China: New Dairy Takes Aim at the "Assassin" of Chilled Milk
Source: DairyNews.today
"One bottle of milk a day makes strong Chinese people" was once a slogan encouraging the consumption of ambient milk in China. However, this once cost-effective nutritional product seems to be falling out of favor with health-conscious consumers in the country.
Chilled milk is now taking center stage. "Ambient milk has lower milk source requirements and can even be reconstituted from milk powder, commonly known as 'canned milk.' In contrast, chilled milk has better taste and is healthier," say advocates for chilled milk, which is perceived as a healthier option compared to ambient milk.
According to data from CMB International, the compound annual growth rate (CAGR) for chilled fresh milk is projected to reach 12% from 2022 to 2027. It is also expected that white milk will undergo a premiumization trend, transitioning from ambient to fresh milk.
In this context, New Dairy, a company traditionally focused on "fresh" business, is finding a new narrative through its chilled milk offerings.
New Story of Chilled Milk
“I fell in love with chilled fresh milk after the first sip. It’s rich, thick, creamy, and refreshing. I haven’t seen ambient milk in my home for a long time,” says Xu Jie, a post-95 consumer and a loyal fan of chilled fresh milk. She started drinking chilled milk in 2020 and has made it a habit due to its taste and flavor.
Xu Jie explains that she turned to chilled milk primarily for health reasons, especially during the pandemic, when experts like Dr. Zhong Nanshan and Dr. Zhang Wenhong recommended milk consumption to boost immunity. She recommends fresh milk with a shelf life of 3-4 days or 5-7 days, as these options contain fewer additives and are more nutritious.
Her research shows that chilled milk requires high-quality, fresh, uncontaminated milk sources, and must be processed within 24 hours of milking. The entire process, from milking to production, is done under refrigerated conditions, making it fresher, safer, and more nutritious. "Ambient milk, on the other hand, has lower milk source requirements and can even be reconstituted from milk powder, leading to concerns about the technology behind its long shelf life."
Growing Popularity of Chilled Milk
Since the pandemic, consumers have become more focused on healthy eating. Compared to ambient milk, chilled milk offers clear advantages in terms of nutrition and freshness, leading to its growing popularity. According to Kantar data, the nationwide penetration rate of chilled fresh milk rose from 18% in 2018 to 39% in 2023, with high-end milk penetration increasing by 5.9% year-on-year. Chilled milk has seen steady growth across all channels, with Q1 2024 sales on Tmall, JD.com, and Douyin platforms increasing by 24%, 6%, and 12% year-on-year, respectively.
In this favorable trend, New Dairy, which has focused on the "fresh" business for many years, seems to be reaping the benefits.
Over the past decade, New Dairy has built its brand around freshness, with different sub-brands targeting various consumer needs. For instance, in 2011, the company launched its "24-hour" product line, emphasizing extreme freshness. The Asahi Premium brand focuses on high-end fresh milk, while the Huorun series has driven growth through new products.
In the first half of 2024, New Dairy's "24-hour" fresh milk series continued its nationwide expansion, and its high-end Asahi Premium fresh milk grew by 15% year-on-year. The company’s overall revenue for the first half of 2024 reached 5.364 billion yuan, a year-on-year growth of 1.25%, with net profit growing 25.26%. This growth is attributed to New Dairy's focus on low-temperature dairy products, with chilled fresh milk and specialty yogurt as its core offerings.
Challenges Ahead for Nationwide Expansion
Despite its success, New Dairy faces challenges in expanding nationally. The limited shelf life of chilled milk (5-7 days for pasteurized milk) and the high costs of cold chain logistics restrict its sales radius, typically to within 300 kilometers of the milk source. Even with the advent of "super-pasteurized milk," which has a longer shelf life of 14-20 days, the sales radius only extends to 500 kilometers.
New Dairy's flagship "24-hour" fresh milk series, which guarantees freshness from production to shelf within 24 hours, has an even smaller sales radius of 100-150 kilometers.
This geographical limitation means that the chilled milk market is still dominated by regional dairy companies, and New Dairy's nationwide ambitions face considerable hurdles.
To overcome this, New Dairy has pursued an aggressive acquisition strategy, buying up regional dairy companies across the country. Since 2002, New Dairy has acquired several prominent regional dairy companies, including Chengdu Huaxi, Hangzhou Shuangfeng, and Hebei Tianxiang, targeting markets in East and North China. In 2019, it expanded its reach further by acquiring a stake in Australian Dairy, cementing its push towards national expansion.
However, despite these efforts, New Dairy's brand recognition remains limited outside of its home region. Interviews with consumers in Hebei, Beijing, and Northeast China revealed that many were unfamiliar with the New Dairy brand, with some saying they had "never noticed" or "weren’t familiar" with it.
Fierce Competition in the Chilled Milk Market
New Dairy’s challenges are not only geographical. The chilled milk market is becoming increasingly competitive, with more dairy giants entering the field. Companies like Mengniu and Yili have launched their own chilled milk products in recent years, further intensifying the battle for market share. Traditional retailers have also joined the fray, introducing their own private-label fresh milk products.
As competition heats up and raw milk supply exceeds demand, the dairy industry is entering a new phase of price wars. Both large and small dairy companies are using discounts and promotions to capture market share, driving down prices across the board.
In this fierce market environment, New Dairy has increased its promotional expenses by 18.69% in the first half of 2024, spending 474 million yuan, with sales expenses accounting for 54.8% of its total revenue.
