China’s milk market overview in 2020
According to research by Euromonitor International, China is the second largest dairy market after the United States. But it is estimated that by 2022 it will reach the United States becoming the largest dairy market in the world.
The most consumed products in China are:
- fresh milk
- powdered milk
Regarding milk market, milk scandals and increased purchasing power have increasingly exposed Chinese consumers to international brands.
In 2018, among all dairy products, milk powder imports contributed almost 70% of the value of dairy products imports to China. This is therefore by far the most consumed by the Chinese.
Chinese consumers are increasingly aware of the nutritional benefits of dairy products. Milk sales in China are expected to increase from RMB 11.95 billion (2018) to RMB 12.83 billion (2022), with an annual growth rate of 1.7%. Therefore, the size of the milk market in China has grown steadily and the opportunities for companies in this sector are manifold.
But given the strong competitiveness with local companies, foreign companies need to understand the needs of Chinese consumers, as well as ways to reach them.
Covid-19 positive impact on milk sales in China
Global data said that annual milk sales in China, which were valued at 24.2 billion in 2019, would increase gradually to 29 billion in 2023. However, following the Covid-19 impact on the milk industry, it is expected to reach 31 billion with the largest jump in sales occurring in 2020.
Therefore, despite the destruction that Covid-19 has caused to many industries, the milk industry does not seem to have felt the negative effect of the pandemic at all, quite the opposite.
The reason is very clear: Chinese consumers are more attentive to their health and recognize the benefits of this drink.
The milk market, especially the powder one is, therefore, a highly profitable market, but how to enter in this huge market? Let’s see together China’s milk market trends and how to export milk to China.
What are the trends in China’s milk market in 2020?
Plant-based milk is growing fast
In China, the plant-based market is growing fast, especially the plant-based milk sector. It is expected that it will increase to 258.3 billion yuan in 2020, accounting for 24.2% of the total market size of the beverage sector in China.
In China 82% of consumers who had consumed plant-based food, had also tried plant-based milk made of soy, rice, almond, oat or other dairy alternatives.
Soy milk was the best sell product in China, according to Euromonitor data, the annual compound sales growth of soy-milk products in the Chinese market was 9.3% from 2014 to 2018.
However, in recent years there has been growing awareness and adoption of plant-base milks amongst consumers in China. Besides soybean milk, there has been a growing demand for almond milk, peanut milk, coconut milk and walnut milk.
Therefore, it means great opportunities for brands as diversified needs lead to diversified products. The Swedish alternative milk brand Oatly has recognized the power of the market and is now a leading brand in China. To know more: OATLY: ANOTHER SWEDISH SUCCESS STORY IN CHINA
Imported milk is the most requested in China
The imported milk market leaves an obvious statement as we walk through the milk section from Shanghai’s Carrefour supermarket: half of the milk on the shelves is exported.
China accounts for 25% of the international import trade in dairy products. In 2018, the volume of imports of dairy products into China reached 2.74 million tons, with a growth rate of 7.8% year-on-year. The value of imports reached $ 10.65 billion, up 14.80% year-on-year. Dairy products imported from China include milk powder, liquid milk, cheese, etc., in which milk powder is the main part.
The main exporters of milk to china
In China, the main sources of milk imports are still concentrated in New Zealand, Australia, EU countries and the United States.
New Zealand is still the main source of imports of Chinese dairy products. Germany has gradually become China’s leading source of imported liquid milk. The United States is the main Chinese source of imported whey powder and Australia has continued to export powdered and fresh milk to China, maintaining an important place.
What are the reasons why imported milk is the most requested in China?
There are 2 major reasons:
- Chinese baby milk scandals
- Lack of self-sufficiency of Chinese milk
1-Multiple Chinese milk scandals led Chinese consumers to prefer imported milk
The baby product quality scandals have led many Chinese parents to purchase foreign milk powder products over the past twelve years. Consumer confidence in Chinese dairy products remains extremely weak. More than half of the Chinese infant formula market is dominated by foreign brands, and in some cities, the percentage reaches 80%.
