Overview

  • From 2012 to 2017, China’s yogurt sales more than doubled, reaching USD 16.95 billion (CNY 119.2 billion)
  • China’s yogurt market is dominated by three listed companies (combined 63% market share in 2018): Inner Mongolia Yili Group (SHA:600887), China Mengniu Dairy (HKG:2319), and Bright Dairy & Food (SHA:600597)
  • Shelf-stable yogurt products have shown remarkable market growth, with Yili Group’s “Ambrosial Greek Yogurt”, Mengniu Dairy’s “Mengniu Pure”, and Bright Dairy’s “Bright Momchilovtsi” products leading the way

Yogurt Sales

China’s yogurt market has seen exceptional growth in recent years. From 2012 to 2017, yogurt sales in mainland China increased from approximately USD 8.14 billion to USD 16.95 billion, or by 108%. On average, Chinese yogurt sales increased at an annual rate of 17.4%. One factor that contributed to this rise in sales was increased urbanization. In 2012, yogurt accounted for approximately 30% of dairy consumption[1] in China’s tier-1 cities and roughly 25% of dairy consumption in its provincial level cities. The urbanization of China has steadily increased over the years. From 2006 to 2016, the percentage of its population living in urban centers of more than 1 million increased from 19% to 25%. Based on these figures, the per capita yogurt consumption of China’s urban population was significantly higher than their rural counterparts. An increase in urbanization enables e-commerce market connectivity and wider distribution channels for yogurt products.Though, as of 2015, online sales of yogurt only accounted for approximately 4% of its total sales.  Convenience stores, a key yogurt distributor, were also able to take advantage of rising urbanization. From 2015 to 2016, Chinese convenience stores’ revenue increased from CNY 118.1 billion to CNY 133.4 billion (~USD 18.2 billion to ~USD 19.3 billion) or by 13%, while the number of stores[2] rose from 91,000 to 98,000 (or by 9%).

Among the different yogurt products available in China, room-temperature (常温酸奶) or shelf-stable yogurt has seen the strongest market growth. Room-temperature yogurt refers to pasteurized heat-treated yogurt that is shelf stable. From 2015 to 2018 (estimated), Chinese sales of shelf-stable yogurt increased from approximately USD 2 billion to USD 4.3 billion, or by 117%. Shelf-stable yogurt is popular in China for multiple reasons. First, the food safety risk for any type of bacterial contamination is minimized through its production process. Second, its shelf-stable nature allows for greater market penetration into towns and cities that lack adequate cold chain logistics. Third, this format of yogurt lends itself to China’s gift-giving culture, where family members and coworkers can give yogurt during the country’s high holidays. As of 2017, the dairy companies of Inner Mongolia Yili Group (SHA:600887), China Mengniu Dairy (HKG:2319), and Bright Dairy & Food (SHA:600597) had a combined share of the shelf-stable yogurt market of 70%. Yili Group’s “Ambrosial Greek Yogurt” (安慕希希腊酸奶), Mengniu Dairy’s “Mengniu Pure” (蒙牛纯甄), and Bright Dairy’s “Bright Momchilovtsi” (光明莫斯利安) are the leading shelf-stable yogurt products.

Chinese sales of traditional low-temperature (低温酸奶) yogurt also recorded strong growth.  From 2015 to 2018 (estimated), Chinese sales of low-temperature yogurt increased from approximately USD 3.8 billion to 5.3 billion, or by 37%. Despite the net growth in sales, low-temperature yogurt’s overall share of China’s yogurt market has been in decline. Over the same period, low-temperature yogurt’s market share decreased from 68% to 47%. In general, low-temperature yogurt is more nutritional and healthier when compared to shelf-stable yogurt. However, the latter’s longer shelf life and better digestibility among consumers has spurred its market share at the expense of low-temperature yogurt.

ChinaAg estimates that sales of yogurt beverage (probiotic) drinks in China totaled USD 4.7 billion in 2017. This figure translates into a 28% share of China’s total yogurt market. Compared to Hong Kong (46%) and Japan (59%), yogurt drinks in China are underperforming and have the potential for strong market growth.

