The fresh milk sector is becoming increasingly crowded. In recent years, a wave of new brands has emerged in the fresh milk sector, emphasizing health labels and commanding higher prices. Concepts such as "no additives," "noble among milks," and "premium milk" have arisen in response. Moreover, a growing number of dairy companies firmly believe that low-temperature milk will become a new track and a second growth curve for the industry. As a leading domestic dairy company, Mengniu naturally cannot afford to miss this trend. Because it is classified as a subcategory under liquid milk, Mengniu did not disclose specific performance figures for its fresh milk business in its latest 2023 financial report, only stating that its fresh milk business has been profitable for three consecutive years. It is clear that Mengniu places great importance on its high-end fresh milk brand, Daily Fresh Milk—mentioned 10 times in its 49-page annual report. Mengniu founded Daily Fresh Milk in 2018. The product has several highlights: it created the industry's first "champagne bottle" design, launched the first A2 fresh milk positioned as "a baby's first fresh milk," and promoted 4.0 protein fresh milk as a selling point. Daily Fresh Milk quickly made a name for itself in the low-temperature fresh milk sector. According to Mengniu's financial report, by 2023, Mengniu held the number one market share in both high-end fresh milk and basic fresh milk. Previously, the head of the fresh milk business revealed that over the past three years, Mengniu's fresh milk growth rate reached three times that of the category, with Daily Fresh Milk growing by over 30%. Recently, leveraging Mengniu's supply chain, Daily Fresh Milk has expanded beyond the mainland market, quietly appearing on shelves in over 1,000 convenience stores in Hong Kong. Not only Mengniu, but in the past month, Jane and Classy Kiss have also announced the launch of low-temperature yogurt and fresh milk products in Hong Kong. Domestic dairy companies are beginning to plan a new round of product and channel expansion overseas, while the fresh milk market is experiencing intense competition. Competing for the Hong Kong Market Without seeing any news or marketing campaigns, Wang Zi, who works in Hong Kong, recently noticed that Daily Fresh Milk fresh milk had "quietly" appeared on the shelves of convenience stores in Hong Kong. "If you hadn't asked me, I wouldn't have noticed this product. It's placed aside among a bunch of fresh milk products and isn't eye-catching, only marked with 'new product' on the price tag," Wang Zi told Modern Consumption. Because she lives in Hong Kong, she doesn't pay attention to mainland brands, but she was surprised by Daily Fresh Milk's price: "It's twice as expensive as Kowloon Dairy, which puts me off a bit." Wang Zi observed that the fresh milk currently sold in Hong Kong is mainly from Nestlé, Kowloon Dairy, Cross Milk, and Vitasoy. "I asked a few local Hong Kong colleagues, and most of them have a habit of drinking fresh milk, but they don't have a particularly loyal brand. They usually buy whichever of these brands is cheaper. As for new products, they say they can try the taste, but if it stays this expensive, it will definitely affect repeat purchases." Wang Zi said that over the past year, she felt there was a trend of price wars in Hong Kong's fresh milk market. "Prices in Hong Kong are high; a bottle of water costs 8 HKD, and now many fresh milk products are around the same price." With that, she sent Modern Consumption a photo of a shelf full of fresh milk. The photo showed the new Daily Fresh Milk priced at 18 HKD; two bottles of Kowloon Dairy fresh milk for only 19 HKD; other fresh milk and high-calcium milk were even cheaper, with two boxes for 12, 15, and 16 HKD. Image source: Daily Fresh Milk on shelves in Hong Kong convenience stores Due to a lack of pastures, 90% of Hong Kong's milk sources are imported from the mainland, and the current oversupply of raw milk has clearly transmitted to Hong Kong. According to data from the National Bureau of Statistics, the Ministry of Agriculture and Rural Affairs, and the Ministry of Commerce, national milk production in 2023 reached 41.97 million tons, an increase of 6.7%. As of the end of December 2023, the average sales price of raw milk in 10 major producing provinces was 3.66 yuan/kg, a year-on-year decrease of 11.2%; the average price for the full year of 2023 was 3.83 yuan/kg, a year-on-year decrease of 7.9%. In this context, dairy companies have not only launched price wars but also used Hong Kong as a training ground for expanding into new markets. In fact, in the past month, Daily Fresh Milk is not the only low-temperature milk company entering Hong Kong. Jane and Classy Kiss have also announced the launch of low-temperature yogurt and fresh milk products in Hong Kong. In response, dairy expert Song Liang analyzed to the media that research report data shows that in some developed regions, including Hong Kong, low-temperature milk accounts for over 70% of liquid milk consumption. Song Liang said that considering