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Milk and Flavoured Milk - China - June 2013

"China’s milk market is attracting more international players. With increasing competition, manufacturers should look at opportunities beyond traditional demographic-specific targeting, to educate consumers about which milk is right for them and drive consumption out-of-home to drive sales."

-Ruyi Xu, Deputy Research Manager


Questions answered in this report include:

  • How can domestic and international brands compete more effectively when China’s milk market becomes more international?
  • What can brands do to drive growth in the market by encouraging more daily consumption?
  • What is unique about China’s milk market and consumers’ consumption behaviour? What implications does that have for product innovation and marketing?
  • In face of competition from UHT milk, how can the pasteurised milk market be further developed?


Report Introduction:

China’s milk market has captured growing international attention ever since the 2008 melamine crisis in infant formula milk. The industry still faces the problem of a fragmented and underdeveloped supply chain, making it difficult for domestic companies to meet increasing consumer demand for milk, both in terms of quantity and quality. The growth of imported UHT milk has showed that the market is already attracting more international players and is getting increasingly competitive not only in terms of the product and price but also in terms of purchasing channels.

Chinese consumers have certain unique behaviours when it comes to milk consumption and attitudes towards milk products. For example, the most popular way to drink milk is as a hot beverage on its own, and in addition to plain white milk, a large minority also buys milk with functional benefits. These habits are shaped by both cultural influences and efforts by operators in the market to drive value.

Although per capita milk consumption in China has significantly increased over the past decade, still only about one third of the urban consumers in Mintel’s research drink milk on a daily basis. Encouraging more frequent milk consumption remains a key opportunity for growing the market.

While consumers are offered wider product choice, there is still uncertainty over what factors can be taken to guarantee good quality and safe-to-drink milk. Consumers’ eagerness to find this reassurance reflects, to some extent, a general lack of knowledge about milk products. This means marketing centred on educating consumers can help manufacturers drive demand.

 

Liqueurs - UK - January 2012

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Table of contents

  1. Introduction

      • Definition
        • Methodology
          • Consumer research
            • Abbreviations
            • Executive Summary

                • The market
                  • Figure 1: Market size of milk and flavoured milk in China, 2008-13
                  • Figure 2: Forecast of milk and flavoured milk total market (retail and non-retail) in China, by volume, 2008-18
                  • Figure 3: Forecast of milk and flavoured milk retail sales in China, by value, 2008-18
                  • Figure 4: Retail sales of milk by segment, China, 2013
                • Companies and brands
                  • Figure 5: Market share of top five dairy companies in China milk and flavoured milk retail market, 2013
                • The consumer
                  • Usage of milk
                    • Milk purchasing channel
                      • Attitudes towards milk
                        • Key issues
                          • The Chinese milk market attracts global interest
                            • Figure 6: Milk market demand and supply volume projection, China, 2008-18
                          • Increasing food pairing and out-of-home consumption occasions can help brands to encourage daily milk drinking
                            • Figure 7: Milk/flavoured milk drink usage frequency, March 2013
                            • Figure 8: Examples of innovative dairy drinks in international markets, 2013
                          • Consumers’ lack of knowledge about milk suggests scope for manufacturers to drive usage by educating consumers
                            • Figure 9: Top milk/flavoured milk purchase factors, by region, March 2013
                        • The Market

