The yogurt industry is already a red ocean, but the battle for niche ecosystems in the 'low-temperature zone' seems to be timely. The consumer market has once again witnessed a long-awaited capital frenzy. On March 25, Jane Yogurt (hereinafter referred to as "Jane") announced the completion of a total 800 million yuan Series B financing round. Existing shareholders Matrix Partners China, Black Ant Capital, CITIC Agricultural Fund, and麦星投资 continued to increase their stakes, while new shareholders included Sequoia Capital China, Yunfeng Capital, Proterra Investment Partners, and DCP Capital. Jane is positioned as a high-end low-temperature yogurt brand in China, with主打 products featuring differentiated selling points such as 0 sugar, 0 additives, and functional benefits to cater to current demand changes. Official data shows that in 2020, Jane's sales increased by over 70%. As of December 2020, Jane's compound annual growth rate over the past five years was 109%. In fact, low-temperature yogurt represented by Jane is just a microcosm of the ups and downs in the yogurt track. Data shows that in recent years, the e-commerce growth rate of low-temperature milk has been fast, exceeding 150%. The "Low-Temperature Milk Trend White Paper" indicates that the growth rate of the low-temperature fresh milk category is nearly 10 times that of the dairy industry. Sales of low-temperature dairy products featuring "air direct delivery" on Tmall have grown by over 150%. It is estimated that the potential customer base for low-temperature milk will reach over 30 million. At the same time, more and more new brands are innovating products in new scenarios and attempting to cater to the needs of a new generation of young consumers with differentiated selling points. The yogurt industry is already a red ocean, but the battle for niche ecosystems in the 'low-temperature zone' seems to be timely. -01- History: Room Temperature Dominance, Oligopoly Rule The commercial history of yogurt in China can be traced back to the early 20th century, with a history of 110 years. In 1911, the Shanghai Kedi Milk Company, founded by British merchants, produced the first batch of yogurt in China using machines. At that time, when foreign powers were dominant and the country was plagued by internal and external troubles, these imported delicacies were only circulated among the elite of the upper class. It was not until after the founding of the People's Republic of China that yogurt truly penetrated the mass market and took root in local commerce. In the 1950s, in Beijing, Shanghai, Guangzhou, Tianjin, and other places, packaged yogurt produced by state-owned dairy factories began to be supplied in small quantities, but due to low production, it was difficult to popularize. After the reform and opening up, dairy factories in various regions achieved substantial leaps in yogurt processing technology through cooperation with foreign enterprises. The set yogurt produced by Beijing Milk Factory (the predecessor of Sanyuan), Shanghai Milk Company, and Guangdong Milk Company (the predecessor of风行乳业) was the representative of "glass bottle yogurt" in the 1980s. The uniform design of "white bottle body + paper headscarf" was frozen into a memory of an era, so much so that even today, the public can find commercial memories from 40 years ago in the nostalgic "scams" of various "city old yogurt." In the 1990s, with the deepening of reform and opening up, the thin and delicious "stirred yogurt" emerged during the restructuring of dairy enterprises. In 1988, Danone launched the first yogurt with a straw in Guangzhou, and this innovative product captured 60% of the local market share within two years of its launch. In addition to product form innovation, the packaging forms of yogurt also began to diversify, with representative examples being百利 packaging and Tetra Pak packaging. Junlebao, founded in the 1990s, opened up the active yogurt market through百利 packaged yogurt in its early years, and its market share once ranked first in the field. Another important type of yogurt packaging—the gable top (also known as fresh house)—also stood out in the market due to its elegant appearance and good display effect, with dairy companies such as Bright, Junlebao, and Tianyou being loyal supporters of this type of packaging. From the reform and opening up to the new millennium, the domestic yogurt market was truly flourishing. During this period, dairy companies such as Bright, Wondersun, Yili, Sanyuan, and Tianyou each dominated their regions, but the seat of a national brand remained vacant. This situation changed after China's accession to the WTO. The decade from 2000 to 2010 was a brilliant period for Yili and Mengniu. Relying on the unique advantages of Inner Mongolia's grasslands as a milk source, the two dairy giants used room-temperature white milk as their product fulcrum and spread their sales channels across the country. In the yogurt field, Yili and Mengniu contributed products such as large fruit pieces, yogurt with