Since the sensational melamine milk scandal in 2008 followed by other scandals in 2013 and 2020, Chinese citizens no longer trust their country’s production and rather choose imported milk.
In a desperate move to strengthen the domestic dairy industry, China has enacted new rules banning the import of dairy products from unregistered foreign producers.
The 2008 Chinese milk scandal
The Chinese milk scandal of 2008 was a food security incident in China. The scandal involved milk and infant formula along with other materials and food components adulterated with melamine. Of approximately 300,000 victims in China, six children died of kidney stones and other kidney damages, and around 54,000 children were hospitalized.
The Sanlu Group, one of the largest milk producers in China has been identified as the main culprit. But as the scandal unfolded, more Chinese dairy companies were involved.
Indeed, the scandal not only damaged the reputation of Chinese food exports but also dealt a devastating blow to the boom in the domestic dairy sector. The baby milk market has increased the demand for foreign products. After this scandal, over 100 foreign brands entered the Chinese market.
The 2020 new scandal in China
In May, news surfaced that a handful of children had been exposed to harmful substances caused by a new protein-based powdered milk drink. The Weibo hashtag #郴州大头娃娃事件 (Chenzhou big head baby incident) generated over 70 million views.
Powdered milk was a best-selling product tailored to children who were allergic to normal milk. Parents of five children appealed to local authorities claiming that their children suffered from eczema, severe weight loss, and rickets.
Local authorities announced that they would conduct a thorough investigation of the matter. But, The Chenzhou milk powder scandal frightened parents in China, reminding them of the 2008 melamine milk powder scandal in which over 300,000 children were suffering from kidney problems.
2-Imported milk fill up the lack of Chinese self-sufficiency
Milk production in China has steadily increased and ranked among the top in the world, but production is still unable to meet domestic demand. In such circumstances, imports are also urgently needed to meet Chinese consumer demand.
Since 2015, two major Normandy dairy companies have exported their baby milk to China: Maîtres Laitiers from the French Cotentin department and the Isigny Sainte Mère cooperative. Both can attest to their world-renowned experience in dairy products.
- In Isigny, a new unit was built at the factory to meet the demand to export infant milk powder and annually produces up to 30,000 tons of powder for its Chinese partner Biostime Pharma: an investment with positive consequences, with the hiring of a hundred additional employees and the production increase of 20% for the dairy farms supplying it. The export milk powder represents an annual turnover of 119 million Euros, nearly half of the total turnover of the cooperative.
- “Maîtres Laitiers” are not left out: they also built a new production unit to supply their Chinese partner Synutra, commissioned in 2017, which aims to deliver 690 million milk packs a year, an astronomical figure that reflects China’s lack of self-sufficiency in this branch of agribusiness.
How to export milk in China?
China export requirements for milk and dairy products include:
- Eligible/ineligible product
- Pre-export approvals by the competent authority of the importing country
- Product specifications
- Production controls and inspection requirements
- Documentation requirements
The requirements are many and very restrictive, taxes are high, so for years there have been simpler methods to export milk to China.
Daigou: a way to export milk avoiding taxes
Daigou “Surrogate Shopping” is an emerging form of cross-border exporting in which an individual or a group of exporters outside China purchases goods for consumers in China, in order to use loopholes illegally or legally to avoid import taxes imposed on goods from abroad. In fact, items brought back to China were often declared as personal items to avoid taxes.
Many Chinese parents turned to Daigou vendors for imported milk. These products are purchased from Hong Kong, Australia or abroad and brought back to the mainland to be resold at a higher price. Many Chinese parents believe that the prices, despite higher prices, are worth the quality of the product.
Covid-19 and the “New e-commerce law” create import problems for Daigou
Daigou sellers today are facing a serious problem as the Covid-19 crisis has paralyzed their ability to supply consumers. Why?