Yogurt Companies

In 2018, Inner Mongolia Yili Group (SHA:600887), China Mengniu Dairy (HKG:2319), and Bright Dairy & Food (SHA:600597) accounted for an estimated 63% of China’s total yogurt market sales. Inner Mongolia Yili Group (SHA:600887) had the largest market share at 27%, and was followed by China Mengniu Dairy (HKG:2319) and Bright Dairy & Food (SHA:600597) at 21% and 15%, respectively. After these three companies there was a huge drop off. Xinjiang Tianrun Dairy (SHA:600419) and Shijiazhuang Junlebao Dairy both had a 3% share of the yogurt market.

From 2012 to 2017, the number of yogurt patent applications in China rose from 422 to 818. Chinese yogurt patent applications peaked in 2016 at 1,152. As of April 2018, Yili Group (197), Mengniu (140), and Bright Dairy (78) had submitted the most yogurt patent applications.

 

Tier 1 – Yogurt Companies (Over 10% Market Share)

Bright Dairy & Food, subsidiary of Bright Food Group (SHA:600597): http://www.brightdairy.com/

  • Industry: Dairy (Milk, Infant Formula, Yogurt, Cheese, Beverages)
  • Headquarters (Est.): Shanghai (2006)
  • Chinese Name: Guangming (光明) means “bright”
  • Summary: Bright Dairy & Food, a Shanghai-based subsidiary of Bright Food Group, produces pasteurized milk, fresh milk, yogurt, ultra-high heat pasteurized milk, milk powder, butter and cheese, and fruit juices. It is one of the largest dairy production and sales companies in China. Bright Dairy produces and distributes a variety of yogurt products including its name brand strawberry yogurt (260 gr) and peach yogurt (260 gr), as well as its ‘Changyou’ (畅优, aka “smooth excellence”) brand of yogurts (100 gr, 180gr). The company also markets yogurt to children thru its Thomas the Tank Engine branded ‘Jianneng’ (健能, aka “healthy energy”) yogurts (100 gr). Bright Dairy also manufactures probiotic and fermented milk beverages.

China Mengniu Dairy (HKG:2319): http://www.mengniu.com.cn/

  • Industry: Dairy (Milk, Ice Cream, Infant Formula, Yogurt, Cheese)
  • Headquarters (Est.): Hohhot, Inner Mongolia Region (1999)
  • Chinese Name: Mengniu (蒙牛) means Mongolian milk
  • Summary: China Mengniu Dairy (HKG:2319) is one of the leading dairy product manufacturers in China, with “MENGNIU” as its core brand. In addition to milk, the company also produces and distributes ice cream, infant formula, yogurt, and cheese. The company was the only Chinese dairy to be a sponsor of the 2018 FIFA World Cup Russia. Its yogurt portfolio includes ‘Chunzhen’ (纯甄, aka “pure”), a high-end brand of cheese, vanilla, avocado, mango, and plain flavored yogurts (200 gr). The company also manufactures tea and fruit flavored probiotic yogurt drinks (340 ml)

