---
title: "Flavored Milk: Gathering Dust on the Shelves"
description: "While ambient white milk has regained consumer attention through functional additions and milk source innovation, and low-temperature fresh milk continues to win over consumers with its nutrition and freshness, flavored milk has been underperforming, with its market share shrinking since 2012. This downturn is also reflected in brand financial reports, such as in 2022 when China Want Want saw growth in all categories except its dairy and beverage business, which declined by over 10%, with Want Want Milk accounting for 90% of that segment; similarly, Li Zi Yuan, known for its 'sweet milk,' experienced declines in both revenue and profit in 2022."
author: "青翎"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-09-05"
language: "en"
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---

# Flavored Milk: Gathering Dust on the Shelves

> While ambient white milk has regained consumer attention through functional additions and milk source innovation, and low-temperature fresh milk continues to win over consumers with its nutrition and freshness, flavored milk has been underperforming, with its market share shrinking since 2012. This downturn is also reflected in brand financial reports, such as in 2022 when China Want Want saw growth in all categories except its dairy and beverage business, which declined by over 10%, with Want Want Milk accounting for 90% of that segment; similarly, Li Zi Yuan, known for its 'sweet milk,' experienced declines in both revenue and profit in 2022.

While ambient white milk has regained consumer attention through functional additions and milk source innovation, and low-temperature fresh milk continues to win over consumers with its nutrition and freshness, only flavored milk has been underperforming, with its market share shrinking since 2012.
The downturn is also evident in brand financial reports. For example, in 2022, while all categories under China Want Want saw revenue growth, only its dairy and beverage business declined by over 10%, and Want Want Milk accounted for 90% of that business. Similarly, Li Zi Yuan, known for its "sweet milk," saw both revenue and profit decline in 2022.
Not to mention that major products like Nutrition Express, AD Calcium Milk, and Mengniu Sour Milk have become memories of the past, relegated to the corners of shelves, with nostalgia being the only reason consumers still choose them.
But "flavor" itself still has broad room for survival. Ipsos monitoring data shows that 78% of consumers pay attention to the taste of dairy products and have richer, more specific requirements for their flavor.
**If low-temperature milk represents health, then flavored milk represents emotional satisfaction. Consumers' desire for both will inevitably drive flavored milk toward a healthier trend.**
In the context of the premiumization of liquid milk, who can deny that flavorization might be another branch of "premium"?
**A Major Category in the Era of "Taste First"**
When discussing flavored milk, one cannot avoid milk itself.
In the early 1990s, the Chinese milk market was dominated by low-temperature milk. Due to transportation limitations, milk consumption was not widespread in China at that time. Moreover, plain milk was tasteless and slightly fishy, making it far less popular than soft drinks like juice and soda in terms of taste.
On the other hand, after years of science popularization, the concept of "Drink a glass of milk a day to strengthen the Chinese people" was ingrained in the DNA of Chinese people. To balance "nutrition" and "taste," Chinese people devised various methods. For instance, in the childhood of the post-90s generation, a common phenomenon emerged: **mothers would add a bit of sugar to powdered milk to make it sweeter.**
Besides these "folk methods," dairy and beverage companies were also actively seeking solutions. The former needed taste, while the latter valued health. They hit it off, and thus a new category—flavored milk—was born.
In 1996, Wahaha created the phenomenal product Wahaha AD Calcium Milk. AD Calcium Milk focused on nutritional fortification and had the backing of the Wahaha brand. In an era driven by brand sales, it gained favor among many parents. Its sweet and sour taste also appealed to children. Within just one year, AD Calcium Milk's production exceeded 1.07 billion bottles, achieving sales of 685 million yuan.
(Source: Wahaha Weibo)
It is worth mentioning that in this year's hit drama "The Knockout," the scene where Xu Jiang places AD Calcium Milk bottles in front of his son's memorial altar made this national product popular again. Wahaha stated that this was not a commercial partnership but a unilateral placement by the production team, highlighting the influence of AD Calcium Milk.
After AD Calcium Milk, Wahaha continued its success in 2005 with Nutrition Express, combining juice and milk to create a new category, with annual sales once accounting for 20% of the group's total sales.
Also in 1995, on the other side of the strait, Want Want Group developed another childhood memory—Want Want Milk. At that time, Want Want was already a well-known star enterprise across the strait. Products like Want Want Senbei in 1983, Want Want Snow Rice Cracker in 1984, Want Want Little馒头 in 1994, and Want Want Milk in 1996 were all epoch-making products.
Taking Want Want Milk as an example, historical financial reports show that over 90% of China Want Want's dairy and beverage segment revenue came from Want Want Milk, and this single product also accounted for about half of Want Want's total revenue. In 2013, Want Want Milk's sales reached a peak of 11.2 billion yuan.
