Hema Fresh is Alibaba’s new retail concept, which combines traditional shopping with a digital experience.
The new ‘Daily Fresh’ milk range is now available in Hema’s 14 stores in Shanghai and Suzhou in 750ml bottles, sourced from Fonterra’s farm hub in Hebei province.
The product has product labels to match each day of the week, which it says highlights and emphasizes freshness, with stock being replenished every night.
Initial volumes are currently around three metric tonnes daily, with plans to scale-up over time and expand with the retailer as it grows its footprint of stores across China.
President of Fonterra Greater China Christina Zhu said shoppers in China are becoming increasingly sophisticated in terms of their tastes and preferences, which are being driven by rising household incomes.
“More than ever before, consumers are consciously seeking products that are fresh, nutritious and safe, and our new product for Hema caters to this,” Zhu said.
According to figures from global management consulting company McKinsey, it is expected that more than 75% of China’s urban consumers will earn RMB 60,000 to 229,000 annually ($9,450 to $35,620) by 2022.
This is up from just 4% in 2000, prompting a shift in consumer behavior and purchasing power.
The Hema model
Linked to this trend is the rise of Hema, which emerged in early 2016.
The shopping experience at Hema is driven by a downloadable app, through which customers can scan barcodes to get information on the product. Food can also be picked, cooked by staff, and eaten in store.
The stores are also ‘fulfilment centers’ where customers can order online through the app, workers collect the items and they are delivered within 30 minutes within a 3km radius.
Hema is also linked to payment options, and is a membership club: the app personalizes shopping for the consumer based on previous purchases.
In addition to the new fresh milk range, Anchor UHT milk products and the Anchor Dairy Foods range of butter, cream and cheese items are sold through Hema.
The retailer is also a foodservice customer, using Fonterra’s Anchor Food Professionals products in its in-store bakery.
Hema Fresh CEO and founder Hou Yi said the co-operation between the two companies is set to redefine the concept of fresh milk in the new retail era.
Zhu says the new product highlights how Fonterra’s business in China is leveraging its local milk pool, spread across three farming hubs.
“No other multinational dairy company in China has a local milk pool to draw from, so we are in an advantageous position,” said Zhu.
“This milestone with Hema is a sign of things to come and indicates that our push to shift more of our local milk into higher-yielding consumer and foodservice products is well-and-truly under way.”
While replenishing stock on a daily basis has the potential to lead to waste as it is replaced daily, a Fonterra spokesperson told DairyReporter the volumes are initially quite small, and the whole model of Hema is that everything is fresh, so the company would rather run out than have stock left over.
The spokesperson said, however, that sales have been going well, with the vast majority of bottles selling out each day.
“For any that are left over, that’s where the uniqueness of the Hema model comes into play to keep waste at an absolute minimum.
“As well as being styled like a grocery store, Hema also has a range of bakeries and restaurants in-store which can utilize surplus product that doesn’t sell on the day.”