New research from market intelligence agency Mintel has revealed that yoghurt and cheese have been the leading categories in China’s dairy market in recent years.
Yoghurt has maintained an annual retail sales growth of over 20% since 2014, while cheese has seen a growth rate of 15-25% from 2015-17.
“When we look specifically at the yoghurt market, thanks to the recent craze over ambient yoghurt, the category is now leading not only in China’s dairy market, but among all food and drink products.” said Summer Chen, senior food and drink analyst at Mintel.
Dairy consumption remains low
Despite consistent sales growth in the yoghurt and cheese categories, Mintel Market Sizes data shows that annual per capita volume consumption of major dairy products in China remains low as compared to other countries.
For instance, per capita volume milk consumption in China is 14.3 litres, compared to 36.8 litres in Japan and 51.7 litres in the US. Per person consumption of yoghurt in China is 3.43kg, 4.92kg in the US and 9.66kg in Japan.
Moreover, on average, the Chinese consume a mere 0.02kg of cheese per person, while the Japanese take 1.46kg per person and US consumers a whopping 6.89 kg per person.
Nonetheless, the overall dairy market in China is growing stably and Mintel forecasts growth of 6.6% CAGR, to reach RMB 349.7bn (about US$55.17bn) by 2022.
Chen said Mintel research indicates that growth will be driven by increased consumption, resulting from the expansion of consumption occasion, value increase due to the rising price of raw milk, and consumers trading up to more premium options.
Paying for premium
According to Mintel, for dairy products, health-related factors are what Chinese consumers are willing to pay more for.
Among the four surveyed dairy products — including milk, yoghurt, butter and cheese — milk and yoghurt are perceived by consumers to be healthier and more nutritious (51% and 48% of consumers respectively for milk and yoghurt), to help improve immunity (49% and 44%), and good for kids (51% and 49%) and the elderly (46% and 37%).
Additionally, milk is more closely linked to being high in protein (47% of consumers), and yoghurt with being easy to digest (60%).
On the other hand, butter is less likely to be associated with the same benefits, rather with issues such as being high in calories (50%), fat (45%) and cholesterol (34%).
Cheese, meanwhile, is somewhere in between, and is associated with benefits such as being high in protein (38%) and nutritious (37%), as well as being high in calories (43%) and fat (41%).
Furthermore, Mintel stated that both positive claims — with additional nutrients (47%) and other healthy food as ingredients (44%) — and negative claims — low fat or fat-free (47%) and no additives (45%) — are critical improvements that consumers would be most willing to pay more for.
Products designed for a special group of people, such as those who are trying to get fit, is also among the top features that consumers are willing to pay a premium for.
In comparison, packaging and taste-related factors — such as convenient packaging (29%) and limited seasonal flavours (22%) — are secondary factors for consumers considering buying premium options.
Imports more trustworthy?
Generally, urban Chinese consumers prefer dairy products from big (65%) and nationwide (59%) dairy brands.
Attitudes towards local milk sources are divided: 44% believe they are reliable, while 36% believe they are not.
Nevertheless, more prefer imported dairy products (43%) than domestic ones (34%). Even among those who trust local milk sources, 32% still prefer imported products.
“When looking at the battle between domestic and imported dairy products, it seems that while urban Chinese consumers are regaining confidence in domestic milk sources and products, they still prefer imported options,” said Chen.
“To appeal more to consumers, domestic brands need to strengthen their offering in other areas, like positioning with a premium brand image, showcasing additional health benefits, and spotlighting innovative flavours in order to compete with imported brands.”
Overall, Mintel stated, China’s dairy market has enjoyed stable growth in the past five years.