Compared to the two cross-industry players mentioned above, Li Zi Yuan, founded in 1995, was one of the earliest companies to focus on the flavored milk beverage market.
In the 1980s, Li Zi Yuan's founder, Li Guoping, invested heavily in raising three dairy cows. At that time, there was a shortage of milk sources, and Li Guoping made a fortune. However, as more people raised cows, milk prices fell. Li Guoping sold the cows and, with friends, founded a condensed milk workshop.
In 1994, Li Zi Yuan was established in Jinhua, Zhejiang, mainly producing dairy products, milk-containing beverages, and other drinks.
Starting in 2001, the "flagship product" sweet milk became the main revenue driver for Li Zi Yuan. According to the 2022 financial report, the milk-containing beverage category, which includes sweet milk, generated revenue of 1.36 billion yuan, accounting for about 97% of total revenue, making Li Zi Yuan synonymous with "sweet milk."
The rapid rise of flavored milk in China was due to the era's background. **At that time, consumers did not place as much emphasis on health as they do today; taste outweighed health, which gave flavored milk, with its dual attributes of beverage and dairy, room to grow.** Internationally, flavored milk was already a well-known major category, with brands like Vitasoy, Meiji, and Yakult emerging in markets such as Hong Kong and Japan. But in the 1990s, flavored milk was still in its infancy. With only this period of expansion, flavored milk could not yet become the second-largest category in liquid milk; its true heyday came after 2000.
**From Hot Category to Relic of the Times**
Although flavored milk is more likely to be seen as a beverage rather than milk due to its taste, milk remains its base. This also means that **dairy companies with raw milk resources will become the most competitive players in this track.**
Soon, the heyday of flavored milk arrived, initiated by the "dairy duo" Yili and Mengniu.
In 2004, Hunan TV held the first "Super Girl." In 2005, Mengniu's product Mengniu Sour Milk became the title sponsor of Super Girl.
As the pioneer of domestic entertainment variety shows, "Super Girl" created a nationwide viewing frenzy. It is understood that during the final selection of the top three in 2005, the ratings reached an astonishing 11.65%.
Super Girl's strong appeal made its sponsor Mengniu very profitable, prompting Yili to catch up. In 2005, Yili launched its competing product "Yili You Suan Ru" and secured CCTV advertising rights for 40 million yuan that same year.
From then on, dairy companies represented by Yili and Mengniu became regular sponsors of TV variety shows. From the early Super Girl to later shows like "Produce Camp" and "Idol Producer," as well as non-competition shows like "Back to Field," "Running Man," and "I Am a Singer," every popular variety show had the support of these "dairy dads."
**Flavored milk, as a high-profile category, has witnessed nearly 20 years of Chinese variety show history.**
For example, Mengniu Sour Milk sponsored "Super Girl," "The Voice of China," "Super Boy," and "Super Girl"; the "Youth With You" series was sponsored by Mengniu Zhen Guoli, but due to the "milk dumping incident," Zhen Guoli also witnessed the sunset of talent shows.
The enduring popularity of TV variety shows also contributed to the dominance of flavored milk. According to CSC Financial data, in 2006, flavored milk accounted for about 32% of the liquid milk market share, and by 2012, this figure had risen to 50%, surpassing the combined share of ambient milk and low-temperature fresh milk.
**But over time, consumers' choice between "taste" and "health" began to shift, and flavored milk entered a period of decline.** According to Euromonitor data, the market size of flavored milk in China was 103.6 billion yuan in 2014, but by 2020 it had shrunk to 60.4 billion yuan.
Starting in 2015, Want Want Milk's sales began to fluctuate repeatedly. In the previous decade, Want Want Milk's sales soared from 2.16 billion yuan in 2006 to 9.6 billion yuan in 2015, just one step away from the 10 billion mark.
But in fiscal years 2015 and 2016, China Want Want's dairy and beverage business revenue declined by 13.6% and 13.4%, respectively, with Want Want Milk, which accounted for over 90% of that segment, seeing declines of 13.5% and 12%.
In the following years, Want Want Milk's revenue maintained slight growth, with growth rates of 1.6% and 0.7% in fiscal 2018 and 2019, respectively. It wasn't until 2020 that Want Want Milk's sales exceeded the 10 billion yuan mark. In 2021, Want Want Milk reached a new high, but in fiscal 2022, it declined by 13.5% to approximately 10.017 billion yuan.
It is worth noting that in 2022, China Want Want's rice cracker products, snack foods, and other products all saw sales growth, but only the dairy and beverage segment experienced a double-digit decline, with the key being the poor performance of Want Want Milk.
