Cheerful growth for cheese and other new dairy products in China

When did you last have a bottle of milk? What about dairy-based snacks and drinks?

Dairy products nowadays are transforming into unexpected formats such as lollipop-shaped cheese sticks, crunchy seaweed wrapped with cheese fillings and side dishes in addition to liquid milk.

In addition to mass-market categories like liquid milk and infant formula, new offerings of cheese and yogurt, cream cheese spreads, freeze-dried cheese slices and chips have hit shelves in recent years.

Shanghai financial adviser Laura Lu, who sometimes bought sliced ​​cheese for breakfast, said there is a growing choice of cheese sticks, natural cheese and baking ingredients in groceries such as Freshippo and Metro.

“Domestic yogurt and other dairy products offer more cheese and snack options to choose from, and it’s also easier to order for delivery,” she added.

China’s innovation scene in the dairy segment has attracted industry giants and new entrants, and the overall capacity of the industry is expected to be further enhanced.

Last week, the China Dairy Industry Association recognized Tetra Pak’s Kunshan Integrated Site as the first scientific and technological innovation base in the country.

The company sees the new scenario for dairy consumption increasing in recent years, with the demand for small portable and bulk sized packages for the foodservice industry both increasing.

Liu Meiju, vice president of the China Dairy Industry Association, noted that innovation is crucial for the dairy industry to ensure high-quality development.

To address the specific nutritional demand for dairy consumption in China, which is already Tetra Pak’s largest single market, he sees the need to stay closer to the local market by combining technology education, product design and customer innovation on this integrated site.

The Kunshan site has improved support for food and beverage companies to test new products, flavors and packaging formats.

As new product categories continue to emerge, he also hopes to inspire other industry players and lead open innovation that benefits all industry players to meet the evolving trend.

Cheerful growth for cheese and other new dairy products in China

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Innovation in the dairy sector is expected to further increase with new product formats, new packaging and various niche needs.

Among the new entrants to the market, Shanghai-based startup Dr Cheese Technology Co is the front runner who hopes to leverage its production site to accelerate the launch of a new production.

The plant in Anhui province, which covers 80,000 square meters of space with 1 billion yuan (US$143 million) investment, is expected to upgrade production capacity for new types of cheese and snack supplements instead of outsourcing production to outside factories .

An internal nutrition research organization was also established to accelerate the launch of new products suited to local nutritional needs and eating habits.

The company, backed by venture capital firms such as Capital Today and Focustar Capital, is the latest example of domestic startups taking over the rapidly changing market.

In China, sales of dairy products and beverages and plant-based alternatives are expected to reach 763 billion yuan by 2026, up from around 659 billion yuan in 2022, according to Euromonitor.

New consumer brands claiming specific advantages in the niche segment are proving to be a latest attraction for domestic companies.

Cheerful growth for cheese and other new dairy products in China

Ti Gong

Shanghai-based Dr Cheese is the latest dairy startup to increase its production capacity.

Founding partner of local strategy consultancy Doc&Doc Consulting, Hong Yinyi, noted that it makes sense for Dr Cheese to transform into a dairy experience that claims top-notch quality and technological know-how.

It should continue to focus on premium categories and initiate new shapes and types of dairy products to establish itself as a leader in these specialty categories, he added.

Instead of following the mass market to offer more affordable products, it should follow the premium trend to become an icon representing the most sophisticated and original cheesemaking techniques and products.

Attractive flavors, health benefits and finally the originality of dairy products are the three stages for the cheese to be adopted by the mass consumer market, according to the consultancy.

He noted that cheese accounts for only 2.3% of the national dairy market despite being the second largest sub-category with nearly a quarter of sales in the global dairy market.

The latest three-year action plan of the Dairy Association of China set a target for the country’s dairy industry’s total output to reach 500,000 tons and retail sales of 30 billion yuan by 2025.

Cheerful growth for cheese and other new dairy products in China

Ti Gong

Bright Dairy, among other local dairy companies, also promotes the high nutritional benefits of cheese.

Even established brands don’t want to be left behind.

Local operators Mengniu, Yili, He Run and Bright Dairy are among those who have caught on to the latest trend of diversifying packaged dairy products such as stick cheese and fresh cream cheese.

Last month, Mengniu Dairy completed the acquisition of an additional 5% stake in Shanghai Milkground Food Tech Co Ltd, after becoming its largest shareholder in previous years.

After the 800 million yuan acquisition of about 25.80 million shares of the Shanghai company, Mengniu holds about 35% of the company specializing in cheese sticks, sliced ​​cheese and other types of bakery materials.

Mengniu noted that he remains confident in the long-term development of China’s cheese market and the company’s positive outlook in the segment.

Mengniu brand itself may not be the best suited to enter a new category like reworked or original cheese, which already houses a whole collection of sub-brands for a variety of products, commented Zhang Yun, global CEO of Ries and president of Ries China, a strategic positioning consultancy.

Instead, smaller players who find growth opportunities in niche categories may have greater advantages in establishing themselves as market leaders and iconic brands.

Technological innovation does not always guarantee a successful brand, and it is essential to create a new and dedicated niche product category and strengthen consumer brand recognition and image, he said.

New product categories are essential for consumer businesses and businesses of various sizes will realize the demand to create new brands, new categories as an important part of their business practice, he added.

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