topping packets, probiotics, and Guanyi Milk, which focused on taste and function. When they spread across the country along the developed sales channel network, the domestic yogurt field officially entered the "duopoly" era led by Yili and Mengniu. By 2010, the revenues of Yili and Mengniu had both reached approximately 30 billion yuan. In the "post-oligopoly" era where business scale was no longer in doubt, the only thing that caused a stir was Bright's launch of "Mozzarella" in 2009. Mozzarella is the most famous pioneering work of domestic "high-end room-temperature yogurt." Among them, "high-end" means high price, high gross margin, and easy to occupy gift-giving scenarios; while "room temperature" means no need for cold chain cooperation, low cost, and strong penetration. Data shows that over 70% of room-temperature yogurt sales are concentrated in prefecture-level cities, county-level cities, county towns, and townships, and it has spawned single products with sales of over 10 billion yuan. Facts have proven that the emergence of Mozzarella indeed brought huge benefits to Bright—the product not only exceeded 10 million yuan in sales in the first month but also remains a star product with annual sales of billions of yuan for the group to this day. Not only that, Mozzarella single-handedly opened up a room-temperature yogurt market of tens of billions of yuan for Chinese yogurt. Bright's blockbuster effect was so successful that it made others "envious." At the end of 2013, dairy giants Mengniu and Yili successively launched their own benchmark products: "Chunzhen" and "Ambrosial." Subsequently, with crazy channel expansion and marketing hype, Mengniu and Yili caught up, and by 2018, Ambrosial and Chunzhen had market shares of 45% and 31%, respectively, surpassing the "originator" Mozzarella's 19%. Although at the juncture of the three-way split among Ambrosial, Chunzhen, and Mozzarella, there were also concepts such as the earliest additive-free yogurt and light yogurt stirring things up, these categories could not overshadow the limelight of room-temperature yogurt. Data shows that in 2017, room-temperature yogurt surpassed low-temperature yogurt to become the largest category in the yogurt market; in 2019, the market sales of room-temperature yogurt even approached the sum of low-temperature yogurt and lactic acid bacteria beverages. With the boost of room-temperature yogurt, the market size of domestic yogurt was also pushed to an unprecedented height. In September 2017, the sales of Chinese yogurt reached 122 billion yuan, a year-on-year increase of 18%, surpassing pure milk for the first time. At the same time, the success of room-temperature yogurt further consolidated the leading position of the duopoly of Yili and Mengniu. By 2019, Yili and Mengniu had captured 74% of the market share in the room-temperature yogurt field. But even the most solid market structure always has cracks, and the latecomers that sprout in the cracks are precisely the surprises of the business world. -02- Cracks: Low-Temperature Era, New Products Break Through The cracks appear in the low-temperature yogurt field. On the one hand, low-temperature yogurt is a long-term trend, and the improvement of the cold chain and the trend of consumption upgrading make the low-temperature yogurt market more development potential. On the other hand, the concentration of low-temperature yogurt is not as high as that of room-temperature yogurt, which also creates certain conditions for startups to emerge. Based on this, many emerging brands have begun to take the lead in segment markets. Lepure, founded in 2014, chose to enter the track of thick low-temperature "Greek yogurt." With its texture that doesn't spill when the cup is turned over, the concept of nutrition without additives, and the delicious taste and packaging loved by young people, Lepure, a dark horse brand, was able to leap up when it launched in 2015, once setting a record of selling 30,000 boxes of yogurt in 8 hours. On the basis of Lepure's natural health, Guangzhou Pucheng Dairy Co., Ltd., established in the same year, further added the concept of "low sugar/no sugar" "naked yogurt" to its main low-temperature dairy brand Jane. This product takes "ultimate purity" as its core, and on the packaging, it highlights the product's characteristics and philosophy with the label "raw milk, sugar, lactic acid bacteria, nothing else." Since its establishment, Jane's average annual growth rate has been as high as 155% , and in premium supermarkets, Tmall, and new retail channels represented by Hema Fresh, Jane has become the best-selling low-temperature yogurt brand. It is not difficult to see that high-end, fashionable, and 0-additive are the mainstream of contemporary consumption concepts, and they have naturally become the keywords for emerging yogurt brands to explore the market. In recent years, the "认养一头牛" and the yogurt brands under Genki Forest, "每日清体" and "北海牧场," have always followed this routine. Apart from zero-additive low-temperature