Inner Mongolia Yili Industrial Group (SHA:600887): http://www.yili.com/

  • Industry: Dairy (Milk, Ice Cream, Infant Formula, Yogurt)
  • Headquarters (Est.): Hohhot, Inner Mongolia Region (1956)
  • Chinese Name: Yili (伊利)
  • Summary: Inner Mongolia Yili Group (SHA:600887) traces its roots back to 1956 when it operated as a dairy cooperative in Hohhot, Inner Mongolia Region. In 1993, the company was restructured as Yili Group and began its ice cream operations. Currently, Yili produces milk, milk beverages, sorbet, ice cream, milk powder, milk tea powder, yogurt, and cheese. In November 2016, Yili Group announced a profit increase (20.69% year-on-year) during the first three quarters (January to September) of 2016. Yili Group attributed part of its profit increase to sales of its Ambrosial high-end yogurt (Greek yogurt product). In May 2017, Yili Group attempted to acquire Stonyfield (U.S. yogurt producer) from France’s Danone for approximately USD 850 million. Danone ended up selling Stonyfield to their compatriots Lactalis (French dairy company).
  • 2018 Yili Scandal Timeline
    • Late 2017 to early 2018: Chairman and president of Yili Group, Pan Gang (潘刚), reportedly managing Yili Group from the U.S.
    • Late March 2018: Pan Gang goes missing and was rumored to have been arrested after returning from the U.S. to China. Chinese authorities would eventually report that Pan Gang was hospitalized and receiving treatment for a heart condition at an unspecified location. Meanwhile, two Chinese journalists reported that Pan Gang was being detained and investigated by the government. These journalists would subsequently be arrested for “spreading rumors”.
    • March 20 to 28: Yili Group’s stock price drops -13% (CNY 30.87 to CNY 26.93 per share).
    • April 8 to 11: Pan Gang missed a scheduled speaking engagement at the Boao Forum for Asia on Hainan Island, southern China. President Xi Jinping gave the opening speech at the forum.
    • April 25 to May 4: Yili Group’s stock prices fall -17% (CNY 29.75 to CNY 24.83 per share).
    • Late May 2018: Pan Gang made his first public appearance since his disappearance. Consequently, Yili Group’s stock price rebounded to a high of CNY 31.03 (~USD 4.47) per share.
    • October 24: The two journalists who were originally arrested in March were sentenced to short jail terms (8 months to 1 year). On the same day, Yili Group published an article on its company website criticizing its former chairman, Zheng Junhuai (郑俊怀), who ran the company from 1993 to 2004. In the letter, Yili Group asked the government to investigate him for financial crimes. Zheng Junhuai had already been arrested in late 2004 for misuse of company (Yili) funds. He served three years in prison before being released in 2008 for good behavior. Since 2015, Zheng Junhuai has been the chairman of the dairy company Heilongjiang Hongxing Group Food (黑龙江红星集团食品有限公司).
    • October 22 to 29: Yili Group’s stock price has plummeted -21% (CNY 26.49 to CNY 21.04 per share).

 

Tier 2 – Yogurt Companies (Above 1% Market Share)

Shijiazhuang Junlebao Dairy: http://www.junlebaoruye.com/

  • Industry: Dairy (Milk, Infant Formula, Yogurt)
  • Headquarters (Est.): Shijiazhuang, Hebei Province (1995)
  • Chinese Name: Junlebao (君乐宝) means “royal joyous treasure”
  • Summary: Shijiazhuang Junlebao Dairy is a subsidiary of China Mengniu Dairy (HKG:2319). In September 2013, the company signed a strategic cooperation agreement COFCO Group, China’s leading state-owned food processing holding companies. Junlebao’s yogurt product line includes strawberry, peach, red jujube date, old style, calcium enriched, sugar free, and plain original flavor. Yogurt product sizes range from 90 gr, 100 gr, 139 gr and 150 gr containers.

Xinjiang Tianrun Dairy (SHA:600419): http://www.xjtrry.com/

  • Industry: Dairy (Milk, Yogurt)
  • Headquarters (Est.): Ürümqi, Xinjiang Region (1992)
  • Chinese Name: Tianrun (天润) means “daily profit”
  • Summary: Xinjiang Tianrun Dairy is known for its yogurt beverages and reportedly has an annual production capacity of 500 MTs. The company has been traded on the Shanghai Stock Exchange’s Main Board since 2013

 

Tier 3 – Yogurt Companies (1% Market Share or below)

Beijing Sanyuan Foods (SHA:600429): http://www.sanyuan.com.cn/

  • Industry: Dairy (Milk, Infant Formula, Cheese, Beverages, Yogurt)
  • Headquarters (Est.): Beijing (1997, roots to 1957)
  • Chinese Name: Sanyuan (三元) or “ternary” which means composed of three parts. Under the former Chinese imperial civil service examination system there were special honorary titles bestowed at three levels. Collectively known sanyuan, they included winners of the provincial level, national level, and Imperial Palace level (highest honor).
  • Summary: Sanyuan was the only major dairy that was not implicated in the 2008 melamine scandal. The company’s yogurt product portfolio includes low-temperature and room-temperature yogurts. Its low-temp yogurt flavors (200 gr) include sugar-free, plain, honey, strawberry, peach, red jujube date, fuling (Poria coccus, an edible fungus often used as an herbal medicine), Docosahexaenoic acid (DHA, an omega-3 fatty acid). Its room-temp yogurt (200 gr) is an Icelandic (Skyr) yogurt that is shelf-stable for 180 days. The company also sells a probiotic yogurt drink, as well as a home-style plain yogurt (both products are 200 gr).

