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Milk and Flavoured Milk - China - April 2016

"Given the large base of lactose intolerants in China, the lactose-free milk segment is worth investing in. The market will, however, require laborious education programmes due to poor consumer understanding of lactose intolerance. Plant protein drinks are also threatening the milk category, suggesting that milk producers should reinforce their health benefits to proactively prepare for increased competition. Low-fat milk will remain niche, while manufacturers should look into the ‘good-fat’ trend emerging globally.”
- Karen Liu, Senior Research Analyst

This report discusses the following key topics:

  • The prospects for lactose-free milk
  • PPDs grab market share from milk
  • Paradigm shift to ‘good fat’

Lactose-free milk represents a significant growth opportunity due to China’s large population of lactose intolerants. Manufacturers will, however, need to invest in laborious education programmes due to poor understanding of the necessity of drinking lactose-free milk in the country.

The steady growth of plant protein drinks in China is threatening the milk market. The drinks are targeting the RTD market, suggesting that milk products should reinforce their health benefits to prepare for increased competition, or consider adding plant protein ingredients to milk.

Low-fat milk is expected to remain niche, while manufacturers should look into the ‘good-fat’ trend emerging globally.

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
          • Figure 1: Definition of low/mid/high MHI groups, by city tier
      • Executive Summary

          • The market
            • Figure 2: Total China milk and flavoured milk market retail value, 2010-20
          • Key players
            • Figure 3: Value share of top 10 companies, 2013-15 (Jan-Jun)
          • The consumer
            • Consumers favour plain milk but lose interest in flavoured milk products
              • Figure 4: Usage frequency of different types of milk, December 2015
            • Consumers drink plain milk for nutritional content and flavoured milk for taste
              • Figure 5: Drinking purposes of different types of milk, December 2015
            • Laborious market education required for lactose intolerance
              • Figure 6: Attitudes towards lactose intolerance, December 2015
            • The market calls for more on-the-go packaging
              • Figure 7: Barriers of drinking milk, December 2015
            • Non-dairy drinks gain popularity
              • Figure 8: Substitutes of milk, December 2015
            • Premium milk prove its high-quality via taste
              • Figure 9: Purchase consideration factors (for self), December 2015
              • Figure 10: Perception and attitudes towards milk, December 2015
            • What we think
            • Issues and Insights

              • The prospects for lactose-free milk
                • The facts
                  • The implications
                    • PPDs grab market share from milk
                      • The facts
                        • The implications
                          • Paradigm shift to ‘good fat’
                            • The facts
                              • The implications
                              • The Market – What You Need to Know

                                • Milk market growth is slowing
                                  • UHT segment drives volume growth while pasteurised segment touts freshness for premiumisation
                                    • Raw milk oversupplies
                                      • Adjacent categories and imported milk compete to grab market share
                                      • Market Size and Forecast

                                        • Milk market growth is slowing
                                          • Figure 11: Retail market size of milk and flavoured milk in China, 2010-15
                                        • The market is forecast to grow at a CAGR of 6%
                                          • Figure 12: Total China milk and flavoured milk market retail value, 2010-20
                                          • Figure 13: Total China milk and flavoured milk market retail volume, 2010-20
                                      • Market Drivers and Challenges

                                        • Oversupply of raw milk in 2015
                                          • Increasing disposable incomes assist growth
                                            • Figure 14: Per capita disposable income, China, 2010-14
                                            • Figure 15: Per capital consumption of milk and flavoured milk, China and top 10 counties, 2015
                                          • Competition from adjacent categories
                                            • Figure 16: Retail market value of plant protein drinks and yogurt, 2010-15
                                          • Competition from imported milk
                                          • Market Segmentation

                                            • Plain milk drives category growth
                                              • Figure 17: Retail market value of milk and flavoured milk, by segments, 2010-15
                                              • Figure 18: Retail value of pasteurised plain milk, 2010-20
                                              • Figure 19: Retail value of UHT plain milk, 2010-20
                                            • Flavoured milk needs to enhance healthy image to regain interest
                                              • Figure 20: Retail value of flavoured milk, 2010-20
                                            • Adult milk powder segment is dying
                                              • Figure 21: Retail value of white milk powder, 2010-20
                                          • Key Players – What You Need to Know

                                            • Top 10 companies losing market share
                                              • Leading dairy companies add non-dairy products to portfolios
                                                • Regional dairy companies strengthen pasteurised products
                                                • Market Share

                                                  • A consolidated market structure
                                                    • Figure 22: Value share of top 10 companies, 2013-15 (Jan-Jun)
                                                  • Mengniu loses 2% market share in 2015
                                                    • Yogurt segment drives growth
                                                      • Figure 23: Annual revenue of Mengniu, by segments, 2014-15
                                                    • Competitive strategies
                                                      • Mengniu and Yili look to plant protein segment
                                                        • Figure 24: Silk plant protein drinks, China, 2014
                                                      • Mengniu exploits lactose-free market
                                                        • Regional companies are proactive in innovation
                                                          • Touting exclusive pastures
                                                            • Interacting with consumers via online platforms
                                                              • Figure 25: New liquid milk from New Hope, China, 2014-15
                                                            • Innovating around packaging design
                                                              • Figure 26: New liquid milk from Modern Farming, China, 2015
                                                            • Regional companies stake chilled milk
                                                              • Modern Farming touts ‘two-hour milk’
                                                                • New Hope constructing pastures nationwide through M&A
                                                                  • Weichuan promotes happy cows
                                                                  • Who’s Innovating?