yogurt, there is another hot track in the field that must be mentioned—plant-based yogurt. Plant-based yogurt is a type of yogurt made from plant-based raw materials such as soybeans, nuts, and oats as the base. Compared with traditional "animal-based yogurt" made from milk, using plants as raw materials can avoid cholesterol, fat, sugar, and other "harmful elements" to the greatest extent, and even avoid production pollution during dairy cow breeding, thus getting closer to contemporary consumers' ultimate pursuit of health and environmental protection. Unlike low-temperature yogurt, which attracts startups, the current domestic plant-based field attracts more cross-border players. Public information shows that at this stage, beverage brands Nongfu Spring, VV, Yangyuan, and Doudouben (under Dali) have entered the plant-based yogurt field. Although the plant-based yogurt segment is still in its infancy in China today, according to the latest report from Hexa Research, due to population surge and increasing awareness of the health benefits of a vegan diet, China is still expected to become one of the major demand centers for plant-based yogurt. It is worth mentioning that since 2020, the trend of cross-industry crossover in the field has become increasingly obvious: in March of that year, Heytea launched layered Greek yogurt; in June, Hema launched lemon turmeric flavored yogurt; in July, Yongpu Coffee launched coffee yogurt... It has to be admitted that the endless creativity is breaking and reorganizing the original giant game of yogurt to a certain extent. According to the usual routine, brands born in the cracks usually quickly receive capital support. Since its establishment, Lepure has successively received multiple rounds of investment and financing from first-tier institutions such as IDG Capital, ZhenFund, Inno Angel Fund, and China Growth Capital. In April 2018, Lepure also received hundreds of millions of yuan in investment from Coca-Cola, with all old shareholders following the investment. Before completing a total of 800 million yuan in Series B financing in March this year, Jane Yogurt had also completed a 400 million yuan Series A financing in May 2020, with investors including Matrix Partners China, Black Ant Capital,麦星投资, and CITIC Agricultural Fund. In less than a year, Jane Yogurt has secured 1.2 billion yuan in financing. Also worth mentioning is Genki Forest, the "lucky star" in the eyes of capital. Now aggressively entering the yogurt market, Genki Forest has a financing record of 2 billion US dollars (approximately 14 billion yuan) in 5 rounds over 2 years. According to the latest news, Genki Forest's current valuation is approaching 6 billion US dollars (approximately 40 billion yuan). According to statistics from Tsingshan Capital, since 2014, more than 15 new yogurt brands have been established and completed financing. Although these new brands have little impact on the existing pattern of the yogurt duopoly, they have at least revitalized the increasingly young and diversified consumer market. -03- Opportunities: Demographic Shifts, Channel Changes If brand innovation is roughly divided into "innovators of mature categories" and "definers of new categories," then emerging yogurt brands undoubtedly belong to the former. Being able to sprout in a relatively mature large category, these new products can be said to have caught up with an unprecedented consumption "big era." First is the change on the consumer side. The so-called "each generation has its own brands," and now Generation Z has entered the territory of core consumer groups. These young people, who have been well-fed and clothed since childhood and have never experienced material scarcity, have a persistent pursuit of health concepts that directly defines the innovation direction of new yogurt brands. In addition to the aforementioned Lepure and Jane, which focus on natural, organic, and additive-free yogurt; 每日清体 and 北海牧场 also continue Genki Forest's 0 sugar and low calorie concept, launching light fermented milk and zero sucrose yogurt, respectively. There are even many yogurt brands that have carved out a small independent world in the meal replacement scenario by virtue of fat reduction, sugar reduction, high protein, and functional types. In 2018, Lepure launched the N300 fitness cup, a combination of "zero-fat yogurt + nuts and fruits," which contains high-quality protein, fiber, and energy, designed for fitness and weight loss people, claiming "one cup for one meal." In October of the same year, CLASSY KISS, which chose "high-protein and high-fat set yogurt" as its entry point, launched the first body management yogurt in China, advocating a yogurt lifestyle centered on "self-discipline." In 2019, CLASSY KISS again released its "YO KEEP" product, which is pure natural, high protein, 0 fat, 0 sugar, and low calorie, positioned as a weight management meal replacement yogurt, targeting fitness enthusiasts, with main consumption scenarios being energy supplementation before