---
title: "Dairy Expert Song Liang: Why the Rise of 'Milk Bars' Is Inevitable and a Trend"
description: "Song Liang, a senior dairy analyst, argues that the rise of milk bars is both inevitable and a trend, as they meet the objective needs of China's dairy industry, expand consumption channels, satisfy consumer demand for fresh milk, increase dairy farmers' income, and invigorate the market. He emphasizes their role in promoting pasteurized milk in third- and fourth-tier cities and suggests that standardization and regulation are key to their sustainable development."
author: "宋亮"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-11-28"
language: "en"
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# Dairy Expert Song Liang: Why the Rise of 'Milk Bars' Is Inevitable and a Trend

> Song Liang, a senior dairy analyst, argues that the rise of milk bars is both inevitable and a trend, as they meet the objective needs of China's dairy industry, expand consumption channels, satisfy consumer demand for fresh milk, increase dairy farmers' income, and invigorate the market. He emphasizes their role in promoting pasteurized milk in third- and fourth-tier cities and suggests that standardization and regulation are key to their sustainable development.

Senior Dairy Analyst Song Liang

In recent years, China's dairy industry has seen continuous innovation in development models, giving rise to a new model that meets the objective requirements of domestic dairy development and conforms to the laws of dairy industry growth—the milk bar. Milk bars play a significant role in broadening dairy consumption channels, satisfying consumers' demand for fresh milk, increasing dairy farmers' income, and invigorating the dairy market.

The rise of milk bars is inevitable and a trend

China has a population of 1.4 billion, with over 400 million in first- and second-tier cities and 900 million in third- and fourth-tier cities. Excluding cheese and butter consumption, per capita fresh milk consumption in first- and second-tier cities is about 25-30 kilograms, already saturated. For the 900 million people in third- and fourth-tier cities, per capita dairy consumption is about 5-15 kilograms.

According to statistics, domestic dairy consumption totaled 45 million tons in 2013, and it is estimated to be 39 million tons in 2017, indicating a decline in consumption. However, it is expected that from 2020 to 2025, per capita dairy consumption in third- and fourth-tier cities will see significant growth, and national dairy consumption could increase to 65-70 million tons. Yet, it is unrealistic to meet such market demand with the current dairy cow inventory. Moreover, under current farming conditions, it is impossible to increase the cow inventory, so how will the 65-70 million tons of market demand be filled? Currently, it mainly relies on imports.

From 2020 to 2025, China will usher in a second golden phase of dairy consumption. Sales of UHT milk will continue to grow on the existing basis; the development of pasteurized milk will strengthen, with first- and second-tier cities upgrading their consumption structure and increasing demand for pasteurized milk, leading to changes in consumer groups and structure, while third- and fourth-tier cities begin to popularize the habit of drinking milk. Considering the national situation, we must both meet the demands brought by market changes and face the severe difficulties that the farming industry will encounter in the future.

In the second half of 2016, international milk prices rose, but this was a recovery increase, with no significant rise in demand. Therefore, international milk prices will not see significant large increases in the next five years and will remain relatively stable. In comparison, China's milk prices do not have a clear competitive advantage. Thus, how can large-scale farming enterprises "cash in" their milk sources? This requires leveraging the development of high-end downstream products.

Currently, for small and medium-sized pastures, the quality of their milk sources is already very close to that of large pastures. In terms of farming costs (excluding investments in hardware equipment for small and medium-sized pastures), their farming costs are about 0.5-1 yuan lower than those of large pastures. These pastures will be the backbone of China's future dairy development.

However, it cannot be ignored that environmental protection costs for pastures are continuously increasing, and the number of pastures is strictly controlled. At the same time, when the import of UHT milk domestically has become a major trend, the majority of dairy farmers need to find their own way out—milk bars are emerging as the answer. The advantage of milk bars lies in their being a brand-new business format that aligns with the current direction of domestic consumption and channel reform, ensures the voice of dairy farmers, and is an important format for the future promotion of pasteurized milk.

The operational advantages of milk bars are significant

In recent years, the development of the internet has driven revolutionary changes in commerce, leading to profound adjustments in channels. Traditional sales channels (such as supermarkets, hypermarkets, and retail stores) have high costs. In the future, from production to sales, the internet has shortened the "distance," but the only thing it cannot solve is the service that producers provide to consumers. The development of milk bars breaks through the limitations of traditional formats. In the future, milk bars will be comprehensive leisure venues, and current milk bar operational efficiency is far higher than that of supermarkets.

