Kantar report highlights Chinese dairy market opportunities

By Jim Cornall contact

- Last updated on GMT

While the Chinese domestic market is dominated by three companies, there are opportunities to break into the Chinese market, says a Kantar Worldpanel report. Photo: iStock - szefei
While the Chinese domestic market is dominated by three companies, there are opportunities to break into the Chinese market, says a Kantar Worldpanel report. Photo: iStock - szefei

Related tags: Milk, Dairy product, Dairy

A new report by Kantar Worldpanel gives an overview of the state of the Chinese dairy market that says there are opportunities for international companies.

‘Growth opportunities for the Chinese dairy market’​ explains that the dairy sector is still growing and providing opportunities for local and foreign businesses.

Jason Yu, general manager of Kantar Worldpanel, China, told DairyReporter that, “It is still one of the fastest growing sectors within the FMCG market, it grows two or three times higher than the overall market, and considering the Chinese appetite for quality dairy products, there is still a lot of potential in this market.”

Urban families across China

Kantar achieves its information through a panel of 40,000 urban families in 373 cities.

“We give them a bar code scanner, and every time they go grocery shopping, they scan products they purchased from the store, so in that way they record all their purchases, from dairy to food and beverages,”​ Yu said.

Kantar then supplies its insights to all the big multinational companies.

Yu said that Kantar supplies its insights to multinationals and the main dairy companies in China.

“The market is pretty much dominated by the biggest local giants that take up about 90% of the dairy market, Mengniu, Yili and Bright,” he said. 

Opportunities through insight

But there are still opportunities for global dairy companies to make an impact in China.

Kantar says it often received inquiries from brands that have not yet entered China. Brands that want to launch successfully in China need to understand the competitive landscape, changes in consumers’ preferences, and look at how to fund their market opportunities, advises Yu.

While there are opportunities, Yu said, because competition is so intense, it’s not easy to compete with the large Chinese companies.

“It's worthwhile to study the market first to formulate a winning strategy,”​ he added.

Arla breaking in

And there are ways to break in, according to Yu. He said that Arla is partnering with Mengniu to achieve market success.

“By using Mengniu's distribution channel and marketing infrastructure, they are building their brand presence in China. By partnering, they are able to make their brand more accessible to Chinese consumers. It would be extremely expensive for them to do it on their own. That's one way of entering the China market,”​ Yu said.

The report shows that 58% of categories showed growth. One of the stronger sectors was the overall liquid milk market (milk and yogurt), which saw a sales increase of 7.5%, far beyond the total growth.

Opportunities for growth

Kantar Worldpanel research shows that the average consumption of dairy products for China's urban households in 2015 is 59.7 liters, less than 20% of that in EU countries.

However, the report says that with the implementation of the two-child policy, China's dairy industry will have more space to grow with as more children are born.

It also found that the successful high-end products can help grow by attracting consumers within a short time of their launch. For example, Browning, one of the new dairy products from the San Yuan Dairy Company, contributed 4.3% for its growth in the Beijing area. It reached 8.1% of total shoppers in that region within only 24 weeks of being launched.

Consumption rising with young

Kantar Worldpanel found the number of dairy categories being purchased per household is increasing year by year. The average purchase rose from six dairy categories in 2013 to 6.2 in 2015. This demonstrates that new launches have helped expand consumer repertoires and provided some incremental sales for the sector.

The study also showed that the consumption between young and teenagers families, who bought 6.6 dairy categories and 61.7 liters per year in average, is much higher than elder and adult families, who bought the 5.7 dairy categories and 57.2 liters per year on average.

Challenge from imported milk

Imported milk is growing faster than domestic milk, Kantar’s data shows.

Yu said that promoting consumer’s confidence on domestic milk quality is a priority for domestic manufacturers.

Growth opportunities

The report concludes that there are still growth opportunities.

It says that dairy manufacturers need to educate Chinese people on the benefits of consuming dairy.

As young consumers are willing to try more categories, it is important to provide a diverse portfolio for them.

Another opportunity for domestic dairy brands is to challenge imported milk online.

It is important for companies to invest in product innovation. Health benefits are a hot topic and using a scientific approach to communicate how the product can improve consumers’ lives can be successful, the Kantar report says.

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