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Receive every freshly baked tweet in a timely manner to reduce prices, clear inventory, and lack of demand...... What are domestic dairy companies experiencing?
According to the National Bureau of Statistics, milk production in mainland China has continued to rise since 2017, reaching 41.9665 million tons in 2023, a year-on-year increase of 6.74%. The latest data from the Ministry of Agriculture and Rural Affairs shows that as of May this year, domestic raw milk purchase prices have fallen for 27 consecutive months year-on-year, the longest since 2010. At the 2024 China Dairy Industry Development Strategy Seminar held on July 3, Li Shengli, chief scientist of the National Dairy Industry Technology System, said that due to the continuous decline in the purchase price of raw milk, milk prices and costs have inverted for the first time since the national dairy system has been recorded.
In addition to the pressure of clearing inventory on the supply side, the demand side is also under pressure. According to the data of the National Bureau of Statistics, the per capita milk consumption of mainland residents has been flat in the past 10 years, which means that the growth momentum of milk consumption demand in the domestic market as a whole is difficult to say sufficient at the moment when the demographic dividend has faded. According to the Q1 2024 China Shopper Report released by Bain & Company and Kantar, yogurt and cheese are among the categories that have seen sales decline for three consecutive years.
Source: Bain & Company× Kantar Worldpanel, 2024.06 China Shopper Report, Series 1
With high raw milk inventories and weak demand for dairy products, seeking structural growth is a road that has to be chosen in such a competitive environment in the stock market, but what is the direction of diversification of China's dairy industry structure?
CBNData found that the low-temperature yogurt category has maintained a high growth rate online, with a compound growth rate of 78.4% in online sales from January to May in the past three years, and a number of new players relying on the category have emerged. In this context, we will explore the reasons behind this in terms of channel evolution, brand landscape and product diversification. Who are the core players? What kind of products have more opportunities to help brands gain a foothold in this track and achieve structural growth?
1
Offline sluggish, online flying,
What are the expansion opportunities brought about by the evolution of the channel?
For a long time, low-temperature dairy products are subject to objective conditions such as cold chain logistics, and often take offline as the main consumption scenario, and hypermarkets and supermarkets have become the main sales channels of low-temperature dairy products. With the continuous improvement of e-commerce penetration rate and the accelerated improvement of cold chain logistics facilities in recent years, the objective constraints that originally affected the online sales of low-temperature dairy products are fading.
The 2023 annual reports of dairy companies such as Mengniu, Yili, and New Hope also mentioned that at the level of sales channels, the retail sales of dairy products in offline physical stores of large supermarkets showed a downward trend compared with the previous year, while the retail sales of dairy products in near-field channels such as convenience stores and online community group buying showed an upward trend compared with the previous year, and online channels maintained rapid development.
The decline of traditional offline channels is difficult to hide, and the emerging retail channels focus on differentiated layout, and the overall growth of dairy products is sluggish in terms of traditional offline channels. According to the data of Instant Win, the overall sales of the offline yogurt category in the first quarter of 2024 decreased by 11.46% year-on-year, and the sales volume decreased by 12.69% year-on-year, while compared with the year-on-year decline of more than 20% in the sales and sales volume of room temperature yogurt, low-temperature yogurt has been at a low level of decline in the overall dairy sub-category.
In terms of the brand structure of the low-temperature yogurt category, Mengniu and Yili still firmly grasp the market share of the offline head, and the Junlebao Jane Alcohol series products achieved a year-on-year increase of more than 20% in sales in the first quarter of 2024. On the whole, there has been no change in the top 10 offline brands in the past three years, and the fluctuation of brand ranking is also small.
In addition to traditional offline channels, the rise of new retail and other emerging formats also affects the competitive situation and layout strategy of brands. Dingdong Maicai told CBNData that in the second quarter of 2024, the sales volume of the low-temperature yogurt category on the Dingdong Maicai platform increased by nearly 20% compared with the same period last year, and due to the impact of high temperatures, the platform expects the sales of low-temperature yogurt to increase by about 30% year-on-year in the second half of this year.