and after exercise and nutritional meal replacement during body shaping. In addition to emerging brands, traditional dairy companies are also deeply cultivating the meal replacement field with functional concepts, typical examples include Xinnong Dairy's oat meal replacement yogurt, Bright's Amyyou brown rice flour fermented milk, and the cross-border launch of "yogurt + daily nuts" gift boxes by snack brand Baicaowei. Undoubtedly, the meal replacement scenario can help yogurt brands smoothly enter the functional segment market. In addition, there are multiple scenarios such as snacking and beverage-ization that allow brands to find new gameplay and highlights on the retail brand side. Beyond the demographic dividend, the iteration and update of the industry chain is also an important boost for the incubation of new brands. From the channel perspective, online sales channels represented by e-commerce have already made famous new brands such as Lepure and Jane. Since 2019, Tmall's support for new brands has further increased. If channel resources can be tilted in small sub-categories, it is possible to create segment blockbuster products. Media channels are also accelerating changes. Nowadays, the form of traffic has become a network structure, and the touchpoints for consumers are very scattered, which means that it is difficult for today's brands to reach all users through a single, unified path. Correspondingly, planting grass on Douyin, Xiaohongshu, Kuaishou, Bilibili, and other off-site platforms, and then completing purchases on Tmall, JD.com, and other platforms has gradually become the mainstream marketing path for brands. A typical case is the internet-famous dairy brand 认养一头牛. In the early stage of the brand's marketing, the team began to launch promotional processes on celebrity traffic such as Wu Xiaobo Channel, Shidian Reading, and Dad's Evaluation, accumulating coverage of nearly 200 million new consumer groups through content output. With the rise of short videos in 2018, the 认养一头牛 team successively used stronger content on public domain channels such as Xiaohongshu, Douyin, Weibo, and Bilibili to promote strong brand exposure and traffic diversion, occupying user minds with younger channel media in a short period of time. By 2019, the brand once again followed the e-commerce live streaming trend, achieving the earliest harvest of e-commerce live streaming traffic dividends through methods such as connecting with major brands and inviting celebrity anchors to bring goods. Also worth mentioning are the opportunities for channel sinking and regional markets. Tsingshan Capital research shows that consumer demand for dairy products in sinking channels is accelerating, and the growth rate in sinking market cities is higher than that in first- and second-tier cities, but the distribution rate of offline terminals is far lower than that in first- and second-tier cities, so there is more market space to explore. At the same time, there is still a large market space for high-end single products in sinking channels. In summary, China's supply chain is gradually becoming more mature, and changes on the consumer side, the rise of Generation Z, and the complexity and diversification of Chinese channels all make it particularly meaningful to find "innovators of mature categories" in the yogurt field today. -04- Traps: Concept Disenchantment, Quality First Today, new yogurt brands born in the internet era are no longer satisfied with staying online, and the offline battle to occupy physical space with high-profile tactics is about to begin. "This one is sugar-free, and young people in their 20s like this the most," a salesperson at a Yonghui supermarket in Beijing enthusiastically recommended the "气色" yogurt from 北海牧场 to TideSight (ID: TideSight) in front of the dairy freezer. "There is no sucrose in this, it is very healthy, and the strawberry flavor sells best." When TideSight visited offline supermarkets, it found that many large supermarkets have already opened "emerging yogurt brand zones" in the dairy freezer, with relevant staff responsible for promotion. Compared with the traditional yogurt brand area, the overall visual design of the new brand area is more minimalist and fresh, more in line with the aesthetic preferences of Generation Z. Of course, there is also a higher price to match. According to observation, the prices of new brand yogurts are generally concentrated in the 7 to 12 yuan range, about 25% higher than traditional brand yogurts of the same specification. Among them, CLASSY KISS's 250g three-pack flavored fermented milk is priced as high as 41.5 yuan, with a single bottle price close to 14 yuan. "Because it looks good, I want to buy it to try, but I definitely won't buy it often," a customer born in 1995 who bought the CLASSY KISS set at a high price told TideSight. Although trying new things is a common mentality among young people, it does not mean they are not sensitive to high prices. Li Zhengyun, vice president of investment at Qingtong