High Value Retail Sales Growth for Yoghurt and Cheese, Overall Consumption Remains Low in China's Dairy Market
• Yoghurt and cheese are winning categories in China's dairy market.
• Chinese consumers are willing to pay a premium for dairy products with health-related attributes.
• Imported dairy options are still more popular despite consumers regaining their confidence in domestic milk sources.
While the overall dairy market in China is growing stably, the various categories are experiencing differing performance. New research from Mintel reveals that yoghurt and cheese are the market’s winning categories in recent years with yoghurt maintaining an annual retail sales growth of over 20% since 2014. Meanwhile, the cheese category has seen a growth rate of 15-25% from 2015-17. Looking ahead, Mintel forecasts the dairy market to grow at a 6.6% CAGR (compound annual growth rate) in value, to reach RMB 349.7 billion in 2022.
Despite consistent sales growth for yoghurt and cheese, Mintel Market Sizes data shows that annual per capita volume consumption for major dairy products remains low compared to other countries. For example, 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 3.43 kg, 4.92 kg in the US and 9.66 kg in Japan. Finally, the Chinese consume a mere 0.02 kg of cheese per person, while the Japanese take in 1.46 kg per person and, in the US, an impressive 6.89 kg per person.
Summer Chen, senior food and drink analyst at Mintel, said,“Dairy consumption in China is still low when compared to Japan, where consumers share a similar dietary tradition to China. Mintel research indicates that China’s dairy market 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. 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.”
When it comes to dairy products, health-related factors are the main areas 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% respectively), helping to improve immunity (49% and 44% respectively), and also good for kids (51% and 49% respectively) and the elderly (46% and 37% respectively).
In addition, milk is more closely related with being high in protein (47%), and yoghurt with being easy to digest (60%). 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 is somewhere in between, associated with benefits such as being high in protein (38%) and nutritious (37%), as well as being high in calories (43%) and fat (41%).
Both plus claims, ie with additional nutrients (47%) and other healthy food as ingredients (44%), and minus claims, ie low fat or fat free (47%) and no-additives (45%), are critical improvements consumers are most willing to pay more for. Products designed for a special group of people (38%), such as those who are getting fit, is also among the top features consumers are willing to pay a premium for.
By 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.
“As consumers gradually become more aware of their dairy intake, both in quantity and quality, our research shows that plus and minus health claims are seen as worthy of paying extra for by urban Chinese consumers,” Summer added.
In general, urban Chinese consumers prefer dairy products from big (65%) and nationwide (59%) dairy brands. While their attitudes towards local milk sources are pretty divided—44% believe they are reliable, while 36% believe local milk sources are not reliable. Nevertheless, more consumers prefer imported dairy products (43%) than domestic ones (34%). Even among those who trust local milk sources, 32% prefer imported dairy 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. 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,” Summer concluded.