                          • Key points
                            • Market size and forecast
                              • Figure 10: Market size of milk and flavoured milk in China, 2008-13
                              • Figure 11: Forecast of China milk and flavoured milk, total market (retail and non-retail), by volume, 2008-18
                              • Figure 12: Forecast of China milk and flavoured milk (retail only), by value, 2008-18
                            • Background and context
                                • Figure 13: Growth rates of volume retail sales in China’s ice-cream, chocolate and coffee market, 2007-12
                                • Figure 14: Average farm size and milk yield by country/region, 2009
                              • Growth drivers and barriers
                                • Growth drivers
                                    • Figure 15: Correlation between annual urban household income and per capita spending on dairy products in urban China, 2001-10
                                    • Figure 16: Volume share of dairy consumption by product type in urban China, 2001 and 2010
                                    • Figure 17: Growth of cafés and ice-cream houses in China, 2008-12
                                  • Growth barriers
                                    • Market segmentation
                                      • Milk imports leap ahead but remain niche
                                        • Figure 18: Imported liquid milk (non-sweetened, non-concentrated) in China by volume and value, 2008-12
                                        • Figure 19: Volume share (2013) and segment growth (CAGR 2008-13) of milk and flavoured milk sales in China by segment
                                      • UHT holds the lead in the Chinese milk market
                                        • Figure 20: Typical price tiers within the China UHT milk market, May 2013
                                      • Innovation drives growth in flavoured milk
                                        • Figure 21: New product launches in China milk market, by top 10 flavours (incl. blend), 2008-April 2013
                                      • Pasteurised milk benefits from modern trade development and consumer interest in milk freshness
                                        • Figure 22: Year-on-year volume growth, by total milk market and white pasteurised milk in China, 2009-13
                                        • Figure 23: Price comparison of UHT and pasteurised milk in China, May 2013
                                      • Powdered milk declines in importance
                                        • Figure 24: Value share of white powdered milk in total retail market in China, 2009-13
                                      • Milk used at non-retail channels also grows
                                        • Segment future growth
                                          • Figure 25: Forecast of growth of China milk and flavoured milk sales, by segment, by volume, 2013-18
                                      • Companies and Brands

                                        • Key points
                                          • A still fragmented market with a long tail of small players
                                            • Figure 26: Market share of top five dairy manufacturers in China milk and flavoured milk retail market, 2012
                                          • Consolidation is taking place in the market
                                            • Figure 27: Companies’ value share in China’s milk and flavoured milk retail market, 2011-12
                                          • National giants vs. regional guardians
                                            • Figure 28: Geographical overview of supply and demand of dairy products in China, 2010
                                          • Heavy investment in securing milk supply and upgrading production
                                            • Figure 29: Selected investments by domestic dairy producers in China, 2010-13
                                          • Inner Mongolia Yili Industrial Group Co., Ltd.
                                              • Figure 30: selected new milk product launches by Yili, 2007-12, China
                                              • Figure 31: Yili’s outdoor advertising during the 2012 London Olympics
                                              • Figure 32: Yili’s product placement in Transformer 3 film, 2011
                                            • China Mengniu Dairy Co., Ltd.
                                              • Figure 33: Selected Mengniu milk product launches, 2007-12
                                              • Figure 34: Mengniu’s school milk programme
                                            • Bright Dairy & Food Co., Ltd.
                                                • Figure 35: Bright’s packaging innovation on Ubest pasteurised milk, 2008-12
                                              • Want Want China Holdings Ltd
                                                  • Figure 36: Wangzai reconstituted milk products, 2010-2013
                                              • The Consumer

                                                • Key points
                                                  • Milk and flavoured milk usage
                                                      • Figure 37: Milk and flavoured milk usage, by type March 2013
                                                      • Figure 38: Frequent usage of milk and flavoured milk, by type, March 2013
                                                    • Ways of consuming milk
                                                        • Figure 39: Ways of consuming milk, March 2013
                                                      • Milk/flavoured milk purchase location
                                                          • Figure 40: Milk/flavoured milk purchase location, March 2013
                                                        • Milk flavour preference
                                                            • Figure 41: Flavours of milk purchased and interest in purchasing, March 2013
                                                          • Important purchase factors
                                                              • Figure 42: Milk/flavoured milk purchase factors, March 2013
                                                            • Attitudes towards milk/flavoured milk
                                                                • Figure 43: Attitudes towards milk/flavoured milk, March 2013
                                                            • Key Issue – Chinese Milk Market Attracts Global Interest

