The cheese market in China
What are the threats but also the opportunities for dairy products producers as well as for smaller producers wishing to expand their activities into the Chinese food market ?
First of all, you should know that most of the Chinese do not like cheese, or the common cheese westerners see and eat everyday. Indeed they think it smells bad and find hard cheeses such as Gruyère or Emmental disgusting. If cheese is a tradition in France, this is simply the contrary in China.
A tourist discovering the stinky Tofu
However, more and more Chinese people would like to try new things and to taste imported products, including cheese, especially in first-tier cities such as Shanghai, Beijing or Guangzhou.
In 2011 China imported 30,000 tones of cheese (source: National Interprofessional Centre of the Dairy Economy ” CNIEL “, report on the dairy market 2012)
- Imported French cheeses in China: 800 tonnes in 2011
- French cheeses represent only 2.5% of the market shares in China (it’s pretty small)
- The Chinese cheese market increased by 22% in 2012
- Average annual growth rate: 24%
The key market players:
The main producers of dairy products in China are Chinese companies:
Nestlé is the only international group present in the top 10 !
But Chinese have just started to introduce cheese in their product offering. New Zealand, Australia and the U.S. are the three largest exporters of cheese in China. These three countries account for 80% of the market shares. France which the largest producer of cheese in the world , represents only 4 % of the market shares of imported cheeses in China.
The main exporters of cheese for China
A key issue: food safety.
Before 2006, four Chinese companies dominated the dairy market:
Bright Dairy & Food
But since the “milk scandal” in 2008, involving the company Sanlu, the Chinese dairy market structure was up side down.
In 2012, Bright Dairy & Food, based in Shanghai remains the market leader in China when it comes to cheese with 50% of market share. Its challenger of foreign origin “Fonterra Commercial Trading” is a New Zealand’s company.
The cheese offered in China is limited
The cheese distributed in China are mostly “process cheese”.
Process cheese: made from the mixing, melting and emulsifying of natural cheeses with addition of food additives and oils.
Natural cheeses: obtained by fermentation of milk and curd, butter or cream with lactic acid and pressure. They can be classified according to their consistency: soft (mozzarella, camembert etc), medium hard (Blue, Gouda, etc.), hard (Edam, Cheddar, Gruyere, Emmental etc.) or very hard (Parmesan).
Process cheese are used for cooking. Process cheese can also be used for breakfast with bread, toast, crackers or snacks. We also find process cheese in fast food and in sandwiches sold at Convenience Stores (CVS). For the moment this kind of international process cheeses that taste neutral and are easy to use match the tastes of the Chinese because they do not smell and are soft.
But unmelted cheese could get a place in the Chinese market thanks to the growing popularity with western lifestyle.
Product of Bright Dairy
Some famous brands of western cheese are present in China:
The Laughing Cow (France)
French food groups like Danone or Bongrain have invested the Chinese market by forming joint ventures with Chinese companies. It is a very Famour brand according to epermarket.
- 94% in supermarkets and hypermarkets
- 4.8% in small independent grocers
- 1.9% in other food retailers
We can also find imported cheese in hotels and upscale restaurants targeting expatriates
Supermarket is the no.1 distribution channel because it is absolutely necessary to maintain the cold chain for cheese. Many small grocers can not provide this quality service.
With the development of the Internet and new ways of consumption, it is now possible to buy your cheese online, see here for more information.
Demand for cheese is driven by two factors:
Chinese consumers looking for high quality dairy products and safe products prefer major western brands.
Lifestyles are moving towards European standards of consumption
The tastes of Chinese regarding cheese will develop gradually. Traditionally Chinese food is served with several dishes. And unlike us, Chinese don’t eat cold meal.
Regarding “process cheese” manufacturers need to innovate and launch new products to meet the growing demand for “health food.”
Cheese with additives and nutritional properties added should become popular with parents who want to provide an healthy diet to their children. For example, some brands use the argument that a lactose deficiency may delay the development of the child.
Risks and opportunities for French cheeses
French brands of cheese entered the Chinese market later than their American, Australian or New Zealand counterparts.
The Laughing Cow
The “Laughing cow” is emblematic. While this brand is the most popular cheese in the world it was not able to penetrate the Chinese market. Many factors explain this:
The price: “Laughing Cow” is more expensive than its direct competitors.
Copies: The brand “Happy Cow” which is almost a copy of “The Laughing Cow”. One package of “Happy Cow” is sold 15 yuan when a package of “Laughing Cow” is sold ¥ 25 !
Communication: Few Chinese know the “Laughing Cow” so there is clearly a lack of brand communication by Bel Group in China. Recently the brand made this campaign:
BEL Group tries to make a marketing approach that highlights the nutritional qualities of the product. BEL Group has also launched a campaign to familiarize the public with the concept of cheese snacks. But they should do much more in social media.
There should also soon have a new range of customized products to suit Chinese tastes (new flavors).
For the market segment of so called natural cheese (camembert, brie, blue, Roquefort …) niche marketing can be considered.
French wine have a good reputation in China. Many experts believe that the consumption of red wine in China will have positive externalities on the “natural cheese” market. Indeed red wine is often associated with upscale cheese.
The French Package
Like what happened in China chocolate market 10 years ago, it will take time for most Chinese population to understand cheese and like it. Similar to chocolate market again, the adaptation of the taste of cheese will be the key.
As we can see, the cheese market in China is not an easy market that requires a lot of investment of time and resources.
The Chinese consumer has not fully understood yet what cheese is. It is a challenge for European & French companies, because it is necessary to change consumer tastes.
In my opinion attractive digital campaigns will be the key factor for success in this young market.