China's Dairy Market: Expanding Amidst Economic Growth and Evolving Consumer Preferences
Source: The DairyNews
In recent decades, China's dairy industry has experienced remarkable growth, fueled by rising incomes and improved living standards, transforming milk and dairy products from luxury items into staples at the Chinese dining table.
This shift reflects broader changes in consumer behavior and dietary preferences, highlighting significant growth potential in segments of the population that remain underserved. This article explores the current trends and burgeoning opportunities within China's dynamic dairy market.
As the second-largest global market for dairy products, China has seen dairy become an increasingly common inclusion in the diet over the last forty years, spurred by economic advancements. Although dairy was not a traditional part of the Chinese diet, its integration reflects an evolving perspective that regards these products as essential for a healthy diet, especially for children.
Despite a substantial increase in consumption since the 1980s, China's dairy market still shows considerable potential for further expansion. Sales and consumption rates are impressive, yet per capita consumption is significantly lower compared to other middle- and high-income nations. A disparity exists between urban and rural consumption, with urban households consuming dairy at much higher rates, indicating a large portion of the population could still be better served.
The industry has witnessed several key trends shaping the market landscape. While powdered milk once dominated, pasteurized fresh milk and ultra-high temperature (UHT) milk have surged in popularity. Additionally, the growing consumption of coffee and milk tea has bolstered demand for both fresh and powdered milk. The markets for niche products like cheese and butter are also expanding, driven by the rising popularity of home baking and premium Western foods among affluent urbanites.
Market Size and Growth Projections
In 2023, China's dairy industry was valued at over RMB 500 billion (approximately US$69.6 billion), according to the China Business Industry Research Institute. Retail sales have been growing steadily, with a compound annual growth rate (CAGR) of 5.3% from 2016 to 2021, expected to maintain a rate of around 4.8% from 2022 to 2026, potentially reaching RMB 596.65 billion (US$83 billion).
Dairy product sales reached RMB 468.7 billion (US$65.2 billion) in retail in 2021, demonstrating a steady rise in demand. Per capita dairy consumption has also increased, from 36.1 kg in 2016 to 42 kg in 2022, although it remains lower than in countries like South Korea and the United States.
The fastest-growing segments include low-temperature pasteurized milk, with a CAGR of 9.4% between 2018 and 2022, and the yogurt sector, which saw an 8.4% CAGR from 2016 to 2021.
Supply Dynamics and Government Initiatives
Domestic production has scaled up significantly alongside consumption increases. From 2001 to 2023, the number of dairy cows rose from 5.7 million to 7.1 million. The primary production areas are in northern and northeastern provinces such as Inner Mongolia and Heilongjiang.
The government has played a pivotal role in supporting the industry, particularly through the "14th Five-Year Plan" for the dairy sector, aiming to boost production to 41 million tons by 2025. This plan includes increasing capital investment, enhancing dairy industry competitiveness through mergers and acquisitions, and promoting domestic milk consumption through various initiatives.
Opportunities and Forward Outlook
The Chinese dairy market offers diverse opportunities, particularly in premium segments such as organic and fortified milk products. The demand for high-quality cheese and butter is growing, and the yogurt market is ripe for innovation in flavors and formats. Additionally, the adult powdered milk segment shows promising growth potential, contrasting with the declining infant formula market due to lower birth rates and increased breastfeeding.
Overall, China’s dairy industry is poised for continued expansion, driven by government support, evolving consumer preferences, and significant investment in domestic production capabilities. This dynamic sector remains a lucrative avenue for investors looking to tap into China's growing dairy consumption.
As the second-largest global market for dairy products, China has seen dairy become an increasingly common inclusion in the diet over the last forty years, spurred by economic advancements. Although dairy was not a traditional part of the Chinese diet, its integration reflects an evolving perspective that regards these products as essential for a healthy diet, especially for children.
Despite a substantial increase in consumption since the 1980s, China's dairy market still shows considerable potential for further expansion. Sales and consumption rates are impressive, yet per capita consumption is significantly lower compared to other middle- and high-income nations. A disparity exists between urban and rural consumption, with urban households consuming dairy at much higher rates, indicating a large portion of the population could still be better served.
The industry has witnessed several key trends shaping the market landscape. While powdered milk once dominated, pasteurized fresh milk and ultra-high temperature (UHT) milk have surged in popularity. Additionally, the growing consumption of coffee and milk tea has bolstered demand for both fresh and powdered milk. The markets for niche products like cheese and butter are also expanding, driven by the rising popularity of home baking and premium Western foods among affluent urbanites.
Market Size and Growth Projections
In 2023, China's dairy industry was valued at over RMB 500 billion (approximately US$69.6 billion), according to the China Business Industry Research Institute. Retail sales have been growing steadily, with a compound annual growth rate (CAGR) of 5.3% from 2016 to 2021, expected to maintain a rate of around 4.8% from 2022 to 2026, potentially reaching RMB 596.65 billion (US$83 billion).
Dairy product sales reached RMB 468.7 billion (US$65.2 billion) in retail in 2021, demonstrating a steady rise in demand. Per capita dairy consumption has also increased, from 36.1 kg in 2016 to 42 kg in 2022, although it remains lower than in countries like South Korea and the United States.
The fastest-growing segments include low-temperature pasteurized milk, with a CAGR of 9.4% between 2018 and 2022, and the yogurt sector, which saw an 8.4% CAGR from 2016 to 2021.
Supply Dynamics and Government Initiatives
Domestic production has scaled up significantly alongside consumption increases. From 2001 to 2023, the number of dairy cows rose from 5.7 million to 7.1 million. The primary production areas are in northern and northeastern provinces such as Inner Mongolia and Heilongjiang.
The government has played a pivotal role in supporting the industry, particularly through the "14th Five-Year Plan" for the dairy sector, aiming to boost production to 41 million tons by 2025. This plan includes increasing capital investment, enhancing dairy industry competitiveness through mergers and acquisitions, and promoting domestic milk consumption through various initiatives.
Opportunities and Forward Outlook
The Chinese dairy market offers diverse opportunities, particularly in premium segments such as organic and fortified milk products. The demand for high-quality cheese and butter is growing, and the yogurt market is ripe for innovation in flavors and formats. Additionally, the adult powdered milk segment shows promising growth potential, contrasting with the declining infant formula market due to lower birth rates and increased breastfeeding.
Overall, China’s dairy industry is poised for continued expansion, driven by government support, evolving consumer preferences, and significant investment in domestic production capabilities. This dynamic sector remains a lucrative avenue for investors looking to tap into China's growing dairy consumption.
