Despite a long and lesser known history of milk consumption, the average consumption of dairy products in China is still much lower than that of most developed countries. However, it has experienced a steady increase in a very short time and it's already showing signs of “Premiumization”, namely the tendency of consumers to progressively choose Premium products rather than "normal" ones.
The difference between the two lays in three aspects: the services provided are better, quality standards are higher and /or price is higher. Citing Silverstein and Fiske's Luxury for the Masses, premium products "possess higher levels of quality, taste and aspiration than other goods in the category but are not so expensive as to be out of reach".
We shouldn't forget that one of the current goals of Chinese Government is to develop and upgrade domestic consumption, whose contribution to GDP is increasing every year.
It is thus no surprise that the keywords of the 13th five year plans included "Digging rural consumption potential", "expanding service consumption", "supporting new consumption"(Green, Fashion, Premium) and "driving click and mortar(o2o) consumption mode".
Food is obviously a part of this, and it is increasingly being seen as a way to affirm economic status and as a health-bearer; furthermore, increased consumers' consciousness is leading to higher concerns on food safety, health and environment and to the diffusion of gourmet culture. Dairy producers know that customers are more and more aware of technical and functional aspects of food production, and that they want to satisfy their emotional needs as well.
Looking at statistics, the chinese market appears very diversified as probiotic drinks, drinking yoghurt and vegetable milk occupy a market share bigger than the world average one. Foreign company should keep this in mind.
Yoghurt products are the ones growing more, with the value of low temperature milk products generally rising faster than UHT ones, but the real drivers of market expansion are premium and innovative dairy products.
This is rather well aligned with some noteworthy worldwide tendencies like Dairy 2.0, "Snackification" and the diffusion of natural, traditional and high protein products.
It all started approximately 20 years ago, when the dairy industry started to create innovative produces based on the premise that whole fat dairy products were not healthy. Low fat cheeses and yoghurts and, later on, probiotic drinks were the outcomes of these companies' R&D departments. Recently, some of the scientific claims those products were based on were proven to be false and dairy companies switched to natural, full-fat products inspired by traditional ones. One of the most famous success stories of the Dairy 2.0 revolution are the pacific invasion of USA market by Greek Style Yoghurt (Chobani brand followed by Danone Oikos to name a few), the spread of “exotic” dairy like Quark, Skyr and Cottage Cheese and the popularity of Ryazhenka or brown yogurt.
Given the still uncharted market expansion potential of Dairy in China and the degree of differentiation and versatility that international companies have reached, this is the right moment to set up market entry strategies for premium dairy products.
A consumer market the size of China has a lot of room for premium dairy and its characteristics might foster new contributions in terms of innovation and research, but this moment won't last forever!
Accessing this huge market straightaway means that all the hardship one will encounter dealing with chinese legislative and regulatory system will be compensated by brilliant results in the medium and long run. Get a move on!
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