E-commerce opens great opportunities to meet China’s huge appetite for dairy products 10-10-2017  478

As China's appetite for dairy products is growing steadily, exporters to China can benefit from the convenient sales channel of e-commerce to get their market share of high-quality dairy products in China.


 


The comparatively low prices of dairy products coupled with the convincing of getting them delivered right at the doorstep have switched e-commerce for many Chinese to their favourite option of shopping, including buying international dairy products. The first dairy products that discovered this channel have been infant formula. 



By now, China’s e-commerce industry has developed to the main entry stage for dairy product imports into the country. In 2016, the e-commerce distributors in China have already reached an import share of 66%, leaving only one-third of imported dairy products not sold via e-commerce. Those products can be sent in normal parcel-sized boxes to China and therefore bypass import tariffs, which regular imports have to face at the borders and ports. 



Dairy products sold and send by e-commerce are not only cheap and convenient for the consumers, but they also ensure that the product is coming from trusted dairy markets overseas, like Australia, Europe, or New Zealand. These regions are the main exporter of dairy products to China and are still preferred by many Chinese for the domestic market since past quality scandals of Chinese dairy products are still present in many minds. 



It may be worth noticing, that newly announced higher taxes on dairy imports in China are not likely to change the buyer’s behaviour to a greater extent since the demand for qualitative foreign dairy products in China is relatively inelastic from the price. Chinese consumers still prefer quality before price, especially if it is about their health or the health of children and grandchildren. 



The Chinese government is working actively to save the domestic dairy industry by regulating the suppliers of dairy products in China. Foreign infant formula brands need a special Certificate to be allowed selling their brands in China. Most of those approved companies are currently located in New Zealand, Australia, the USA, and Europe. 



Chinese manufacturers cooperate with e-commerce provider 

According to market intelligence firm CCM, the new trend also leads to cooperation between China’s dairy and e-commerce giants. One example is the announcement of China’s second-largest dairy producer, Mengniu Dairy, to operate closely with China’s e-commerce giant Alibaba. Mengniu achieves its profits mainly with the sales of liquid milk and ice cream products. The cooperation will be focused on using the delivery platform of Alibaba to ensure quick and reliable sells of fresh products. Furthermore, the companies want to work together in sharing both data for effective and precise marketing activities. As a fact, for the last 4 years, Mengniu has been working to establish a professional data team to conduct data mining, modelling and analysis. Up to now, it has amassed a large amount of detailed data about the dairy market. Alibaba has comprehensive data about a variety of sectors. 



Similarly, Yili struck a cooperation agreement with JD Daojia, a platform of the E-commerce business JD Company that is designed to deliver fresh fruit, vegetables, etc. to customers within 2 hours of them placing orders. This deal aims to facilitate deliveries of Yili fresh yoghurt and frozen foods. JD Daojia commits to deliver such products to customers within an 1 hour via its strong cold chain logistics service, enabling Yili to conduct business in a way which has not been possible up to now. Both Yili and Mengniu make most of their sales from UHT milk, but customers are becoming increasingly inclined to consume fresh dairy products with shorter shelf lives. 



Alibaba even has its own supermarkets in China, selling food and dairy products. These supermarkets have a fulfilment centre that deals with online orders and can deliver the required products within 30 minutes.











 


According to a research by Goldman Sachs, Online supermarkets, omnichannel sales, and lower-tier cities are lifting up the e-commerce growth in China to the next level which will leave the online retail market to be about USD1.7 trillion by the year 2020. This development would mean a double of value compared to the current situation. 



In China, it is very easy for consumers to order the trusted dairy product they prefer online and get it delivered even on the same day. This process skips any middleman or retailer and lets manufacturers sell directly to the end-consumer. For companies, this means, that marketing and promotion online and on e-commerce platforms is a key task they have to conduct in order to place their products and brands in the right light. 



The Chinese government announced recently to delay the enforcing of tougher rules on the cross-border retail market to the end of 2018. The planned new rules will increase both the taxes and regulations on cross-border sold products. With the delay, the government aims to give retailers more time to prepare for the change ahead. 



About CCM 

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. 



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