population size, dairy consumption frequency, and average spending per customer, if companies do well in the Hong Kong low-temperature liquid milk market, it could approach the scale of Beijing or Shanghai, making Hong Kong an important regional dairy market. Now that mainland low-temperature liquid milk brands are joining the competition in Hong Kong, besides enhancing brand image, they can also digest milk sources and use Hong Kong as a springboard for future entry into the international market. For dairy companies, local consumers' love for low-temperature fresh milk also makes the Hong Kong market a must-win. Post-90s consumer Wen Jing likes to try new things and is a loyal fan of low-temperature fresh milk. She developed the habit of drinking low-temperature fresh milk after the pandemic. "During the pandemic, Academician Zhong Nanshan and Professor Zhang Wenhong both recommended drinking milk to boost immunity, and low-temperature fresh milk has better nutritional value. With more mainland brands entering the Hong Kong market, consumers have more choices." Attacking the "Local Powers" In fact, in terms of supply chain construction and sales channels, Daily Fresh Milk has significant advantages. Mengniu's former president, Lu Minfang, once expressed the idea of "proactively laying out domestic and foreign upstream milk sources and dairy raw materials." To this end, he led strategic investments in several dairy farming companies, including Modern Dairy, Fuyuan, and Shengmu, and signed cooperation agreements with large overseas pastures. This laid a solid foundation for Daily Fresh Milk's expansion into Hong Kong. Mengniu's 2023 financial report shows that as of December 31, 2023, Mengniu Dairy had 45 production bases nationwide, with overseas factories including 2 in Indonesia, 2 in Australia, 1 in the Philippines, and 1 in New Zealand, with an annual production capacity of 14.04 million tons. Relying on Mengniu's supply chain, it is reported that Daily Fresh Milk can be transported from the Ma'anshan factory in Anhui to Shanghai on the same day. In terms of sales channels, Daily Fresh Milk has also actively expanded. Mengniu's 2023 financial report shows that it continues to lead in advantageous online and offline channels, achieving the number one share in Yonghui, Walmart, Sam's Club, and Hema, as well as number one in JD.com and Taobao's grocery shopping, with high-speed year-on-year growth in sales on Tmall and Pupu. However, for dairy companies with overseas ambitions, expanding low-temperature milk business in overseas markets means greater challenges. "This is mainly determined by the pain point of the short shelf life of low-temperature fresh milk," Xue Tao, a dairy industry insider, told Modern Consumption. He said that the short shelf life of low-temperature fresh milk is the main factor limiting the development of low-temperature milk companies. He cited examples such as Yuexiu Huishan's "Fresh Doctor" in Northeast China, which has never expanded beyond the Northeast, and even Harbin, not far from Liaoning, rarely has its fresh milk products on shelves. Image source: Photo by 摄图网, based on VRF agreement A staff member from Wandashan also revealed to Modern Consumption that, for example, "Ru Ci Xin Xian" fresh milk develops very well in its home base of Harbin in the Northeast, but due to the short shelf life of fresh milk, it is still mainly deployed in the Northeast and North China markets. In fact, the previous fresh milk sterilization technology was mainly pasteurization, which uses a temperature of 72-85°C for 15 seconds to kill harmful pathogens in raw milk without destroying its nutritional value, but pasteurized milk has a shelf life of 5-7 days. This limits its sales radius due to milk source and cold chain costs, requiring rapid distribution within about 300 kilometers of the milk source to keep costs reasonable. If far from the milk source, costs increase significantly. In recent years, many dairy companies have begun to launch "ultra-pasteurized milk" with a sterilization process between pasteurized milk (commonly known as fresh milk) and ultra-high-temperature sterilized milk (commonly known as room-temperature milk). This product loses some active substances but extends shelf life to 14-20 days, expanding the sales radius to 500 kilometers, providing opportunities for companies like Miss Fresh to break through regional sales bottlenecks. However, the low-temperature milk market has entered a "Warring States era" of fragmented competition, with local dairy companies dominating their regions. For example, Beijing's Sanyuan Dairy, Shanghai's Bright Dairy, Guangzhou's Yantang Milk, Northeast's Wandashan, and New Hope Dairy in the southwest all dominate their respective territories. In Hong Kong's fresh milk market, besides international brands like Nestlé, the common brands such as Kowloon Dairy, Cross Milk, and Vitasoy are all local Hong Kong brands. It is easy for Daily Fresh Milk and others to enter a new market, but it is not easy to win in the strongholds of these regional dairy companies. But clearly, as