Consumers browse dairy products at a supermarket in Shijiazhuang, Hebei province, in June. JIA MINJIE/FOR CHINA DAILY
Dairy brands in China are adopting creative strategies to navigate some of the industry's emerging challenges, such as a declining birthrate, an aging population, a market traditionally dominated by shelf-stable milk products and increased consumer preference for more cold-chain products.
Sales of packaged milk products fell 2.9 percent in the first quarter compared to the same period last year, mainly due to a recovery in outdoor activities and a shift in consumer spending patterns post-COVID, according to the China Shopper Report 2024 by Bain & Co and Kantar Worldpanel.
Given the situation, it is imperative that Chinese dairy brands create new categories and discover innovative opportunities, said Yan Wei, a principal of the China health and consumer and investor support teams at global management consultancy Roland Berger.
Yan made the remarks during the Food and Beverage Innovation Forum 2024 and FBIF Food Innovation Exhibition held in Shanghai from June 25-27.
Some dairy brands have already taken steps to overcome the challenges.
Haihe Dairy, an over six-decade-old time-honored brand based in Tianjin, has, for instance, designed innovative products specifically for Gen Z consumers. The company has infused local humor and incorporated the relaxed nature of Tianjin residents to come up with offerings such as coriander and avocado-flavored milk.
Zou Yang, chairman of Haihe Dairy, credits its success to Tianjin's inherent sense of humor.
Speaking at the FBIF Forum, Zou described Tianjin as a "Florida" for China, renowned for its xiangsheng, or crosstalk comedy.
Viral moments, such as the "diving grandpa" and motorboat surfing during city floods, epitomize the unique humor and laid back attitude of Tianjin residents.
Haihe Dairy has integrated city landmarks and cultural elements into its yogurt product promotions, making "playfulness" a hallmark of its product innovation, Zou said.
"In our collaborative products, we focus on the unique characteristics of Tianjin," Zou said.
A view of Chinese cheese producer Milkground's booth during a baking expo in Shanghai in May 2023. [Photo provided to China Daily]
Haihe has partnered with Tianjin's traditional bakery, Xianghe Bobo Shop, to open five co-branded fresh milk stores in the city, using Haihe milk in baking pastries.
The company has also collaborated with the Tianjin Museum on culture-themed products and launched co-branded ice cream with the De Yun She Performance Group, known for xiangsheng performances. These collaborations have made their products iconic representations of Tianjin.
Looking ahead, Haihe Dairy plans to explore further collaborations with grilled fish brands to develop iced products and specialty milk beverages, Zou said.
"Our goal is to seamlessly integrate Haihe milk into various consumption scenarios," Zou said, adding that its products sport a playful image in order to better resonate with consumers.
Some dairy producers have chosen to innovate on taste rather than flavors.
Bai Xuedong, vice-president and co-founder of Blue Sea Dairy, said the company's focus on brand innovation is based on surprising Gen Z consumers with changes to taste.
He cited an example of its product "Haomanzu", which means "satisfied" in Chinese, a yogurt incorporating whole strawberries and grapes, differentiating it from other freeze-dried fruit yogurts on the market.
"You have to delight your consumers with something challenging, yet unexpected," said Bai.
But a change of flavor in dairy products is easily copied by competitors, she added. So, Blue Sea Dairy chose to innovate on taste, providing a deliciously luxurious experience of an entire fruit-in-yogurt product, said Bai.
The company stocks 50 metric tons of seasonal fruits a year in advance, 48 hours from picking and processing to stocking, he said.
Another player, New Raspberry Co Ltd, has also made strides in product innovation by making yogurt a replacement for meals.
Zhang Xingshi, general manager of the company, said it was inspired by the popular fruit oatmeal trend to develop its Chewy Yogurt product.
Combining yogurt with grains and freeze-dried fruits, New Raspberry has positioned yogurt as a potential meal replacement, catering to both necessity and frequent use.
Under the concept of "everything can be chewy" and light eating, New Raspberry launched mini packs of room-temperature chewy yogurt products. These 50-gram packs, containing 10 grams of grains, meet children's pre-meal dessert needs, creating new consumption scenarios, he said.
How to help Chinese consumers eat more natural cheese is what French dairy enterprise Lactalis prioritized in its work in China.
Alexandre Pasquet, general manager of Lactalis North Asia, said Chinese consumers are increasingly focusing on functional and natural dairy products. Lactalis International's leading brands include President, Lactel and Kraft.
While European children start consuming natural cheese early to meet nutritional needs, similar trends are emerging in China, Pasquet said.
Consumers check out dairy products at a supermarket in Shanghai in June 2022. [Photo provided to China Daily]
Lactalis estimates that natural cheese will gain a higher market share in China. The company is building a factory in Jiangsu province to produce natural cheese and plans to innovate Camembert cheese by incorporating Chinese elements based on local consumer preferences.
Ren Song, chief executive officer of Milkground, a leading cheese producer in China, said the company has carried out innovations through expansion of its consumer groups.
By targeting both young people and middle-aged to elderly consumers, Milkground aims to understand young people's preferences and innovate product categories.
It has upgraded cheese sticks to "Huaruo Sticks", which are low-GI(Glycemic Index) and sugar-free. The product quickly became popular among youngsters after it was launched in May, demonstrating how incorporating floral elements into cheese can resonate with young consumers' emotional needs, said Ren.
Tetra Pak, a global leading food processing and packaging solutions company, has developed many concept products, including protein functional drinks and elderly nutrition milk, based on emerging consumer needs for precise nutrition drinks and sports meal replacements in the Chinese market, said Jessie Ge, its marketing services manager APAC, at the leading food processing and packaging solutions company.
Other leading technologies include its E3/Speed Hyper filling machine, featuring e-beam sterilization technology, which is considered a new global benchmark for paper packaging filling speeds. The technology also helps reduce operational costs and enhances environmental sustainability for dairy companies.
