Don't Casually Pick Up Chilled Yogurt in the Supermarket!

Source: AI Finance and Economics (ID: aicjnews), Author: Shao Lanjie, Editor: Sun Jing Forget about 'cherry freedom'; if you can buy yogurt at will in the supermarket, that's another proof of your spending power. Why are yogurts on the shelves getting more expensive, often over a dozen yuan per bottle? Upgraded nutrition is one factor, but more likely, you're just paying for dairy companies' sky-high advertising costs. -01- Don't Casually Pick Up Chilled Yogurt in the Supermarket What you can't afford might just be a bottle of yogurt. Smart mom Zhang Shan realized this seemingly sentimental reality early on. When chatting with colleagues, she would joke, "Don't casually pick up a bottle of yogurt from the chilled dairy shelf in the supermarket, because you might not be able to afford it." Zhang Shan would stock up during major promotions like 618. A bottle of chilled yogurt priced at 8.9 yuan in the supermarket could be bought for less than 7 yuan on an e-commerce platform during 618, with "fresh dates and touching prices." She bought 24 bottles at once, roughly a week's supply for her family of four. Image/Shao Lanjie She can't remember when buying yogurt at the supermarket became a luxury. Now, yogurt varieties can fill at least two to three meters of shelf space in the supermarket. The flavors and types are dazzling, but the prices will quickly sober you up. An operations director at a fresh food supermarket told AI Finance and Economics that some yogurt brands, to maintain their high-end image, prefer buy-one-get-one-free (with near-expiry products) over discounts. So when it comes to categories with the most buy-one-get-one-free offers, yogurt is unbeatable. Although consumers have their own psychological limits—post-90s writer Wang Yu says she generally only buys bagged yogurt under 5 yuan or multi-pack yogurts in the discount section. Even with discounts, she pulls out her phone calculator to compare which deal is more cost-effective. In the supermarket, the cheapest yogurt is the 100g*8 cup multi-pack. This area's "lineup" is very stable, dominated by major dairy companies like Mengniu, Yili, and Sanyuan. A multi-pack usually costs around 10 yuan, but can drop to 5.9 yuan during promotions. However, more and more new yogurt products are single bottles, usually around 200g, but their prices rival a multi-pack. For example, at Beijing Wumart supermarket, the price range with the highest share of yogurt SKUs and sales is 7 to 14.99 yuan, with bottled being the best-selling packaging. In convenience store channels, which rarely have buy-one-get-one-free or discounts and don't sell multi-pack yogurts, you can also glimpse the market performance of single bottles—at Bianlifeng, yogurt mainly comes in small packages, with the mainstream price range between 5 and 15 yuan. But if you really plan to spend only 5 yuan, your choices at convenience stores are few. Take the 40-plus yogurts on the Bianlifeng app on June 21 as an example: only 5 are under 5 yuan, most others are concentrated in the 7-10 yuan range, with capacity increased to over 200g. The most expensive is a Lecun yogurt at 18 yuan for 135g. When did yogurt become a high-consumption item? Independent dairy analyst Song Liang recalls that around 2009, with the successive launches of Bright's Mosilian, Mengniu's Guanyiru, and Yili's Anmuxi, domestic yogurt had already shown a high-end trend. Since 2014, the high-end trend has accelerated, marked by the introduction of Japan's Meiji Bulgarian-style yogurt to China and the emergence of the new brand Lecun. When Lecun entered the market in 2015, each box was 120g with an average price of 22.5 yuan. Spending 22.5 yuan on a cup of yogurt back then was indeed a niche thing. But this niche represented a market force, driving Lecun to expand continuously, from international hotels and premium supermarkets to hypermarkets and convenience stores, making high-end yogurt a mass consumer product. **"Yogurt is just a representative," says Zhu Danpeng, a Chinese food industry analyst. The entire dairy product structure is changing; everyone is on tiptoes, rushing toward high-end, including pure milk, milk powder, and cheese. ** Of course, consumers' pursuit of a healthy lifestyle has expanded the audience for yogurt, also creating space for more high-end brands to enter. -02- Expensive for a Reason? Or Maybe an IQ Tax But what exactly makes high-end yogurt expensive? There's more to it than meets the eye. A person in charge at Junlebao Dairy explained to AI Finance and Economics that the final product pricing is a combined result of R&D and product costs, market demand, and market competition. Dairy expert Song Liang revealed that the gross profit margin for yogurt is about 30-60%, nearly double that of ordinary milk, leaving significant pricing room. "Yogurt is different from white milk; it has a wide range of combinations. Different strains and fermentation processes create different subcategories, and the price range is also broad. Depending on the target of the subcategory, yogurt can be defined as a fashion product, a nutritional product, or a functional product. Different positioning leads to different pricing." Image/Visual China Let's look at costs first. Science writer Yun Wuxin told AI Finance and Economics that to judge the nutritional value of a bottle of yogurt, the main indicator is protein