Appetite for high-end products rising, says Mengniu

Mengniu Dairy Co Ltd, China's major dairy maker based in Inner Mongolia, said high-end dairy products tailored to local preferences will be a leading future trend in China's dairy industry, to meet the increasingly diversified demand from quality-conscious consumers.

The dairy maker said it has witnessed remarkable growth in sales of its yogurt, low-temperature milk and cheese products in the past few years. Products with high added value in terms of flavor, nutrition, packaging and convenience are favored by Chinese consumers, spurred by growing incomes and purchasing power, the company found.

For example, the popularity of Tetra Pak's eight-sided packaging, which is easy to hold, and boxed dairy products that can be consumed directly from the pack, show the demand for more convenient products from consumers.

"The places that Chinese consumers can purchase milk have expanded. Now, bakeries, cinemas, convenience stores, gyms are all channels that dairy makers are trying to access," said Yu Xubo, chairman of the board of directors of Mengniu, and president of COFCO Group, China's largest food trader.

"We have also found that the purchase of fresh dairy products is increasing in major cities among middle to higher-income earners," said Yu, who is also a deputy to the 13th National People's Congress.

This year, Mengniu said it plans to establish specific cold chain logistics channels and strengthen its ability to produce and transfer fresh dairy products.

Meanwhile, the dairy maker has developed some niche products. It has introduced sports milk with a high protein content tailored to those who work out often, and milk that acts as a meal substitute, both of which have seen higher-than-expected sales, driven by new and more diversified demand from consumers, the company said.

In the next five years, the total consumption volume of dairy products in China is expected to grow by 15 percent to 20 percent, and the annual per capita consumption of raw milk is expected to reach 40 kilograms.

Currently in China, the figure is about 36 kg a year, while it is 50 kg in Japan and South Korea, according to the New Horizon 2023 report released by the Sino-Dutch Dairy Development Center.

In November, Mengniu opened a factory in Cikarang industrial zone in West Java province in Indonesia, the first dairy factory in Southeast Asia launched by a Chinese dairy maker.

The daily capacity of the plant has reached 260 metric tons, and the annual output value is expected to touch $160 million. The factory mainly produces probiotic drinks and yogurt products under its YoyiC brand. The company's some other products are also sold in Singapore, Malaysia, Cambodia and Myanmar.

"We are the first Chinese dairy maker to sell products abroad, and we will introduce more products tailored to the preferences of local consumers. In Indonesia, the penetration rate of yogurt is low and there are not many brands available, so there is a huge market potential," Yu said.

Li Shengli, a professor at China Agricultural University, said leading Chinese dairy firms Yili Group and Mengniu Dairy, which are both among the top 10 global dairy producers, are expected to increase their sales by 30 billion yuan ($4.46 billion) to 50 billion yuan in the next five years or so, and could join the top five global dairy producers, bolstered by strong demand in China.