Although China Want Want stated in its financial report that "Want Want Milk resumed growth in the fourth quarter of fiscal 2022," according to self-media reports, the so-called growth was in distributors' warehouses. In other words, **a significant amount of Want Want Milk did not reach the consumer end.**
Li Zi Yuan's performance also fluctuated. According to its 2022 financial report, Li Zi Yuan's revenue was 1.404 billion yuan, a year-on-year decrease of 4.5%; net profit attributable to shareholders was 221 million yuan, a decrease of 15.8%, ending five consecutive years of growth.
Furthermore, Nutrition Express, AD Calcium Milk, Zhen Guoli, Sour Milk... those once-hot star products are becoming relics of the times hidden in the corners of shelves as consumer preferences change.
Replacing them is the rise of low-temperature fresh milk. According to a research report from Industrial Securities, from 2011 to 2021, the CAGR of low-temperature fresh milk was 9.7%, and its sales share increased from 21.5% to 27.5%.
**Downward Expansion and Innovation**
The decline of flavored milk is closely related to its composition.
In fact, the production standards for flavored milk on the market are not unified. For example, products like Yili Weikezi and Guangming Ice Cream Flavored Milk follow the "National Food Safety Standard for Modified Milk" (GB 25191-2010).
The official definition of modified milk is: a liquid product made with no less than 80% raw cow (or goat) milk or reconstituted milk as the main raw material, adding other raw materials or food additives or nutritional fortifiers, and processed using appropriate sterilization or aseptic techniques.
For instance, Want Want Milk is a type of "modified milk," with its ingredient list using 80% reconstituted milk, which is made from water, whole milk powder, and condensed milk. Additionally, Want Want Milk contains white sugar, food additives, and food flavorings.
Products like Mengniu Zhen Guoli and Yili You Suan Ru are produced according to the standard for "Milk-Containing Beverages" (GB/T 21732-2008). The national standard defines milk-containing beverages as: beverage products made from milk or dairy products as raw materials, adding water and appropriate auxiliary materials, and prepared or fermented.
The core is the beverage, with a relatively low milk content. For example, Nutrition Express is a milk-containing beverage, with its packaging clearly stating that juice content is >5% and milk content is >30%, which does not even meet the standard for modified milk.
Whether it is a milk-containing beverage or modified milk, the milk content is lower than that of pure milk, and the nutritional value is relatively low. Moreover, today's consumers are wary of additives, all of which affect their preferences when choosing liquid milk.
Despite the shrinking market share, flavored milk remains the second-largest category in the liquid milk market. While urban white-collar workers in new first-tier cities have shifted to low-temperature fresh milk and yogurt, in the vast lower-tier markets, flavored milk can still be found in every township.
This is attributed to the deep channel cultivation of these traditional brands over the past 20 years. For example, Want Want launched the "Send Want to the Countryside" project in 2007, with sales personnel equipped with trucks directly facing township terminal orders and delivering goods. By the time of its listing in 2008, Want Want had over 1 million terminal outlets.
**"Blockbuster product + advertising marketing + channel sinking,"** this is the combination that old-generation brands used to establish their current positions. Want Want Milk is still a 10-billion-yuan product, accounting for half of Want Want's revenue, and Wahaha's Nutrition Express was a super product at the 20-billion-yuan level during its peak.
At the same time, the industry itself has seen new changes.
For example, the trend toward low-temperature products. Now, convenience store shelves often feature low-temperature modified milk, also known as "flavored fresh milk," which generally uses raw milk as the primary ingredient, supplemented with water, white sugar, concentrated juice, or whipping cream.
It is worth noting that compared to traditional ambient flavored milk, the taste of low-temperature modified milk is moving closer to new-style tea drinks to suit young people's palates. In addition to traditional flavors like strawberry, banana, and chocolate, flavors such as strawberry peach, white peach rose, coconut latte, and taro paste thick milk have emerged.
As a channel operator, Hema Fresh has stated that low-temperature modified milk is based on modern consumers' demand for milk that is both healthy and tasty. Such products can attract more young consumer groups and also provide an additional choice for those who previously liked milk beverages and ambient modified milk.
Innova data shows that 70% of global consumers believe "taste" is an important factor in making food and beverage experiences richer and more interesting, and 65% of consumers are looking for better product flavors.
For consumers, "flavor" and "health" are always on opposite ends of the scale, and it is difficult to see a polarization. This means that no matter how brands favor one over the other, they can always bet on some consumers' preferences.
Although flavored milk is currently gathering dust on the shelves, it does not mean it will be completely removed. Brands will not give up on the "flavored milk" cake but will push it toward a healthier and more premium direction.


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