However, despite these efforts, New Dairy's core markets in the Southwest and Northwest regions saw revenue declines of 6.87% and 12.68%, respectively, in the first half of 2024, highlighting the challenges it faces in maintaining growth amidst intensifying competition.
With both external competition and internal challenges mounting, New Dairy will have to fight hard to maintain its position and achieve its national expansion goals.
Source
According to data from CMB International, the compound annual growth rate (CAGR) for chilled fresh milk is projected to reach 12% from 2022 to 2027. It is also expected that white milk will undergo a premiumization trend, transitioning from ambient to fresh milk.
In this context, New Dairy, a company traditionally focused on "fresh" business, is finding a new narrative through its chilled milk offerings.
New Story of Chilled Milk
“I fell in love with chilled fresh milk after the first sip. It’s rich, thick, creamy, and refreshing. I haven’t seen ambient milk in my home for a long time,” says Xu Jie, a post-95 consumer and a loyal fan of chilled fresh milk. She started drinking chilled milk in 2020 and has made it a habit due to its taste and flavor.
Xu Jie explains that she turned to chilled milk primarily for health reasons, especially during the pandemic, when experts like Dr. Zhong Nanshan and Dr. Zhang Wenhong recommended milk consumption to boost immunity. She recommends fresh milk with a shelf life of 3-4 days or 5-7 days, as these options contain fewer additives and are more nutritious.
Her research shows that chilled milk requires high-quality, fresh, uncontaminated milk sources, and must be processed within 24 hours of milking. The entire process, from milking to production, is done under refrigerated conditions, making it fresher, safer, and more nutritious. "Ambient milk, on the other hand, has lower milk source requirements and can even be reconstituted from milk powder, leading to concerns about the technology behind its long shelf life."
Growing Popularity of Chilled Milk
Since the pandemic, consumers have become more focused on healthy eating. Compared to ambient milk, chilled milk offers clear advantages in terms of nutrition and freshness, leading to its growing popularity. According to Kantar data, the nationwide penetration rate of chilled fresh milk rose from 18% in 2018 to 39% in 2023, with high-end milk penetration increasing by 5.9% year-on-year. Chilled milk has seen steady growth across all channels, with Q1 2024 sales on Tmall, JD.com, and Douyin platforms increasing by 24%, 6%, and 12% year-on-year, respectively.
In this favorable trend, New Dairy, which has focused on the "fresh" business for many years, seems to be reaping the benefits.
Over the past decade, New Dairy has built its brand around freshness, with different sub-brands targeting various consumer needs. For instance, in 2011, the company launched its "24-hour" product line, emphasizing extreme freshness. The Asahi Premium brand focuses on high-end fresh milk, while the Huorun series has driven growth through new products.
In the first half of 2024, New Dairy's "24-hour" fresh milk series continued its nationwide expansion, and its high-end Asahi Premium fresh milk grew by 15% year-on-year. The company’s overall revenue for the first half of 2024 reached 5.364 billion yuan, a year-on-year growth of 1.25%, with net profit growing 25.26%. This growth is attributed to New Dairy's focus on low-temperature dairy products, with chilled fresh milk and specialty yogurt as its core offerings.
Challenges Ahead for Nationwide Expansion
Despite its success, New Dairy faces challenges in expanding nationally. The limited shelf life of chilled milk (5-7 days for pasteurized milk) and the high costs of cold chain logistics restrict its sales radius, typically to within 300 kilometers of the milk source. Even with the advent of "super-pasteurized milk," which has a longer shelf life of 14-20 days, the sales radius only extends to 500 kilometers.
New Dairy's flagship "24-hour" fresh milk series, which guarantees freshness from production to shelf within 24 hours, has an even smaller sales radius of 100-150 kilometers.
This geographical limitation means that the chilled milk market is still dominated by regional dairy companies, and New Dairy's nationwide ambitions face considerable hurdles.
To overcome this, New Dairy has pursued an aggressive acquisition strategy, buying up regional dairy companies across the country. Since 2002, New Dairy has acquired several prominent regional dairy companies, including Chengdu Huaxi, Hangzhou Shuangfeng, and Hebei Tianxiang, targeting markets in East and North China. In 2019, it expanded its reach further by acquiring a stake in Australian Dairy, cementing its push towards national expansion.
However, despite these efforts, New Dairy's brand recognition remains limited outside of its home region. Interviews with consumers in Hebei, Beijing, and Northeast China revealed that many were unfamiliar with the New Dairy brand, with some saying they had "never noticed" or "weren’t familiar" with it.
Fierce Competition in the Chilled Milk Market
New Dairy’s challenges are not only geographical. The chilled milk market is becoming increasingly competitive, with more dairy giants entering the field. Companies like Mengniu and Yili have launched their own chilled milk products in recent years, further intensifying the battle for market share. Traditional retailers have also joined the fray, introducing their own private-label fresh milk products.
As competition heats up and raw milk supply exceeds demand, the dairy industry is entering a new phase of price wars. Both large and small dairy companies are using discounts and promotions to capture market share, driving down prices across the board.
In this fierce market environment, New Dairy has increased its promotional expenses by 18.69% in the first half of 2024, spending 474 million yuan, with sales expenses accounting for 54.8% of its total revenue.
However, despite these efforts, New Dairy's core markets in the Southwest and Northwest regions saw revenue declines of 6.87% and 12.68%, respectively, in the first half of 2024, highlighting the challenges it faces in maintaining growth amidst intensifying competition.
With both external competition and internal challenges mounting, New Dairy will have to fight hard to maintain its position and achieve its national expansion goals.
Source