                                                              • Key points
                                                                • Demand will outgrow domestic supply in China’s milk market
                                                                  • Figure 44: Annual per capita milk consumption in selected countries, 2012
                                                                  • Figure 45: Milk market demand and supply volume projection, China, 2008-18
                                                                • Popularity of imported UHT expands from online to offline retailers but differentiation is still limited to country of origin
                                                                  • Figure 46: Attitudes towards imported milk, by demographics, March 2013
                                                                  • Figure 47: Milk/flavoured milk purchase factors, total of top three ranks, March 2013
                                                                  • Figure 48: Milk shelf in the chilled section in a convenience store, Shanghai, May 2013
                                                                  • Figure 49: Examples of milk in gifting packaging in China
                                                                • Targeting products to demographic groups is a major trend in China with more niche targeting opportunities beyond kids, women and seniors
                                                                  • Figure 50: Demographic claims in milk and flavoured milk new launches, China and Global (excl. Asia Pacific), Jan 2011-April 2013
                                                                  • Figure 51: Most common ingredient and functional benefit claims featured in new milk launches targeting specific demographic groups, China, Jan 2008-April 2013
                                                                  • Figure 52: Example of a milk product targeting specific health needs, China, 2007
                                                                  • Figure 53: Example of a milk product targeting specific health needs in the UK, 2011
                                                                  • Figure 54: Frequency of usage of milk by gender and age group, March 2013
                                                                  • Figure 55: Binggrae milk drink products in China, 2012
                                                                  • Figure 56: Price comparison between Bright Dairy standard and fortified milk products, China, May 2013
                                                                • What it means
                                                                • Key Issue – Increasing Food Pairing and Out-Of-Home Consumption Occasions Can Help Brands to Encourage Daily Milk Usage

                                                                  • Key points
                                                                    • Extending milk’s image beyond a standalone drink with food pairings should support higher usage
                                                                      • Figure 57: Milk/flavoured milk usage frequency, March 2013
                                                                      • Figure 58: Milk consumption with other foods/drinks, by demographics, March 2013
                                                                      • Figure 59: Milk featured in Oreo biscuit advertising, China, 2013
                                                                      • Figure 60: Got Milk? strawberry flavoured magic straws
                                                                      • Figure 61: Unilever’s Knorr bouillon advertising encourages new usage occasions, China, 2013
                                                                      • Figure 62: Packaging of energy drink brand Ichimore, China, 2013
                                                                    • Convenient packaging and smaller products can facilitate usage in the workplace and on-the-go
                                                                        • Figure 63: Examples of innovative dairy drinks in international markets, 2013
                                                                      • Expanding successful on-trade products into retail, and vice versa, can offer brands additional revenue streams and boost visibility
                                                                        • Figure 64: Packaged milk teas in the retail market, China, 2013
                                                                        • Figure 65: Grain-flavoured milk products, China, 2013
                                                                        • Figure 66: Purchase of milk from speciality outlets and attitudes towards milk speciality outlets, by demographics, March 2013
                                                                        • Figure 67: Bright Fresh House, the milk speciality outlet in Shanghai
                                                                      • What it means
                                                                      • Key Issue – Consumers’ Lack of Knowledge About Milk Provides Gaps For Manufacturers to Fill by Shaping Product Perceptions and Influencing Choice

                                                                        • Key points
                                                                          • Pasteurised milk has growth potential given importance of freshness as a purchasing choice factor
                                                                            • Figure 68: Top ranked milk/flavoured milk purchase factors, by region, March 2013
                                                                            • Figure 69: Nutrition loss comparison between pasteurised and UHT milk
                                                                            • Figure 70: Sanyuan pasteurised milk, China, April 2013
                                                                            • Figure 71: Typical packaging of pasteurised milk in China and other markets, 2013
                                                                          • Strengthening the premium image of pasteurised milk and emotional attachment to local brands can help regional players compete against national operators
                                                                              • Figure 72: Example of milk in a glass bottle in the retail channel, 2013
                                                                            • Lactose-free milk segment needs to draw attention to addressing specific problems to fully capitalise on the high prevalence of lactose intolerance
                                                                                • Figure 73: Shuhua milk featured in popular US drama, March 2012
                                                                                • Figure 74: Packaging label comparison of lactose-free/low-lactose milk products in different markets, 2013
                                                                              • What it means
                                                                              • Appendix – Market Size and Forecast