                                                                    • Chilled segment increases
                                                                      • Figure 27: Newly launched liquid milk products, China, 2011-15
                                                                    • Selling high protein as premium
                                                                      • Figure 28: Protein content of liquid white milk, China and global, 2011-15
                                                                      • Figure 29: Examples of new launches with ‘high protein’ claim, global, 2014-15
                                                                    • Packaging opportunities in the dairy market
                                                                      • China leads small-size packaging
                                                                        • Figure 30: Top 5 unit packaging size of liquid milk, China and global, 2011-15
                                                                      • On-the-go packaging innovations
                                                                        • Figure 31: On-the-go packaging from U-best of Bright, China, 2012
                                                                      • Minimalist packaging design can enhance naturalness
                                                                        • Figure 32: Examples of minimalist packaging, global, 2014-15
                                                                      • Simplifying on-pack nutrition tables
                                                                        • Figure 33: Examples of on-pack nutrition table, global, 2014-15
                                                                      • Whole milk highlighting ‘good fat’ in global market
                                                                        • Figure 34: Milk with ‘good fat’, global, 2014-15
                                                                    • The Consumer – What You Need to Know

                                                                      • Consumers favour plain milk but are losing interest in flavoured milk
                                                                        • Competition from plant protein drinks increases
                                                                          • Prospects for lactose-free milk
                                                                            • The market calls for on-the-go packaging
                                                                            • Usage Frequency

                                                                              • Ambient plain milk is most popular
                                                                                • Figure 35: Usage frequency of different types of milk, December 2015
                                                                              • Consumers drink less flavoured milk due to safety concerns
                                                                                • Lactose-free milk has white space
                                                                                  • Different usage patterns by age and region
                                                                                    • Figure 36: Usage frequency of different types of milk, By age and gender, December 2015
                                                                                • Drinking Purposes

                                                                                  • Plain milk’s protein and calcium content appeal to consumers
                                                                                    • Figure 37: Drinking purposes of different types of milk, December 2015
                                                                                  • Flavoured milk and milk beverages compete as tasty drinks
                                                                                  • Dissatisfaction towards Milk

                                                                                    • Consumers expect to see more flavour options
                                                                                      • Figure 38: Barriers to drinking milk, December 2015
                                                                                      • Figure 39: Barriers to drinking milk, By age, December 2015
                                                                                    • The market calls for more on-the-go packaging
                                                                                      • Figure 40: Barriers to drinking milk (continued), December 2015
                                                                                    • High prices stop low-income groups from drinking milk
                                                                                      • Figure 41: Barriers to drinking milk, By income, December 2015
                                                                                    • Only 9% of consumers are aware of discomfort after drinking milk
                                                                                      • Figure 42: Barriers to drinking milk (continued), December 2015
                                                                                  • Purchase Consideration Factors

                                                                                    • Authentic taste, promotion and rich nutritional content drive self-consumption
                                                                                      • Figure 43: Purchase consideration factors, December 2015
                                                                                    • High nutritional value and safety are key for children’s milk
                                                                                      • Figure 44: Newly launched kids milk, by top 10 claims, 2011-15
                                                                                    • Consumers perceive lactose free and low fat milk as suitable for the elderly
                                                                                    • Substitutes for Milk

                                                                                      • Non-dairy drinks gain popularity
                                                                                        • Figure 45: Substitutes of milk, December 2015
                                                                                      • RTDs can hardly replace milk
                                                                                      • Perception and Attitudes towards Milk

                                                                                        • Consumers are sophisticated enough to check product details
                                                                                          • Figure 46: Perception and attitudes towards milk, December 2015
                                                                                        • Premium milk proves high-quality via taste
                                                                                          • Figure 47: Perception and attitudes towards milk, December 2015
                                                                                        • Prospects for more functional milk
                                                                                          • Figure 48: Perception and attitudes towards milk (continued), December 2015
                                                                                        • Consumers lack knowledge about lactose intolerance
                                                                                          • Figure 49: Perception and attitudes towards milk (continued), December 2015
                                                                                        • Imported milk offers fierce competition
                                                                                          • Figure 50: Perception and attitudes towards milk (continued), December 2015
                                                                                      • Meet the Mintropolitans

                                                                                        • Mintropolitans favour chilled plain milk
                                                                                          • Figure 51: Heavy usage (once a day or more) of different types of milk, by consumer classification, December 2015
                                                                                        • Mintropolitans demand on-the-go packaging
                                                                                          • Figure 52: Barriers of drinking milk, by consumer classification, December 2015
                                                                                        • Milk is a functional food for Mintropolitans
                                                                                          • Figure 53: Purchase consideration factors (for myself), by consumer classification, December 2015
                                                                                      • Appendix – Market Size and Forecast

                                                                                          • Figure 54: China yogurt market, total volume sales, by retail and non-retail, 2010-20
                                                                                          • Figure 55: Volume sales of total yogurt market, China, 2010-20
                                                                                      • Appendix – Market Segmentation

                                                                                          • Figure 56: Retail volume of pasteurised plain milk, 2010-20
                                                                                          • Figure 57: Retail volume of UHT plain milk, 2010-20
                                                                                          • Figure 58: Retail volume of flavoured milk, 2010-20
                                                                                          • Figure 59: Retail volume of white milk powder, 2010-20
                                                                                      • Appendix – Methodology and Abbreviations

                                                                                        • Methodology
                                                                                          • Fan chart forecast
                                                                                            • Mintropolitans
                                                                                              • Why Mintropolitans?
                                                                                                • Who are they?
                                                                                                  • Figure 60: Demographic profile of Mintropolitans vs non-Mintropolitans, by gender, age and personal income
                                                                                                  • Figure 61: Demographic profile of Mintropolitans vs non-Mintropolitans, by marital status, city tier and education level
                                                                                                • Abbreviations

                                                                                                Companies Covered

                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                Milk and Flavoured Milk - China - April 2016

                                                                                                £3,273.18 (Excl.Tax)