- The number of available cross-border flights has been curtailed
- sea shipments have serious logistical problems, citing an increase in delivery times and customs problems.
- China’s new e-commerce law, which came into effect at the beginning of 2019
China’s new e-commerce law
On January 1, 2019, China officially rolled out a new e-commerce law to directly regulate Daigou activities. Under the new law, all Daigou participants will be legally required to register as e-commerce operators and acquire licenses both in China and in the country in which they purchase, making their activities subject to taxation both in China and in the region in which they bought goods.
Cross-border e-commerce is a new opportunity for brands
Due to the Covid-19 crisis and the new e-commerce law, Daigou sellers could completely exit the sector, paving the way for foreign retailers and pharmacies to sell in China through cross-border e-commerce.
Due to the increase in costs and risks, more businesses could move towards cross-border e-commerce, where retailers and international brands ship the products one by one directly to Chinese consumers.
Cross border e-commerce platforms like Tmall Global, JD worldwide, Vip.com, Ymatou, and Kaola. These platforms offer brands the opportunity to:
- sell their products without having a physical presence in China,
- skipping over lengthy product registration and approval processes,
- not incurring in long paperwork to export them and avoiding inventory risks.
However, it is not so easy to create an online store on these platforms, therefore brands can find distributors or contact us as we can help you with all managing tasks.
To know more about Cross-border E-commerce: https://agency.marketingtochina.com/crossborder/
How to enter the Chinese milk market?
Work on branding and e-reputation to succeed in China’s milk market
As we said before, Chinese people distrust domestic milk and prefer to buy imported ones. However, they don’t buy whatever comes from abroad. If they don’t know the brand, they will not buy it.
It is important to spread consumer knowledge and awareness through active marketing efforts, educating consumers on the benefits of your milk, thus showing reliability. It is thus very important to create your e-reputation and brand awareness on the Chinese Internet.
Why? Because Chinese people are highly connected with the Internet, and social media play an essential role in Chinese daily lives. Chinese consumers spend a lot of time online to find potential brands and products that fit their needs. However, in China western digital platforms are banned, therefore, brands should make their marketing efforts on Chinese channels.
In addition, Chinese consumers mostly rely on recommendations from previous consumers or from people they trust, therefore it is essential for brands, to be present on forums and Q&A platforms where people can discuss product benefits.
How to create a good e-reputation in China?
There are several ways to increase your e-reputation and generate leads, you can choose one of them, but We recommend a multichannel strategy to create a strong and faster e-reputation.
Baidu SEO & PPC strategy to rank you first on the Chinese search engine
What is the first thing you do to find a company or product information? It is going on google, What about China? Google is banned in China, however, there is a solution, namely Baidu. Baidu is the main search engine for finding information in China, so the brand that wants to be recognizable among Chinese consumers should open an account on Baidu.
In addition, if you want to break into the Chinese market, Baidu SEO is a must step and a must-have. However, Baidu is really different from Google, if you want to know more, you can contact our agency GMA.
To rank, your website needs to:
- be hosted in China
- get ICP license
- be in Mandarin
Baidu knows only Mandarin and gives priorities to websites hosted in China. The website culture is different, therefore you need to adapt your content/design to the locals expectations.
Oatly knows this well because its Chinese website is hosted in China. Furthermore, as can be seen from the image above, Oatly is present on Baidu to reach Chinese consumers who cannot use google as it is banned in China.
Baidu PPC is also a great tool to use as the first step in your global marketing strategy. It gives you credibility because if you can make Baidu ads, it means you are a real brand and also bring your first visitors to your website.
In a second step, it will work great combine with a good SEO strategy. Both channels will support each other in a sustainable way.
PR & Forums create word of mouth and brand credibility
PR is one of the most cost-effective solutions. It is a basic of marketing where the right people talk about you. PR is a good way to build your credibility.