low-temperature milk brands set their sights on the whole country and even the international stage, the competitive landscape between national and regional dairy companies is expected to be broken, and a new round of competition has already begun. Competing for the "First Taste" In fact, China's low-temperature fresh milk accounts for less than 30% of white milk consumption, lower than the 90%+ in the United States, Japan, South Korea, the UK, and other countries, and Russia's 60%+. However, as "more nutritious" and "healthier" become labels for low-temperature milk, China's dairy market is showing a trend of transitioning from room-temperature milk to low-temperature milk. "Previously, there were only a few low-temperature milk brands, such as Bright, Sanyuan, and Wandashan. Now the fresh milk display cabinets are clearly getting bigger, and there are more and more brands," a promoter in the liquid milk section of a supermarket in Gu'an, Hebei, told Modern Consumption. Currently, room-temperature milk sales still account for a large proportion, but the share of low-temperature milk sales is significantly higher than before. The reason is that since the pandemic, consumers have paid more attention to healthy eating. Compared with room-temperature milk, low-temperature milk has obvious advantages in nutritional content and "freshness" perception. Therefore, dairy companies firmly believe that low-temperature milk will become a new track and a second growth curve for the industry. According to data forecasts from BOCOM International, the compound annual growth rate of low-temperature fresh milk from 2022 to 2027 will reach 12%, and it is expected that white milk will undergo a premiumization trend, shifting from room-temperature milk to fresh milk. Nongkai Fund Investment also predicts that the low-temperature dairy industry is expected to reach 160 billion yuan in scale by 2025. Currently, there is no single product in the low-temperature fresh milk category exceeding 10 billion yuan in sales, which means there is unlimited space and imagination. In the future, the dairy company that first gets the "first taste" will have the best chance to grab this big cake. Facing this temptation, since 2018, dairy companies have shifted their strategic focus from room-temperature business to low-temperature business. Mengniu's fresh milk division launched "Daily Fresh Milk" and "Modern Ranch," with sales reaching 3 billion yuan in 2022. Yili launched "Yili," "Jindian," and "Muchang Qingchen" fresh milk at the end of 2019, with sales exceeding 1 billion yuan in 2022. Bright Dairy and New Hope Dairy have both established five-year strategic plans centered on "fresh." Xi Gang, chairman of New Hope Dairy, even said in a media interview, "It is expected that within about 5 years, the proportion of low-temperature milk in China will definitely exceed 50%." Suddenly, practitioners accelerated their entry into the fresh milk track, making the industry extremely crowded. According to Qichacha data, there are currently 68,500 fresh milk-related enterprises in China. With many players, the homogenization problem in low-temperature milk is becoming increasingly serious. In this context, marketing is particularly important. Brands are flocking to advertising and marketing campaigns, striving to create the most impressive slogans, sponsoring popular TV dramas and variety shows, hoping to gain audience attention through the influence of these programs, strengthen product awareness in consumers' minds, and expand the market. For example, Daily Fresh Milk has cooperated with Nayuki Tea, Xiong Kunkun, Disneyland, and others to launch innovative drinks and packaging to attract more young consumers. In addition, it has tried to strengthen the emotional connection between the brand and consumers through signing spokespersons and sponsoring variety shows. But frequent spending does not seem to maintain high brand loyalty among consumers—they tend to make purchasing decisions based on price and quality. For instance, Wen Jing considers multiple factors when choosing low-temperature fresh milk: when she doesn't want to spend too much, she buys the cost-effective Kowloon Dairy from Hong Kong, but this fresh milk has a light taste; when she has a bit more money, she has tried Meiji low-temperature milk, which tastes amazing, but she always feels the opening design is not good, and she worries about bacteria getting in if she doesn't finish it and puts it in the fridge; Daily Fresh Milk has a slight natural sweetness, and she often buys its 4.0 (4.0 refers to milk protein content of 4.0g/100ml) fresh milk to drink... In addition, Wen Jing is tempted by more choices—room-temperature milk, flavored milk, flavored white milk, flavored milk with ingredients (grains, fruit pieces), milk beverages, formula milk powder, low-temperature yogurt, and the increasing number of options on terminal shelves. Facing a chaotic and fully competitive fresh milk market, how Daily Fresh Milk can win this battle and gain consumers' unwavering choice is clearly a complex subject. Recommended Reading