                                                                                  • Figure 75: Forecast of China white UHT milk market (retail only), by volume, 2008-18
                                                                                  • Figure 76: Forecast of China white UHT milk market (retail only), by value, 2008-18
                                                                                  • Figure 77: Forecast of China white pasteurised milk market (retail only), by volume, 2008-18
                                                                                  • Figure 78: Forecast of China white pasteurised milk market (retail only), by value, 2008-18
                                                                                  • Figure 79: Forecast of China flavoured milk market (retail only), by volume, 2008-18
                                                                                  • Figure 80: Forecast of China flavoured milk market (retail only), by value, 2008-18
                                                                                  • Figure 81: Forecast of China powdered milk market (retail only), by volume, 2008-18
                                                                                  • Figure 82: Forecast of China powdered milk market (retail only), by value, 2008-18
                                                                                  • Figure 83: Forecast of China milk and flavoured milk market (non-retail), by volume, 2008-18
                                                                              • Appendix – Milk and Flavoured Milk Usage

                                                                                  • Figure 84: Milk/flavoured milk drink usage frequency, March 2013
                                                                                  • Figure 85: Milk/flavoured milk drink usage frequency, March 2013 (continued)
                                                                                  • Figure 86: Frequency of usage of “Semi-skimmed milk’ and ‘skimmed milk’, by demographics, March 2013
                                                                                  • Figure 87: Frequency of usage of ‘Full fat/whole milk’ and ‘premium milk’, by demographics, March 2013
                                                                                  • Figure 88: Frequency of usage of ‘Any long life milk (UHT)’ and ‘Flavoured milk’, by demographics, March 2013
                                                                                  • Figure 89: Frequency of usage of ‘Milk with additional benefits’ and ‘lactose-free milk’, by demographics, March 2013
                                                                                  • Figure 90: Frequency of usage of ‘Other cow’s milk alternative’, by demographics, March 2013
                                                                              • Appendix – Ways of Consuming Milk

                                                                                  • Figure 91: Ways of consuming milk, March 2013
                                                                                  • Figure 92: Most popular ways of consuming milk, by demographics, March 2013
                                                                                  • Figure 93: Next most popular ways of consuming milk, by demographics, March 2013
                                                                              • Appendix – Milk/Flavoured Milk Purchase Location

                                                                                  • Figure 94: Milk/flavoured milk purchase location, March 2013
                                                                                  • Figure 95: Most popular retail channels from which milk/flavoured milk has been purchased, by demographics, March 2013
                                                                                  • Figure 96: Next most popular retail channels from which milk/flavoured milk has been purchased, by demographics, March 2013
                                                                                  • Figure 97: Food service outlets from which milk/flavoured milk has been purchased, by demographics, March 2013
                                                                              • Appendix – Milk Flavour Preference

                                                                                  • Figure 98: Flavour of flavoured milk purchased, March 2013
                                                                                  • Figure 99: Most popular flavours of flavoured milk purchased, by demographics, March 2013
                                                                                  • Figure 100: Next most popular flavours of flavoured milk purchased, by demographics, March 2013
                                                                              • Appendix – Interest in Purchasing Different Milk Flavours

                                                                                  • Figure 101: Flavour of flavoured milk not purchased but interested in purchasing, March 2013
                                                                                  • Figure 102: Most popular flavour of flavoured milk not purchased but interested in purchasing, by demographics, March 2013
                                                                                  • Figure 103: Next most popular flavour of flavoured milk not purchased but interested in purchasing, by demographics, March 2013
                                                                              • Appendix – Important Factors When Purchasing Milk

                                                                                  • Figure 104: Milk/flavoured milk purchase factors, March 2013
                                                                                  • Figure 105: Rank 1: Milk/flavoured milk purchase factors, by demographics, March 2013
                                                                                  • Figure 106: Rank 2: Milk/flavoured milk purchase factors, by demographics, March 2013
                                                                                  • Figure 107: Rank 3: Milk/flavoured milk purchase factors, by demographics, March 2013
                                                                              • Appendix – Attitudes Towards Milk/Flavoured Milk

                                                                                  • Figure 108: Attitudes towards milk/flavoured milk, March 2013
                                                                                  • Figure 109: Most popular attitudes towards milk/flavoured milk, by demographics, March 2013
                                                                                  • Figure 110: Other attitudes towards milk/flavoured milk, by demographics, March 2013

                                                                              Companies Covered

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                                                                              Milk and Flavoured Milk - China - June 2013

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