yogurt segment is expected to decline in low single digits in 2023. Significantly, the cheese category stands out as a high-growth category, achieving an impressive CAGR of 22.6% from 2017 to 2022. Projections indicate a sustained robust growth trajectory with an expected CAGR of 12.9% from 2022 to 2027 in the cheese category.
The Chinese dairy market exhibits a significant level of concentration, with Yili and Mengniu holding notable market shares of 30.2% and 25.9%, forming a duopoly. In specific categories, the top five enterprises in the UHT category are projected to account for 90% of the market in 2023, with Yili and Mengniu contributing over 85%. The pasteurized milk category, characterized by a short shelf life and limited transportation radius, favors regional dairy enterprises over their national counterparts. The top five enterprises, which include four regional dairy enterprises, collectively hold a share of 60.6% in this category. In the yogurt category, top five enterprises capture 75%, with Yili and Mengniu jointly exceeding 55%.
Noteworthy Consumer Trends
Segmentation of Consumer Groups
The primary consumers in the Chinese dairy market are students and young people, alongside a notable surge in the elderly population. A crucial emphasis is placed on personalized nutritional enhancement, presenting a strategic opportunity for brands to tailor their offerings to meet the specific needs of each consumer segment.
Premiumization of Products
Consumer trends indicate a heightened health awareness and an enhanced understanding of product formulations. This is set to propel innovation in premium dairy products. Key drivers behind the development of premium products include unique milk sources, refined nutrition, innovative technology, and simplified formulas. Furthermore, there is a significant demand for functional dairy products, particularly those designed to promote immunity, enhance bone/joint health, and support digestive well-being.
Diversification of Consumption Scenes
Beyond traditional breakfast and gifting scenarios, consumers are actively exploring various segmented scenes such as sports/fitness, meal replacements, afternoon tea, social gatherings, and DIY. As dairy consumption scenes continue to diversify and become more widespread, there is also a noticeable surge in demand for flavor diversity.
While overall trends indicate positive growth, the Chinese dairy market face current challenges. The liquid milk sector has witnessed a decline in consumption, influenced by the increasing popularity of plant-based milk, freshly brewed coffee, and tea beverages. According to the National Bureau of Statistics, in the first half of 2023, raw milk production increased by 7.5% YoY to 17.94 million tons, and dairy product production totalled 15.12 million tons, with a YoY growth of 4.6%. The faster growth of raw milk compared to dairy product production signals that downstream demand is insufficient to absorb the surplus in upstream raw milk production. This underscores a phase-specific oversupply in raw milk production, resulting in a decrease in raw milk prices and also potentially triggering price wars among dairy products.
On the import side, the surplus of domestic raw milk has resulted in a decline in the import of large pack milk powder, which was once a crucial supplement for raw milk. Imported packaged milk has also seen a decrease due to reduced demand for liquid milk in the market. Customs data showed that in the first three quarters of 2023, China imported a total of 2.23 million tons of dairy products, a 12% YoY decrease, with an import value of USD 9.61 billion, reflecting a 10.1% YoY decrease. Notably, import volume of large pack milk powder, condensed milk, and packaged milk experienced declines of over 20%. Infant formula and cream also saw high single digits decrease. In contrast, whey powder and cheese products defied the trend, experiencing growth of over 10%.
Despite these transitional challenges, Chinese dairy consumption retains significant growth potential. Enhanced consumption levels, heightened health awareness, and trends like premiumization and diversification are set to drive steady growth in the coming years. This resilience, coupled with innovation and adaptability, positions the Chinese dairy market for continued expansion.
The national food safety standards specify the definition and technical requirements (ingredients, sensory requirements, physicochemical indicators, microorganism level, etc.) of dairy products. The following are corresponding GB standards for different dairy products:
Referenced GB standard
Cream, butter and anhydrous milkfat
Only dairy products that passed the national assessment can be exported to China. Permitted dairy species and their exporting countries and regions can refer to Catalogues of Foods Exported to China from Countries or Regions That Meet the Assessment and Examination Requirements and Conduct Traditional Trade with China.
Besides, according to the Administrative Provisions on Registration of Overseas Manufacturers of Imported Foods, overseas manufacturer registration is mandatory for all imported food products and the registration of dairy manufacturers should be recommended by the local competent authorities.
Moreover, regardless of food categories, the overseas exporters or agents and importers in China shall get themselves filed with GACC.
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