Dairy products are all kinds of liquid or solid food made by heating, drying, freezing, or fermenting with fresh cow, goat milk and its products as the main raw materials. Dairy products, one of the national consumer goods in China, contain all 8 essential amino acids for the human body.
Dairy Industry Chain
China's dairy industry has a long industrial chain, covering many links such as forage grass and feed, dairy farming, dairy processing, terminal sales, etc. All links are closely linked with each other and the degree of integration is high, which has realized the vertical extension of the dairy farming industry to the dairy processing industry and logistics.
Dairy cattle breeding is recognized as the basis of the dairy industry as the world's most efficient and grain saving animal husbandry. The development of dairy farming directly affects the quantity, quality, and price of raw milk downstream, and plays a vital role in the quality, cost, and yield of downstream products.
At the time of the melamine scandal in 2008, China had nearly 2.6 million dairy farms, of which nearly 2 million had fewer than five cows. These small farm owners often lack the resources and expertise to implement best practices for efficient production, quality and food safety. After the 2008 food safety accident, China's dairy farming industry has been in a relatively depressed state, and the supply quantity and quality of downstream milk sources have been affected. From 2007 to 2018, the country strictly enforced animal husbandry, reducing the number of dairy farms from 2.67 million to 660,000, a drop of nearly 75 percent.
Dairy products have extremely high nutritional value. In addition to nutrients such as lactose, fat, protein, and inorganic elements, they also contain a wide range of bioactive substances with significant effects, which are especially beneficial to the health of children and elderly groups. With the continuous increase in consumer spending in the field of residents' health and the continuous improvement of residents' health awareness, the consumption of dairy products has achieved rapid growth.
Liquid milk products are the most popular products in China's dairy industry, occupying more than 50% of the Chinese dairy market. China's liquid milk production rose from 16.42 million tons in 2009 to 26.92 million tons in 2017, the data showed. From 2009 to 2019, China's per capita liquid milk consumption increased from 8.8 kg to 35.1 kg, with a compound annual growth rate of 11.6% in recent ten years, much higher than the growth rate of other developed countries or regions in the same period, indicating the rapid growth of domestic liquid milk consumption.
However, in terms of per capita liquid milk consumption, there is a significant gap between China and developed countries in Europe and America. Compared with Japan, which has a similar diet and lifestyle, and India, which has a large population, China's per capita consumption of liquid milk is also at a low level, so there is huge room for development and growth potential in China's dairy market.
The report shows that with the increase in public health awareness during the epidemic, the overall dairy business index increased to 62.7 points. The survey results showed that more than 40% of adults and children increased their intake of dairy products during the epidemic, and the types of dairy intake also increased. Diversified, more than 96% of the public believe that drinking milk has a great effect on improving immunity. After the epidemic, consumers' awareness and awareness of nutrition have improved, which is beneficial to the dairy industry in the long run.
The downstream of China's dairy product industry chain consists of two links, of logistics, transportation, and distribution, with consumers at the end. Logistics transportation includes two parts: raw milk purchase and raw milk transportation, which is an important link to ensure the safety of dairy products. The sales channels of the dairy industry can be divided into online channels and offline channels, with offline channels accounting for approximately 80% and online channels accounting for approximately 20%.
The offline sales channels of the dairy industry include traditional channels, wholesale channels, special channels, and emerging channels. Traditional channels are offline large supermarkets, convenience stores, ordered milk into the home, and vending machines, accounting for about 90% of offline sales channels.
In terms of online channels, the rise of e-commerce platforms such as Taobao and JD has opened up new sales channels for dairy producers. Online channels have significant advantages such as flexible operation, rich product categories, and more promotional activities. At present, the sales market is growing rapidly at a rate of nearly 5%. The defect of the online channel lies in the single product structure. Since the storage of low-temperature milk products at room temperature will not only shorten their shelf life but also reduce the nutritional value of the products, which may harm the health of consumers in serious cases, it is necessary to rely on cold chain logistics in the distribution process. However, at present, most dairy companies are limited by the high cost of cold chain logistics, and the main products of online channels are still room temperature milk.
Industry Pattern
The current competitive landscape of China's dairy industry is relatively clear. Dairy resources are rapidly concentrating on dairy giants such as Yili and Mengniu Dairy. More than a dozen companies headed by Yili, Mengniu Dairy, and Bright Dairy account for more than 50% of all dairy production above designated size. At present, Yili and Mengniu Dairy, which have achieved 100% large-scale pasture supply, gradually occupy the leading position in the industry. In the future, as the industry continues to mature, the market is expected to be further concentrated in leading companies.
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