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Brands making changes for the fast growing pasteurized milk market in China
Eight years ago, Bright Dairy put its first pasteurized milk on shelf in Shanghai and priced at CNY18 (EUR2.5), 50% higher than normal milk but the supplier was not sure if the market was ready for such products at time.
But that market has seen such a rapid growth in the past few years, as Chinese consumers’ incomes continue to increase and so does their demand for safe and quality products, especially in dairy section given the dairy safety scandals a few years ago. According to Ole, a premium supermarket format from China Resources Enterprise, the leading grocery retailer in China, sales of pasteurized milk accounted for 45% of the whole dairy section in 2014, compared to only 20% in 2013.
Now consumers have realized the benefits of pasteurized milk and more importantly they are now able to afford the more premium products. However, foreign suppliers are facing challenges in providing the products to retailers.
It comes mainly from the cost and time of logistics. For example, Japanese dairy company Meiji was selling imported pasteurized milk manufactured in Japan at the price of CNY40 (EUR5.8). But it took at least three days to transport the milk from Japan to retailers in Shanghai in cold chain, which pushed up the costs. Although, it was still selling well with the high prices, the supplier decided to build farms in China to shorten the time, cut costs and aim for the whole country. It took them two years to find a qualified farm in China but eventually they launched pasteurized milk in more cities and brought down the price to CNY20 (EUR3).
In addition to Japanese Meiji, Yonsei from Korea, Weichuan from Taiwan and Asahi from Japan have all announced aggressive plans in pasteurized milk and domestic dairy companies are also improving their technologies to capture the new trend.
In this case, these suppliers captured the change in consumers’ needs and launched new products to meet the new demand. Given increased consumption power in China and changing demographics in recent years, we are seeing new opportunities in many categories, such as fruit and beverage, where consumers look for a change in variety and quality. But it is not an easy cake. Seeing the opportunities, suppliers need to tailor their products and find a localized solution.