Fortune Ng Fung Food (SHA:600965): http://www.fucheng.net/

  • Industry: Meat (Beef, Lamb, Sausage, Duck), Dairy (Milk, Yogurt), Processed Food, Retail (Restaurants)
  • Headquarters (Est.): Langfang, Hebei Province (1998)
  • Summary: Fortune Ng Fung Food produces and distributes strawberry flavored yogurt drinks. The company has been traded on the Shanghai Stock Exchange since July 2004

Fujian Haocaitou Food: http://en.haocaitou.com/

  • Industry: Beverages (Yogurt, Water), Processed Food (Candy, Baked Goods)
  • Headquarters (Est.): Jinjiang, Fujian Province (1985)
  • Chinese Name: Haocaitou (好彩头) means “very lucky (in business)”
  • Summary: In February 2016, Fujian Haocaitou Food opened a new factory in Guizhou Province, southern China. The factory’s product line included yogurt drinks, pastries and candies. The company’s yogurt drinks are marketed as probiotic beverages and are sold in 100 ml and 330 ml containers. Fujian Haocaitou Food was listed on the Tianjin Equity Exchange in June 2012.

Guangdong Wenshi Food (SHE:300498): http://www.wens.com.cn/

  • Industry: Meat (Poultry, Pork), Dairy (Milk, Yogurt)
  • Headquarters (Est.): Yunfu, Guangdong Province (1983)
  • Chinese Name: Wenshi (温氏) means “Wen’s family (or clan, kinsfolk)”. The company was started by Wen Pengcheng (温鹏程)
  • Summary: Guangdong Wenshi Food produces and distributes a variety of yogurt products including low-temperature yogurt and beverages. The company sells a red jujube date flavored yogurt and has been traded on the Shenzhen Stock Exchange since November 2015.

Guangdong Yantang Dairy (SHE:002732): http://www.yantangmilk.com/

  • Industry: Dairy (Milk, Yogurt)
  • Headquarters (Est.): Guangzhou, Guangdong Province (1956)
  • Chinese Name: Yantang (燕塘) means “Hebei Pond”, with the first symbol being the ancient name for Hebei Province
  • Summary: Guangdong Yantang Dairy produces and distributes a variety of yogurt products including sea salt cheese (also with lemon) and strawberry flavored yogurt. Guangdong Yantang also sells plain flavored yogurts. The company has been traded on the Shenzhen Stock Exchange since December 2014

Huaxia Dairy Farm: http://www.wondermilk.cn/; http://www.huaxiadairyfarm.cn/

  • Industry: Dairy (Milk, Yogurt, Ice Cream)
  • Headquarters (Est.): Sanhe, Hebei Province (2004)
  • Chinese Name: Huaxia (华夏) is the ancient name for China
  • Summary: In 2011, Huaxia Dairy Farm received a USD 30 million investment from Olympus Capital (Hong Kong-based PE firm) and had received a total of USD108 million from Olympus by mid-2014, making Olympus Capital its largest shareholder. Other notable investors include Mueller Milch Management (Switzerland), GIC Private Limited (Singapore), and Grand River Capital (Texas, USA). In 2015, Huaxia had three dairy farms with a total daily production capacity of 220 tons of raw milk, the bulk of which was sold to China Mengniu Dairy (HKG:2319). It should be noted that Huaxia Dairy Farm is a subsidiary of China Genetics Holdings, which in turn was acquired by Inner Mongolia Saikexing Breeding and Reproductive Biotechnology (Group). Saikexing is a subsidiary of China Mengniu Dairy (HKG:2319). Huaxia Dairy Farm does market its own brand of high-end dairy products such as Wondermilk and Wonderyogurt.

Hunan Jinjian Cereals Industry (SHA:600127): http://www.600127.cn/

  • Industry: Grains (Rice), Edible Oil (Rapeseed Oil, Rice Oil), Dairy (Peanut Milk, Yogurt), Noodles
  • Headquarters (Est.): Changde, Hunan Province
  • Chinese Name: Jinjian (金健) means “golden health”
  • Summary: As of early 2016, Hunan Jinjian Cereals Industry was primarily known for its “Jinjian” rice products

Lanzhou Zhuangyuan Pasture (HKG:1533): http://www.lzzhuangyuan.com/

  • Industry: Dairy (Milk, Yogurt)
  • Headquarters (Est.): Lanzhou, Gansu Province (2000)
  • Chinese Name: Zhuangyuan (庄园) can mean “estate”, “manor”, or “farm”
  • Summary: As of early 2016, Lanzhou Zhuangyuan Pasture had dairy facilities in Gansu Province, Qinghai Province, and Ningxia Region

