China dairy growth: Rising consumer income and increased functional product innovation yields large leap

By Pearly Neo contact

- Last updated on GMT

China’s dairy industry witnessed a large growth in per capita consumption in 2021. ©Getty Images
China’s dairy industry witnessed a large growth in per capita consumption in 2021. ©Getty Images

Related tags: China, Dairy

China’s dairy industry witnessed a large growth in per capita consumption in 2021, backed by rising consumer incomes and firms responding to current trends with the development of functional products.

According to data from the Dairy Association of China (DAC), 2021 saw the per capita consumption of milk in China rise to 14.4kg, a significant increase of 10.6% from the previous year.

“One of the contributing factors to this has been the recovery and rise of consumer income, allowing for a corresponding increase in demand for [quality] products such as dairy,”​ the association said via a formal statement.

“This can be seen by the improvement in overall per capita consumption expenditure numbers. In 2021, this averaged at CNY24,100 (US$3,674) which was a 13.6% year-on-year increase from 2020 – even if price fluctuations are excluded, the year-on-year increase was still 12.6%.

“This has translated to higher spending power, and along with local policies ensuring sufficient food supply and stable product prices has led to correspondingly higher demand for food products in general.

“Dairy saw the second-largest growth in consumption as a result of this at 10.6% to 14.4kg in 2021, losing out only to meat and poultry consumption which saw a 20.5% increase to 45.2kg.”

The Chinese government has been actively pushing for consumers to increase their dairy consumption​ since as far back as 2020, with four major local dairy industry associations having come together to form a set of guidelines for dairy consumption locally and constantly pushing its health and nutritional benefits.

The guidelines advise for a daily dairy intake of 300g per person, and appears to have yielded rather positive results, based on the rise in consumption over the past few years.

Another factor likely to have contributed to China’s successful dairy consumption increase is a rise in health and wellness awareness leading to increased demand for healthier and functional products, which local dairy firms have been quick to respond to.

China dairy giant Yili predicted rising demand for value-added and sustainable dairy products​ last year, particularly after winning multiple awards at the Global Dairy Congress for such products.

“China’s consumer market has seen a raft of upgrades in recent years, and this has led to a boom in various new categories, products and business models,”​ Yili Assistant President Dr Yun Zhanyou told FoodNavigator-Asia​.

“This has helped the Chinese dairy market to thrive, and today local dairy consumers are devoting increasing attention to functionality and innovation, as well as brand concepts and values.

“Innovating functional products has thus been a very big focus for Yili – for example we have the Cute Star Rub Your Tummy Dietary Fibre Yoghurt Drink wherewe used a low sugar formula and added fruit juice, dietary fibre, zinc, iron and various elements to help three to 12-year-old children get a good appetite without gaining weight.

“There’s also our TOORan Black Milk Powder which contains traditional herbs and our patented walnut peptide, which helps to support emotional well-being and nourish stress-related hair issues.”

Sustainability in dairy

The dairy industry has long received criticism over environmental and sustainability concerns, but China is also looking to boost its overall sustainable production with a goal of peaking CO2​ emissions before 2030 and achieving carbon neutrality before 2060.

As such, the dairy industry is also under pressure to ensure it evolves towards more sustainable practices, and many companies are looking to technology to do this.

“Chinese consumers are showing increased focus on sustainability in addition to product functionality, so [we as a company] will also need to respond to this,”​ said Dr Yun.

“This includes exploring innovative approaches for R&D, digitalisation, and carbon emission reduction, particularly with the use of novel technologies, to work towards continuous low-carbon growth and environmental protection in our operations.

“Chinese dairy companies as a whole are becoming more committed to supporting sustainable development and actively promoting greener and healthier lifestyles, and this is consumer-driven [as] products which are green, organic and produced with less carbon are becoming more popular.”

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