Capital, once explained in an interview that the yogurt industry chain is very mature, and brand owners do not need to own pastures or processing plants. With the support of a mature supply chain and industry chain, startups can easily enter this business. But for startups, they can only go for high-end yogurt, and high unit prices are needed to cover their costs. For example, Jane's naked yogurt contains raw milk, Lactobacillus bulgaricus, and Streptococcus thermophilus, with protein at 3.8/100g, priced at 6 yuan per 100g. In contrast, New Hope's yogurt of similar specification has the same ingredients of raw milk, Lactobacillus bulgaricus, and Streptococcus thermophilus, with protein at 3.5/100g, but priced at only 4.3 yuan per 100g. One of the secrets of the premium pricing of new brands lies in promotional rhetoric. Still taking Jane and New Hope as examples. Jane's naked yogurt focuses on 0 sugar and specifically mentions fitness people, babies, and pregnant mothers, who are willing to pay high prices for health; New Hope's 0 sugar yogurt, on the other hand, has become an ordinary low-priced yogurt because it does not highlight the crowd selling point. In order to maintain the high-value persona, new yogurt brands inevitably need to engage in continuous money-burning marketing, and the source of marketing expenses, besides large-scale financing, may also rely on the profit space formed by "inflated" product prices. At the same time, spending a large amount of costs on marketing will undoubtedly further push up their price base. Another fatal issue lies in product quality. Taking the popular "no additives" as an example, Liu Huiping, a professor at the School of Food Engineering at Tianjin University of Science and Technology, once said that "no additives" is just a gimmick, not a scientific concept, and it implies a conclusion that "if there are additives, it is harmful." In fact, as long as additives are used within the standard range, they are safe. But some yogurt products' "no additives" only claims "no additives of a certain type" as "no additives," which is tantamount to playing word games. Jane has been questioned for this. At the beginning of 2020, a Zhihu author questioned that Jane's yogurt ingredients are "milk + bacteria + sugar." The article pointed out that Jane "only uses citrus sterol or other thickeners that I don't know about, so the ingredient list can write 'no additives.' Consumers will think it is healthier, but it is actually no different from other yogurts, and even the amount of bacteria added is not as good as other brands." As for the slogan "nothing else" commonly used on Jane's yogurt packaging, the author also pointed out that "nothing else" is actually a registered trademark of Jane Yogurt, and posted the trademark query results as evidence. In response, Jane Yogurt stated in an official Weibo statement that this was "blatant defamation." But some professionals still said that even if Jane's production does not use synthetic additives, it should not write "no additives," but should write "XX (specific item name) not detected." Moreover, the milk source test values listed by Jane are not optimal. Public information shows that Jane's milk source somatic cell count is less than 400,000 CFU/ml, while Junlebao's average somatic cell count is only 100,000 CFU/ml, and Bright Dairy's milk source somatic cell count also averages 397,000 CFU/ml. The gold-plated design and gimmicky marketing have left consumers with an impression that emerging yogurts are not cost-effective. The new-style yogurt, which was once a disruptor in the room-temperature yogurt field, now inevitably falls into the red ocean track. Public information shows that "no additive" yogurt was first proposed by traditional dairy company Bright, and its "Rushi" product has been on the market for nearly 10 years with a not-low growth rate. Moreover, from the current stage, old low-temperature yogurt brands such as Yili and Mengniu are also continuously advancing into emerging segments. The former launched Joy Day high-end low-temperature yogurt, while the latter's Guanyi Milk has begun to emphasize health functions. In the future high-end low-temperature dairy track, new brands will inevitably have a battle with traditional giants in terms of milk sources, factories, quality control, and prices. From the current point of view, compared with giants, emerging yogurt brands still have many "gaps" at least in terms of quality. -05- Conclusion On one hand, a group of new brands and new product lines of old players are constantly shouting "redefine yogurt," while on the other hand, various popular science and rumors about yogurt are emerging one after another. The dazzling market tests the judgment of capital, while consumers waver between rationality and preference, paying for beautiful wishes and novelty. The yogurt industry continues to ferment, and there will always be new scripts left. Source: TideSight (ID: TideSight) Author: Wang Dunden Tips will be paid 400-2000 yuan once adopted.