Qinghai Xiaoxiniu Dairy: http://www.xxnry.com/

  • Industry: Dairy (Milk, Yogurt)
  • Headquarters (Est.): Xining, Qinghai Province (2002)
  • Chinese Name: Xiaoxiniu (小西牛) means “little western cow”, a likely reference to its location in western China
  • Summary: In January 2014, Qinghai Xiaoxiniu Dairy, a company known for its “Qinghai-Tibet” branded yogurt series and fresh milk products, received an USD 8.25 million investment from Tiantu Capital (Shenzhen-based PE firm). Its yogurt product line includes 100 gr and 140 gr containers of cherry, peach and oats, qingke barley (grown in Tibet and Qinghai), and plain original flavor.

Royal Group (SHE:002329): http://www.gxhsry.com/

  • Industry: Dairy (Milk, Yogurt), Beverages (Apple Vinegar)
  • Headquarters (Est.): Nanning, Guangxi Region (2001)
  • Summary: Royal Group has been traded on the Shenzhen Stock Exchange since early 2010

 

Yogurt Imports

Mainland China’s yogurt imports have grown exponentially in recent years. From 2014 to 2017, mainland China’s yogurt[3] imports increased from 3,945 MTs to 28,188 MTs, or by 614%. Equivalent import values rose from USD 13.8 million to USD 53.1 million, or by 284%. China’s import supply network is dominated by Germany. In 2017, Germany accounted for 81% of China’s yogurt imports by volume. The next largest suppliers were Spain (5% of imports), Poland (3%), and Austria (3%).

Unlike mainland China, Hong Kong’s yogurt imports have been relatively flat. From 2014 to 2017, Hong Kong yogurt imports rose slightly from 7,188 MTs to 7,440 MTs, or by 4%. Equivalent import values rose from USD 25.8 million to USD 26.4 million, or by 2%. Hong Kong’s import supply network is fragmented. In 2017, Switzerland and Austria accounted for 17% and 14% of Hong Kong’s imports by volume. The next largest suppliers were the United Kingdom (12% of all imports), Thailand (12%), and Germany (9%).

Cold Storage Capacity

China’s cold storage infrastructure has rapidly expanded in line with yogurt sales growth patterns. From 2013 to 2017, the country’s cold storage capacity nearly doubled from 24.1 million metric tons (MTs) to 47.7 million MTs. Equivalent cold storage space rose from 60.2 million cubic meters to 119.3 million cubic meters. The rise in cold storage capacity was necessary as China’s infrastructure lagged behind those found in the U.S. and Japan. In 2015, the cold storage capacity of the U.S. averaged 0.36 cubic meters per capita on average, while Japan’s averaged 0.33 cubic meters. Far behind was China, with an average cold storage capacity of 0.07 cubic meters per capita. The building up of its cold storage network benefited Chinese logistics companies. From 2014 to 2015, China’s top 100 cold chain logistics companies saw their revenue increase 17.3% to CNY 17.38 billion (USD 2.52 billion).

Despite the improvements to its cold storage network, China’s cold storage logistics market is still dominated by refrigerated road transport. In 2008, China had approximately 30,000 refrigerated trucks. By 2014, this figure had jumped to more than 79,000. In 2015, the number of refrigerated trucks peaked at 99,663 before falling to 74,587 in 2017.

 

[1] Tier-1 cities include Bei-Shang-Guang (北上广), or Beijing, Shanghai, and Guangzhou. Dairy consumption included shelf-stable milk (常温白奶), flavored milk (调味奶), milk beverages (中性乳饮料), lactic acid drinks (乳酸饮料), refrigerated milk (冷藏奶), and yogurt (酸奶).

[2] Major convenience store chains in China include 7-Eleven (Japan), FamilyMart (Japan), Lawson (Japan), Ministop (Japan), Shanghai Kedi Convenience Store (China), Shanghai Lianhua Quik Convenience Stores (China), Suguo Supermarket (China), Alldays (aka 好德, China), and Buddies (aka 良友, China).

[3] HS Code 040310: Dairy produce; yoghurt, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa

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