content. The higher the protein, the higher the cost and the selling price. Protein is an important indicator for yogurt. Gao Qiang, a dairy industry practitioner, said that taking high-protein yogurt as an example, if Greek-style yogurt has a protein content of 6g/100g, while ordinary yogurt is generally 3g/100g, this means the former requires twice the milk source, and the separator on the production line has basic capacity settings and raw material waste, so costs immediately rise. Another value indicator for yogurt is the strain. Lactobacillus bulgaricus and Streptococcus thermophilus are the most common probiotics in yogurt ingredient lists. However, in the view of dairy expert Wang Dingmian, these probiotics have already achieved industrial production. Adding one or two more types only costs a few cents per bottle. "Ordinary fermented yogurt strains might cost one or two cents, better ones four or five cents, but never more than five cents." In Gao Qiang's view, from dairy farming, raw milk quality, factory production conditions, production processes, production equipment, to packaging materials, filling processes, and the entire cold chain, everything has improved, and compared to ten years ago, it's a complete transformation. These improvements are reflected in costs, leading to higher yogurt prices now. However, the cost of raw materials and production processes is not a large proportion of dairy product costs. According to monitoring by the Ministry of Agriculture and Rural Affairs, in the fourth week of June, the average price of raw milk in 10 major dairy-producing provinces (regions) including Inner Mongolia and Hebei was 3.59 yuan/kg, up 0.6% from the previous week, but also up 0.6% year-on-year. This means the price of raw milk has remained almost unchanged over the past year. Image/Visual China "A cup of yogurt is 100 grams; how much yogurt can a kilogram of milk make?" In Wang Dingmian's view, a bottle of yogurt now often priced at over a dozen or even twenty-plus yuan has already sold at a "white powder price." He calculated himself: "Traditionally fermented yogurt already meets daily nutritional needs. Selling at over three yuan a bottle, companies already make a profit; they don't lose money." Dairy companies' enthusiasm for high-end yogurt is driven by higher gross profits. Song Liang gave an example: suppose a mid-range yogurt costs 1 yuan to produce and sells for 5-6 yuan; a high-end yogurt costs 2 yuan, with better raw milk and probiotics than mid-range, and sells for 8-10 yuan. The gross margin for mid-range yogurt can reach 30%, but for high-end yogurt, it's as high as 60%, with marginal benefits far exceeding marginal costs. But since the raw material cost of a cup of yogurt isn't high, which link actually drives up product costs? Turn on the TV and you might quickly find the answer—marketing and channel costs. Dairy products are high-frequency consumption, but domestic products are highly homogeneous, and consumer loyalty is low. How to capture consumer mindshare? The simplest and most direct way is large-scale advertising, spending money to buy the market. Financial report data is a very intuitive window. In 2019, Yili invested 11.041 billion yuan in marketing expenses, about 12% of total annual revenue. This means that when you buy a bottle of Yili milk for 10 yuan, 1.2 yuan goes toward advertising and marketing. Mengniu spent 8.49 billion yuan, about 11% of total revenue. Roughly calculated, the combined annual advertising and marketing investment of the two major dairy companies exceeds 19.5 billion yuan, meaning on average, these two companies spend over 50 million yuan daily on marketing. In contrast, another old dairy company, Bright, is much stingier, with its 2019 advertising and marketing expenses less than 3% of total revenue, only 649 million yuan. If placed in the 2019 national total advertising revenue of 867.4 billion yuan, the two big spenders, Yili and Mengniu, contribute over 2%. Despite the crazy spending on market, Yili's liquid milk category gross margin in 2019 remained at 35.20%. Where do dairy companies' marketing expenses go? First, signing brand ambassadors. Someone once counted that Mengniu invited 23 celebrities to endorse its various products, such as Chen Weiting endorsing Guanyiru and Yi Yangqianxi endorsing Youyi C; Yili has had 30 celebrities endorse, like Wang Yibo and Yang Chaoyue endorsing Anmuxi. Second, sponsoring popular variety shows. Yili and Mengniu almost occupy half of domestic variety shows, whether it's "Sisters Who Make Waves" or "Produce 101," you can see both dairy companies. In comparison, Yili is more aggressive. According to incomplete statistics from Lianxun Securities, in 2019, Yili's brands sponsored 8 variety shows. "Companies need to survive, meet sales targets, and ensure profits, so they can only go high-end. High-end means high prices, which means high profits, so companies are following the trend to make high-end yogurt," Wang Dingmian believes. High-end is a commercial choice companies make for competition, which is understandable, but if consumers blindly follow trends, it's a bit irrational. "Don't have vanity, thinking expensive and high-end means good, especially for gift products; this tendency is quite obvious." This is particularly prominent in the room-temperature yogurt sector in lower-tier markets. Data shows that over 70% of room-temperature yogurt sales