Complete your PR efforts and strengthen your credibility using forums (like Zhihu) and KOLs to talk about you. KOLs and communities are powerful and widely listen to the Chinese internet, in fact, their opinion matters the most.
Zhihu is the best place to find advice for milk in China
Zhihu is an amazing channel for Chinese people that want to find recommendations for products from other people and, at the same time is important for brands to explain product benefits.
Zhihu is a Chinese question-and-answer site like Quora. On Zhihu, questions are created, answered, edited, and organized by its users. In Classical Chinese, “Zhihu” means “Do you know.”
Thanks to additional functions developed by Zhihu, users can also:
- Write articles
- Participate in discussions
- Read e-magazines containing the best answers related to certain industries
- Give an online presentation about a specific topic
- Interact with an audience in real-time
Companies can develop:
- Q&A Campaigns (Answering questions, brands can establish a relationship with users and build their reputation this way. It allows them to promote themselves and introduce their products)
- KOL Endorsements to enhance a brand’s image and reputation (brands can invite experts or key opinion leaders to answer questions for them. Answering questions on Zhihu allows them to showcase their expertise and connect with both industry experts and general users)
- Zhihu Live (it allows brands to conduct online presentations on specific topics. Brands can have opportunities to provide in-depth knowledge and communicate with users in a more direct way)
- In-Depth Articles (Brands can publish long-form content to gain credibility in their industry which is highly valued by people in that industry)
For example, in the image below you can see how Oatly is using Zhihu account to explain benefits of its plant-based milk products.
KOLs are a good way to influence Chinese consumers to buy your product
KOLs are always a great way to influence Chinese consumers to buy your products as they are seen as more loyal than the company’s advertising campaigns. They are also important in the milk sector as they offer consumers an example of a healthy living.
However, if a company wants to collaborate with KOLs, it must be very careful in its choice as not all KOLs are reliable and produce results for companies.
Is the right KOL for my brand? Is it in line with my core business and are its followers my target market? His followers are true or not? These are all questions that are difficult to answer. This is why GMA is here to help you choose the right KOL for your brand image.
In the following image, you can see how Oatly is collaborating with KOLs for its marketing campaigns in China.
Social media in China are the best place to work on your branding and storytelling
Chinese people spend a lot of time on social media doing many things like, chat with friends, create videos, buy products and others, however, what is important for brands is that Chinese people go on these channels also to:
- obtain information about products and brands
- obtain suggestions from other people,
- learn how to use a product
- discuss their opinions and experience
As they spend time on these platforms, it means that these are the best places where to put your marketing efforts, therefore brands should open an account and then interact with Chinese consumers posting advertising, articles, news, images, and so on. Of course, you should localize your content and understand Chinese consumer’s behavior and culture before doing your marketing campaign on these platforms.
On these platforms brands can:
- interact with users
- teach how to use products
- show what are the benefits of products
- show the brand’s value and products
- increase brand awareness
- increase brand loyalty
- see what Chinese people like and don’t like
- see what consumers’ needs are and how to solve them
- sell products thanks to payment systems and links to e-commerce platforms.
The most used social media in the Chinese digital world for milk are Wechat, Weibo, and Xiaohongshu. To reach all these benefits a brand should open a verified account on these platforms, create post or short-video about the company’s value and products, communicate with consumers.
This is exactly what Oatly is doing on its Wechat, Xiaohongshu, and Weibo accounts.
From how you can guess in the previous image, for example, Oatly is using these platforms to entice consumers through:
- the use of its products as a new healthy lifestyle,
- the use of recyclable and therefore eco-sustainable products,
- promotion of all its oat milk products,
- education on how best to use its products in daily life.
GMA IS YOUR PARTNER TO EXPORT MILK TO CHINA
Gentlemen Marketing Agency is a digital marketing agency that is expert in helping foreign companies to establish or strengthen their position in China. We can help your brand increase sales in China, thanks to our services like:
- Baidu SEO&SEM
- Social Media
- KOL & Influencers
- E-commerce and cross-border e-commerce