Comparing the composition of low-temperature yogurt brands and the top 10 best-selling products in Shanghai of Hema (self-operated) and Dingdong Grocery Shanghai, it can be seen that these two channels basically cover the mainstream low-temperature yogurt brands in terms of brand selection, but there are obvious differences in the specific product price combination strategy.
Hema's own brand products basically cover the major items of the current low-temperature yogurt category (curd yogurt, sugar-free yogurt, Greece yogurt, drinking yogurt, etc.), focusing on a choice that has become the most cost-effective among large items, while other settled brands make up for various medium and high price bands with differentiated positioning space. In contrast, Dingdong Grocery is more cautious in the layout of its own products, in addition to a few cost-effective customized items, more in the form of brand co-branded models to create special items, in terms of brand entry is more biased towards the public, the traditional Mengniu, Yili, New Hope and other mass consumer line products are covered, and the price range is also wider.
It is not difficult to find that as players from various channels begin to do their own business, the opportunities for brands in these retail channels lie more in the creation of differentiated products. In other words, how to balance the rising costs brought about by rapid product iteration and refined operation while fully embracing the emerging multiple channels is a key issue that brands need to solve when entering these channels.
Online low-temperature yogurt took off against the trend, and the competition pattern of the three types of players began to show Compared with the downturn in offline, online channels presented a different scene. According to the data of Mojing Insight, the compound growth rate of overall dairy product sales on the Tao e-commerce platform from January to May in the past three years was 6.29%, and the compound growth rate of low-temperature yogurt in the past three years was 78.4%, the highest growth rate among all subcategories; The compound growth rate of low-temperature dairy products including low-temperature yogurt, low-temperature milk, and low-temperature prepared dairy products (39.8%) was also significantly higher than that of the normal temperature track (3.32%).
In May 2024, the sales of low-temperature yogurt accounted for 8.4%, an increase of more than 8 percentage points from January 2022, and it has become a segment that cannot be ignored in the entire dairy industry. Not only Tao e-commerce, but also low-temperature yogurt shows the same accelerated growth trend after integrating the sales data of Douyin e-commerce.
It is worth noting that although the overall sales of low-temperature yogurt have maintained rapid growth, further splitting can find that the overall online sales growth of the current low-temperature yogurt track is mainly driven by sales volume rather than price factors. The average price of industry products has dropped from about 80 yuan in 2022 to between 20-40 yuan in 2024.
On the one hand, the increase in sales confirms that consumers' demand for low-temperature yogurt is unabated, and on the other hand, it also shows that cost-effectiveness is still important for low-temperature yogurt consumption decisions. Under these two premises, there are changes in the competitive landscape of brand players. Judging from the changes in the brand concentration of the Tao platform, the concentration of the top 5 low-temperature yogurt brands has always remained in a relatively stable range of about 60% after a round of rapid contraction in the first half of 2022, and the window period for new brands to break through has narrowed.
What kind of online competition are they facing for the players in the middle of it?
From January to May 2024, among the top 20 brands of Tao e-commerce, only Younuo is a foreign brand, and the others are composed of domestic brands, including national dairy enterprises represented by Mengniu and Yili, regional dairy enterprises represented by Tianrun, Herun, Langege and Xiyuchun, as well as a new generation of consumer brands represented by Jane Eyre, Wudao and Lechun. For the latter two types of brands, low-temperature yogurt is often the key track for them to achieve differentiation and breakthrough in online channels.
It is worth noting that in the past two years, traditional dairy companies have continued to make efforts in online channels, and the mass basic plate of online low-temperature yogurt has been quickly locked. From January to May 2024, the sales growth rate of Mengniu and Junlebao under the low-temperature yogurt category was as high as 900%+ and 400%+ year-on-year respectively, and the market share increased by about 8 and 5 percentage points year-on-year respectively.
