Trying to benefit from
China’s booming demand for healthy yoghurt, Nestlé introduced its
first Acti-V UHT yoghurt in the domestic market, sold through
the Xiamen Yinlu Group, which showed disappointing sales figures in
recent years.
In
the beginning of December, Nestlé Acti-V UHT yoghurt was presented for the
first time at the national dealer meeting 2018 of Xiamen Yinlu Group Co., Ltd.
This product includes dietary fibre and sells in 200mL bottles in 2 different
taste varieties.
Acti-V
is a functional yoghurt containing special ingredients that appeal to
health-conscious shoppers, like its unique ingredient FORTIS, a bifidobacterium
that aids digestive health.
Nestlé
has a 60% stake in the Yinlu Group, a Chinese dairy enterprise specialized in
the sales of peanut milk. The new product is expected to lift the declining
sales of the company by targeting the demand for healthy, functional dairy
products for China’s growing middle class.
Over
the last 3 decades, the share price of Nestlé rallied over 14 times, largely
attributed to its plentiful strategic acquisitions that helped to diversify and
expand its scale and efficiency.
According
to Nestlé, the company is aiming for opportunities across China dairies,
particularly in fermented dairy products like yoghurt, cheese and butter that
should all are expected to grow in double-digit numbers in the next years.
Especially
the booming demand for yoghurt in China is driving the dairy investments in the
middle kingdom. Premium milk products like yoghurt have seen the biggest growth
of dairy products as consumers start to choose higher quality products.
UHT
yoghurt, in particular, is expected to witness the fastest growth of more than
20% each year, as many Chinese consumers are showing sins of lactose intolerant
and avoid purchasing milk products. In addition to this, UHT dairy products do
not need to be stored at low temperatures, allowing it to swiftly expand into
more remote areas across China.
At
present, the penetration rate of yoghurt products in China in terms of per
capita consumption remains low, compared to neighbouring Asian countries like
Japan, and South Korea. As demand increases further while household
affordability also improves, the average selling price of yoghurt could also
see room to increase ahead, as seen from a fairly steady price increase since
2010.
Selling
yoghurt is very popular for manufacturers in China since the profit margins
exceed the ones of plain milk by almost double. Currently, the profit margins
are at 40%. The high margins enable a good profitably of this business,
accounting for a big share of the total revenue for the dairy manufacturers.
It
is important to look at China for any international dairy enterprise, as China
is even to overtake the USA as the largest dairy markets by about 4 years, a
research study by Euromonitor revealed.
By
now, the segment of yoghurt is mostly covered by Chinese firms, enjoying
high-profit margins and booming demand while facing less competition from
international players.
Awarded bottle design
Furthermore,
Yinlu Group hopes to attract a growing number of customers with the new design
of the yoghurt drink, which packaging design has been awarded before.
After
all, market researches show that the packaging of Yinlu Group has
always been in the colours of red and white and looks too old-fashioned to
attracted China’s youth which is searching for yoghourt and other beneficial
dairy products.
For
example, Nestlé has redesigned its packaging for their Acti-V yoghurt range and
resulted in a double-digit growth in product sales and market share in Hong
Kong.
The
key challenge for Nestlé was to develop a design language for the brand’s
packaging that would clearly communicate the product’s benefits, and create
real stand out on the shelf to justify the premium price and increase sales.
High Competition
Whether
Yinlu's launch into UHT yoghurt will be a success needs to be waited for, as
competition in the market is significantly fierce.
For
example, stimulated by the huge sales growth of yoghurt in China, the two
domestic dairy giants Mengniu and Yili have released their popular products
Just Yoghurt and Ambrosial in 2013 already, according to market intelligence
firm CCM.
The
two new products had a clear negative impact on the UHT yoghurt by Bright
Dairy, Momchilovtsi, which sales went down 1.44% YoY in 2015. In 2016, the
sales have been estimated at USD1017.60 million, but the company hasn't
released any figures on Momchilovtsi since 2015 when it underperformed against
a sales target of USD1210.9 million.
Beaten
by the fierce competition in China’s UHT yoghurt market, Bright Dairy announced
at a press conference in Hong Kong that it launches the product in this new
market.
How
successful Nestlé Acti-V UHT yoghurt can prove in the booming yoghurt
market with high competition and growing demands of customers must be
debatable, since it can be considered to be just another me-too product in the
market.
About the article
The
information for this article comes from CCM’s China Dairy Newsletter. This
newsletter gets published monthly and reveals all relevant insights into China’s
dairy products, including market trends, company dynamics, import and export data,
and all newsworthy stories.
CCM
is China’s leading market intelligence provider for the fields of agriculture,
chemicals, food & feed. Contact our team at econtact@cnchemicals.com or call us
directly at 86-20-37616606.
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