Milk bars have a very clear significance for the popularization of pasteurized milk in third- and fourth-tier cities. If milk bars are used as a cold chain "transfer station" in third- and fourth-tier cities, a cold chain logistics system can be established from the production end to the sales end, ultimately solving the "last mile" problem of delivering pasteurized milk to consumers. Therefore, milk bars will become the "main force" in promoting pasteurized milk in third- and fourth-tier cities, with relatively low operational costs and faster development speed.

However, the key to establishing milk bars lies in whether they can be "nearby," requiring nearby milk sources, nearby processing, and a complete production and distribution system. Milk bars have the foundation for promotion and development in domestic third- and fourth-tier cities, so it is recommended that large dairy enterprises develop the milk bar industry.

In a sense, milk bars have become an important way for China's dairy industry to "cash in." Large dairy enterprises can learn from the production-processing-sales models of Europe, America, and Japan, and have a say in the farming segment. For many years, the core reason why the farming industry has not had a voice in China's dairy development lies in two points: first, poor "cash-in" ability, and second, land use relying on leasing, which is a fundamental issue. Therefore, by developing milk bars, changes can be made in both voice and "cash-in" ability.

In terms of the price system, pasteurized milk is higher than UHT milk. UHT milk reflects resource advantages, while pasteurized milk reflects regional advantages.

In the future, whether for large or small enterprises, pasteurized milk will become mid-to-high-end milk, while UHT milk will be guaranteed milk. Only in this way can they survive the competition between high-cost domestic dairy products and low-cost imported dairy products. Milk bars must become the "promoter" of pasteurized milk, and at the same time, enhance the "cash-in" ability of milk sources. Most importantly, they must be made into mid-to-high-end products.

How to promote the sustainable development of milk bars?

Currently, for milk bars to develop further, the degree of standardization and normalization is key. At the same time, the development of milk bars also plays an important role in promoting targeted poverty alleviation, boosting the development of local leisure service industries, and enhancing the "self-generation" ability of poor households.

Therefore, it is recommended that relevant competent authorities actively promote the development of milk bars, issue regulations for milk bars, establish entry thresholds, require milk bars to have their own milk sources or cooperative milk sources, strictly monitor milk sources, have regulatory departments test the quality and safety of milk sources, establish a high-standard testing system, and strictly supervise downstream product production processes, thereby improving the standardization and normalization of milk bars.

Specifically, it is recommended that the food and drug regulatory and health and family planning departments research and issue safety management regulations and standards for milk bars; the Ministry of Industry and Information Technology research and issue production management standards for milk bar development; and the Ministry of Agriculture research and formulate standardized milk source standards and regulations and requirements for the integrated development of milk sources and processing.

Nowadays, China's dairy consumption is concentrated in East and South China. In the future, dairy consumption will move closer to Central and North China. In the vast rural areas of North China, such as Shandong, Henan, and Hebei, rising consumption levels will significantly drive dairy consumption.

In recent years, room-temperature yogurt has developed very rapidly, like a force of nature. In 2016, 60% of the growth in national room-temperature yogurt consumption came from third- and fourth-tier cities. If milk bars can solve the problem of active lactic acid bacteria in yogurt, they will have strong competitiveness in the market.

Only by having a voice can dairy farmers cope with situations such as price suppression, milk quotas, and rejection in the farming market, and maintain market competitiveness. Therefore, in the development of milk bars, it is recommended to establish industrial organizations and alliances, coordinate planning, standardize development, use high-quality milk sources, and promote the healthy development of the industry.

For the market development of the milk bar model, it is necessary to unite all forces that can be united, utilize pasture and social financing, and also introduce capital injection. The era of traditional channels and distribution is over. The future of channels lies in consumer maintenance, requiring information symmetry, information exchange, and integrated online-offline development.

In this context, milk bars carry not only product sales but, most importantly, serve as venues for future consumer service experiences. In the future, milk bars will become places for consumers to gather and relax, just like coffee shops such as Starbucks. This is the fundamental purpose of milk bars, and it will also be the future trend. Therefore, the future milk bar will be a brand-new business format, and it is necessary to learn from the management and service experience of Japan and Taiwan, thereby forcing the farming segment to produce high-quality milk to meet the supply of milk bars. In the next five years, environmental protection issues in dairy farming will be a focus. The rise of the milk bar industry is adapting to market demand and conforming to the trend of the times.

Facing the new situation in dairy development, we should seize the opportunity, focus on third- and fourth-tier cities as the main body, plan ahead, standardize regulations, serve well, and study well. In the development process of milk bars, we must vigorously promote pasteurized milk and probiotic yogurt with good taste. Only by achieving standards and norms can milk bar operations be sustainable and usher in the spring of dairy development!

Source: Food Observer (ID: shipinguanchajia)
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