However, this does not mean that latecomers cannot be overcome. Judging from the overall performance of the brand's online sales, the new generation brands such as Jane Eyre, Wudao, and Lechun still hold their market position in Tao and Douyin e-commerce. In addition, some brands choose to compete in the channel side, such as Langege and Xuebao, which are particularly prominent on the Douyin platform. On the whole, Jane Eyre, Wudao, Kashi, Tianrun and Yili are the top 10 brands of low-temperature yogurt in Tao and Douyin e-commerce for 3 consecutive years.
2
Different price bands have different differences.
The brand starts the battle of card slots around the product
In an ever-expanding track, what are the similarities between these brands that can quickly seize and maintain market share?
Aggressive low-price strategy vs. long-term diversified layout
From a longitudinal point of view, from January to May 2024, Mengniu, Chunxiang, Xiyuchun and True Zero have risen significantly in their online rankings, and their commonality lies in the ultimate low-price strategy. Judging from the unit price per 100 grams of the hot selling items of the top brands of the Tao system from January to May 2024, these brands are concentrated in 1~3.9 yuan/100 grams, which is the absolute king of cost performance.
On the whole, the hot-selling products of traditional dairy enterprises and regional dairy enterprises represented by Mengniu (Mengniu's main brand/Guanyi Milk/Ammule/Large Fruit Yogurt/chewing yogurt), Junlebao (Jane, Chunxiang), Yili (Yili's main brand/Changqing/Old Yogurt), New Hope, Xiyuchun and other brands are mainly concentrated in the price range of 1~3.9 yuan/100 grams; The middle price band of 4~7.9 yuan/100 grams presents a situation of scuffle among all kinds of players, including foreign brands Meiji and Younuo, as well as various domestic brands, such as Mengniu's Chewing Time and Daily Fresh Cheese, New Hope's Da Vinci, Kashi, Jane Eyre, Beihai Ranch and Langege. The price band above 8 yuan is mainly based on Greece-style yogurt from Wudao, Lechun and Younuo and children's yogurt products from Jane Eyre and Custar.
Therefore, even if the online sales of Mengniu and Junlebao have skyrocketed, it has not significantly affected the market share of Jane Eyre, Wudao and Lechun, which are positioned in the middle and high price bands, because there are significant differences in the price bands of the people they lock. It is worth mentioning that Kashi and Jane Eyre are the only two brands that have a place in each price range, which is not unrelated to their diversified product matrix, from 1-3.9 yuan/100 grams of mass-sold yogurt, family yogurt, to 4~7.9 yuan/100 grams of sugar-free yogurt and probiotic yogurt, and then to 8-11.9 yuan/100 grams of baby yogurt for children, both brands have related hot products.
To a certain extent, this also shows that under the current competitive landscape of the low-temperature yogurt track, the brand's offensive way lies in a single dimension to surpass competitors (such as Jane Eyre's minimalist recipe back then, Xiyuchun's current extremely low price), and the code lies in the diversified product portfolio and consumer mental positioning formed over time.
Focusing on the three categories of products, what are the differentiation opportunities for low-temperature yogurt? Since diversified products are the inevitable way for brand development, what kind of products have a better chance of winning more rational consumers?
For low-temperature yogurt, the products on the current market can be divided into three types: stirred yogurt, coagulated yogurt and filtered yogurt according to different processes; In addition, further differentiated product design can be carried out according to factors such as whether sugar is added, whether a special fermentation process is adopted, whether a patented flora is added, whether an organic milk source is used, etc.
From the perspective of product competition, in order to seize consumers in the same price range, it is necessary to greatly surpass opponents in a certain differentiation dimension, and the current differentiated competition is mainly focused on protein content, probiotic efficacy and more non-standard taste and texture.