are concentrated in prefecture-level cities, county-level cities, counties, and townships, and have spawned single products with sales of over 10 billion yuan. In 2018, room-temperature yogurt sales exceeded 30 billion yuan, with high-end brands like Anmuxi, Chunzhen, and Mosilian holding market shares of 45%, 31%, and 19% respectively, with a combined market share of 95%. It's well known in the industry that the gross profit margin of room-temperature yogurt is much higher than that of chilled yogurt. "They're not even on the same level," Gao Qiang said bluntly. Chilled yogurt, mainly targeting first- and second-tier cities, requires cold chain support, with cold chain costs accounting for at least 20% of costs. Of course, this area is also more likely to see high-end yogurt brands emerge, even becoming internet-famous. Image/Visual China -03- Mindshare Tug-of-War Even with the truth in front of them, consumers still face a mindshare tug-of-war. To get you to pick up the yogurt on the shelf and willingly pay high prices, companies have gone to great lengths. The "innovation" in the yogurt world has broken consumer imagination: maybe you've drunk yogurts with fruit pieces, but have you tried donkey-hide gelatin yogurt? Fish mint yogurt? Fermented rice yogurt? It's getting harder to drink a simple yogurt; it seems that yogurts without "special functions" are embarrassed to be on the shelf. In 2019, Mengniu launched Zhonghua Ziyang Nuanyan yogurt, incorporating nourishing ingredients like donkey-hide gelatin and goji berries, which sound "high-end," into yogurt. A 220g bottle sells for over 8 yuan. But compared to a 200g bottle of Heng'antang yogurt at nearly 20 yuan, this isn't expensive. Sanyuan's yogurt's main selling point is that, in addition to traditional probiotics, it adds 6 types of active bacteria, as well as 6 types of prebiotics and dietary fiber, claiming to boost immunity. Nongfu Spring also launched a plant-based yogurt last year, priced at 9.9 yuan for 135g, with selling points of low sugar and 0 cholesterol. These yogurts with too-obvious intentions currently have few takers. Image/Shao Lanjie High-end yogurts seem to have many varieties, but the ideas usually fall into two categories: one exists as a functional drink, liking to highlight various strains in the ingredient list; the other exists as a snack food, pursuing taste and innovating in different flavors, early on adding fruits, now adding cheese and grains. But trends change, and recently the yogurt industry's direction has shifted again; the concept high-end yogurt companies like is "0 additive". This concept was popularized by internet-famous brands that entered the yogurt field in recent years. These brands have extremely high exposure on social media, with simple and restrained packaging, but clear positioning, and most importantly, high prices. Li Zhengyun, vice president of investment at Qingtong Capital, explained that the yogurt industry chain is very mature. Brands don't need to own pastures or processing plants; with mature supply chain and industry chain support, startup companies can easily enter this business. For startups, they can only go high-end; high unit prices are needed to cover their costs. For example, Jane Love naked yogurt, 135g, a pack of four for 32.6 yuan, with a single bottle priced at 8.1 yuan, ingredients of raw milk, Lactobacillus bulgaricus, and Streptococcus thermophilus, and protein at 3.8g/100g. The price per 100g is 6 yuan. In contrast, New Hope's bucket of pure yogurt, 340g, with the same ingredients of raw milk, Lactobacillus bulgaricus, and Streptococcus thermophilus, and protein at 3.5g/100g, but priced at 14.9 yuan, with a price per 100g of 4.3 yuan. Jane Love naked yogurt emphasizes 0 sugar, and in its graphic introduction, it specifically mentions fitness enthusiasts, babies, and pregnant mothers—groups willing to pay higher prices for health and nutrition. New Hope's bucket of pure yogurt, although also "0 added sucrose," doesn't highlight it as a selling point, so it's just an ordinary yogurt. The price difference naturally arises. But these internet-famous high-end yogurts haven't escaped homogenization, such as all doing 0 additive. Yun Wuxin believes that "no additive is not a legal term but a marketing term". The public's understanding of no additive is only milk and strains, which is achievable, but maybe not many people would like to eat it. Some "no additive" only claims "no added certain ingredients" as "no additive," playing word games. Image/Shao Lanjie A staff member at an international certification body said bluntly, "In corporate promotions, if you claim no additives, pure natural, or no added something, as long as you want to claim it, we can issue certificates and reports if we have the capability, showing that the claim corresponds to the product." The staff member revealed to AI Finance and Economics that this certification business started last year. At that time, they helped a well-known dairy company certify a product as 0 additive. On this product, sugar was still listed, but on the product introduction page, small text noted "no added flavors, pectin, or thickeners." Facing many complex marketing tactics, Gao Qiang's advice to consumers is to the point: "If yogurt ingredients are similar, prices shouldn't differ much; a big price difference is an IQ tax." (Note: Zhang Shan, Gao Qiang, and Wang Yu are pseudonyms.)