Opportunities and Challenges in Rebalancing Supply and Demand
China's dairy market is currently in a period of slow recovery. While major dairy companies such as Yili and Mengniu continue to maintain considerable revenue, most are facing declining sales and profit pressures. The industry is grappling with a dual challenge of temporary raw milk oversupply and sluggish demand recovery, entering a critical phase of structural adjustment.
Fresh Milk Sector Shows Strong Performance
Fresh refrigerated milk is becoming a new market favorite, significantly outpacing the growth of shelf-stable milk. Mengniu’s "Daily Fresh" and Yili’s premium fresh milk series both achieved growth rates exceeding 20% this year, emerging as key drivers of performance.
Effective September 16, the new "National Food Safety Standard for Sterilized Milk" came into force. The updated regulations require that pure milk must be made from 100% raw milk, and any use of reconstituted milk must be clearly labeled. This change is expected to further promote quality upgrades across the industry.
Infant Formula Segment Sees Intensifying Premium Competition
Despite a continued decline in birth rates, central and local government birth subsidy policies have provided support to the infant formula industry. The competition between Yili and Feihe for market share leadership is intensifying, with ultra-premium product lines now capturing 64% of the market.
It is worth noting that Feihe invested 1.2 billion yuan in birth subsidies in the first half of the year, reflecting the substantial costs companies are bearing to maintain their market positions.
Global Raw Material Prices Generally Decline
Recent data from the Global Dairy Trade (GDT) auction showed a broad decline in prices for major dairy categories, except for cheddar cheese. Prices for whole milk powder, skim milk powder, butter, and anhydrous milkfat all decreased, primarily due to oversupply and weak demand.
Cheddar cheese was the only exception, with prices rebounding after a period of concentrated selling by manufacturers and gradually returning to normal levels.
Strategic Adjustments and Layouts of Dairy Companies
In response to new market conditions, major dairy companies are actively adjusting their strategies:
-
Mengniu and Yili are accelerating their expansion into B2B segments, providing professional dairy solutions for the foodservice industry
-
New Hope Dairy is offering OEM services to new retail enterprises such as Hema
-
Mengniu sold its New Zealand Yashili factory to a2 Milk Company, optimizing its global asset allocation
Future Outlook
Industry concentration is expected to continue increasing, with the top ten dairy companies further expanding their market share. Technological innovations (such as artificial intelligence and blockchain) will play a more significant role in the industry chain. The trend of consumption stratification will simultaneously drive development along both premiumization and value-for-money paths.
The dairy market is undergoing profound transformation, and both businesses and consumers will encounter new opportunities and choices amidst these changes.
About CCM:
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & feed and life science markets. Founded in 2001, CCM offers a range of content solutions, from price and trade analysis to industry newsletters and customized market research reports. CCM is a brand of Kcomber Inc.
For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.