CBNData sorted out the keyword sales performance of low-temperature yogurt products in Tao and Douyin e-commerce from January to May 2024, and on the whole, health is still the general trend, and in terms of subdivision, the dimensions of taste, texture, packaging specifications, functional efficacy and consumption scenarios all show different specific trends. From the perspective of product taste, nuts are one of the flavor keywords with the highest growth rate since 2024, and fruity flavor has shown a year-on-year decline trend in the overall e-commerce platform. From the perspective of product functionality, probiotics, high protein, and high calcium are all keywords with positive sales growth in Tao and Douyin e-commerce, among which probiotics and high calcium on the Tao platform have increased significantly. From the perspective of product packaging specifications, barrels, bags and combinations perform well on the Douyin e-commerce platform, while on the Tao platform, sharing and barrels also show the same trend. From the perspective of consumption scenarios, breakfast is still the core scenario, and at the same time, sub-scenarios such as fitness, meal pairing, and meal replacement also have a high growth rate.
These trend keywords do not exist independently of each other, but often use a single item as a specific carrier.
For example, the main grain + yogurt mixing bowl type products are combined with meal replacement, fitness scenes, in recent years, major brands have related new products launched, combined with the demand of this group of people for high protein, Lechun, Younuo and Wudao launched Greece yogurt cereal bowls per 100 grams of unit price is higher than 10 yuan, becoming a premium in the premium.
In recent years, the health of the intestinal flora has also attracted more attention from consumers, and Custard, Jane Eyre and Meiji have all launched a variety of probiotic-added fermented milk, because such products are often bound to digestive effects, the post-meal scene is a good opportunity to combine, and this also determines that the texture of such products should not be too heavy.
For product R&D personnel, limited by food processing technology and cost control goals, deliciousness, health, and cheapness are the impossible triangles of the entire food and beverage processing industry, and product R&D has also become a process of balancing and choosing based on the preferences and needs of the target audience.
Taking protein properties as an example, generally speaking, the higher the protein content per 100 grams, the higher the price, and the filtration process is a way to achieve high protein, but this means two or three times the input of milk raw materials, so under the premise of maintaining the price, some products will choose to add whey protein powder with lower cost, but this also means that compared with the original filtered yogurt, the yogurt with protein powder will be discounted in taste, and food industry experts may balance the taste through other ingredients such as gelatin, pectin, and cream. But back to the consumer demand level, will a consumer who can read the product ingredient list and care about the protein content of yogurt accept such an excessively long ingredient list? The answers to these questions are ultimately reflected in the pricing and market performance of the product.
Pulitzer Prize-winning investigative journalist Michael · Moss, in his book "Salt, Sugar and Lipids: How Food Giants Manipulate Us", highlights the deep dependence of processed food companies on the three major ingredients of salt, sugar and lipids, and how to achieve the "blindfolding" of the processed food world through the trade-off of these three ingredients. But the business model of grabbing the market by satisfying the "bliss" of the taste buds is being challenged in an era where more and more consumers are aware of the dangers of too much sodium, sugar and fat. This is also the reason why with the extremely short ingredient list of "raw milk, lactic acid bacteria, sugar, and everything else is gone", Jane Eyre can quickly make a name for itself in the low-temperature yogurt track, and it can still maintain the head brand of the subdivision track today.
In the context of the overall expansion of the track scale, the expansion of the price band, and the expansion of diversified products, the low-temperature yogurt track has also ushered in more strong "number one players" such as Mengniu, Yili, and New Dairy. Going back to the question at the beginning, is it possible for low-temperature yogurt to bring structured growth opportunities to dairy companies that are deeply bottlenecked in the industry?
The answer is yes, under the trend of health demand, low-temperature yogurt with its own active probiotics naturally has a category advantage that room temperature yogurt does not have; Compared with milk, it has functional attributes such as being lactose intolerant, more digestible and low GI, and can adapt to the needs of a wider range of people and special scenarios, which lays a functional foundation for the development of this category. Compared with the overseas mature yogurt market, China's low-temperature yogurt market is still in the stage of undeveloped, and consumers' functional awareness and consumption habits of low-temperature yogurt still need time to establish. Greece the phenomenon of category brands such as yogurt and probiotic products has verified the market's recognition of the functional attributes of fermented dairy products to a certain extent, and yogurt with added Iceland yogurt, kefir yogurt, and various patented flora has been added...... These subdivided products with a certain threshold but more functional value are also worthy of continuous exploration by dairy companies in the future.
Source: CBNData
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