In recent years, the dairy industry has gradually entered a downturn, with sluggish terminal product sales and upstream farms experiencing a 'cold winter.' However, among various market segments, A2 milk has stood out. As an emerging high-end market track, A2 milk is in the early stage of rapid growth, with major dairy giants accelerating their layout to use A2 dairy products as a differentiation breakthrough. While jointly expanding the A2 dairy cake, how to maintain differentiated competitive advantages and gain industry discourse power remains a topic that every dairy company needs to address.

New Blue Ocean for Dairy For current industry competition, the difficulty for any new entrant to enter a mature industry with a stable competitive landscape is imaginable. To gain a foothold and survive, besides facing squeeze competition from industry leaders, achieving a leading advantage in new segmented tracks is the key to breaking through.

The dairy industry is such an industry. As a deep integration of primary, secondary, and tertiary industries, it involves all aspects from dairy farming, production and processing, to terminal sales. It is an important industry related to national economy and people's livelihood, with strong rigid demand attributes.

From the competitive landscape, the current dairy market shows very obvious red ocean characteristics, with fierce competition and numerous giants. The 'dual leaders' position is unshakable, while other small and medium brands hover on the edge of survival.

More importantly, in recent years, the dairy market has been affected by multiple factors such as weak demand and declining milk prices, causing the industry to continue hovering in a trough, showing a trend of volume increase but price decrease. In this context, upstream farms have experienced large-scale losses, especially small and medium farms under general operational pressure. During the industry downturn, further market concentration will be the future trend. In this regard, Gao Hongbin, honorary president of the China Dairy Association, once stated that the domestic dairy industry is ushering in an era of pattern reshaping and survival of the fittest. The number of domestic dairy enterprises above designated size has decreased from 815 to 587, and concentration will further increase in the future. On the other side of the industry downturn, with the continuous improvement of people's living standards, there is an obvious trend of industrial upgrading. Consumers pay more attention to product quality and health attributes. As a representative of healthy high-quality products in the dairy market segment, A2 milk has attracted much consumer attention in recent years.

Image / Photo by 摄图网, based on VRF agreement

From a nutritional composition perspective, A2 milk mainly contains the star nutrient A2 β-casein, while ordinary milk contains both A1 and A2 β-casein proteins. Only purebred A2 cows can produce pure A2 β-casein milk.

According to research from Northeast Agricultural University, A2 β-casein has a significantly smaller particle size than A1 β-casein, with higher digestibility and better ability to balance gut microbiota, making it more suitable for Asian lactose intolerant populations.

According to the '2022 Scientific Milk Drinking Trends Insight' study, with the increasing popularity of functional dairy products and growing consumer awareness of A2 milk, 85% of consumers pay attention to protein content when purchasing milk, 49% of respondents value A2-β casein, and 28% of mothers prefer to choose A2 milk for their children. This indicates that consumers place more importance on the quality of dairy products.

Currently, A2 dairy products have become a new blue ocean track for sustained high growth in dairy products. According to data released by Fior Markets, the global market size of the A2 category was $5.89 billion in 2018, and is expected to surge to $21.39 billion by 2026 with a compound annual growth rate of 17.03%, equivalent to over 100 billion RMB.

Facing the new blue ocean of A2 dairy products, various players in the industry have entered the market hoping to get a share, and competition in the track has become increasingly fierce.

Seizing the A2 Dairy Windfall Undoubtedly, the A2 milk category has become the new favorite in the high-end dairy market segment, showing strong vitality.

Among the participants in the A2 dairy track, there are not only industry leaders like Mengniu and Yili, but also regional brands such as Bright Dairy and Wandashan, as well as emerging new consumer brands like the 'industry dark horse' One Cow Adopted.

From a product perspective, A2 dairy products have penetrated most industry segments, whether it is ambient liquid milk, low-temperature fresh milk, or milk powder and cheese products, all have A2 dairy products.

Specifically, in white milk, examples include Yili's Jindian A2 Organic Pure Milk, Mengniu's Selected Pasture A2β-casein Pure Milk, Shrixianyu's Youhu A2β-casein Fresh Milk, Bright Dairy's Zhiyou A2β-casein Fresh Milk, and One Cow Adopted's A2-β casein Organic Pure Milk and A2 Jersey Milk.

At the same time, to highlight the nutritional value of A2 milk, major players in the industry have also intensified competition in protein content.

For example, Shrixianyu's A2β-casein Xiaoxianyu Light Fresh Milk labels A2β-casein content ≥9.7g/L; Mengniu's Selected Pasture A2β-casein Pure Milk has A2β-casein content of 8.1g/L; Jindian A2 Organic Pure Milk has A2β-casein of 9g/L; Weigang Dairy's Zhichun A2β-casein Fresh Milk claims 4g protein per 100mL and A2β-casein content ≥10g/L, showing increasing involution in protein content.

Competition in the milk powder segment for A2 dairy products remains fierce, with all products being high-end brands. These mainly include Yili's Jinlingguan Organic A2 products, Hyproca 1897 Xizhi, Bellamy's A2 Organic Infant Formula, Feihe's Xingfeifan A2, and One Cow Adopted's children's milk powder with added A2β-casein.

Image / Photo by 摄图网, based on VRF agreement

In addition, overseas milk powder brand giants are also making frequent moves. For example, Wyeth launched Qifu Atwe with A2 protein, Shan'erjia A2 milk source children's growth milk powder, and a2 launched a2 Smart Nutrition children's milk.

At the same time, according to the 'A2 Protein Dairy Industry Trends White Paper' (hereinafter referred to as the White Paper), from 2008 to 2022, the compound annual growth rate of the domestic basic white milk market was only 3.2%, while the average growth rate of new A2 white milk products reached 151%, and globally this figure was 27%.

On e-commerce platforms, the growth of A2 dairy products is also very rapid. From 2022 to 2023, e-commerce sales of A2 white milk grew by 45%. In social e-commerce, on the Douyin platform in 2023, the transaction volume of A2 products increased from 3.8e+ to 4.6e+, a year-on-year increase of 21%, significantly higher than the overall dairy market GMV growth rate.

Overall, although the number of entrants in A2 dairy products is increasing, it is still dominated by a few large enterprises, and many local dairy companies have not yet fully laid out A2 products. Because of this, the A2 dairy track has given new consumer brands the opportunity to rise. In this pattern, One Cow Adopted has stood out as a dark horse.

According to the White Paper, from January 2022 to December 2023, One Cow Adopted's A2 white milk accounted for 68% of monthly sales on e-commerce channels, already ranking first in the category.

In my view, the reason why One Cow Adopted can overtake on curves is not only the high product quality but also the deep cultivation of the supply chain. This is also an important direction for future competition in the industry.

Supply Chain 'Support' In the dairy industry and even the entire consumer goods industry, the importance of the supply chain to product quality is self-evident. Enterprises with advantages in the whole industry chain have more say in the current quality consumption environment.

Relevant research data shows that only 30% of dairy cows globally are A2 genotype cows, which is obviously scarce. Therefore, strengthening milk source layout is particularly important.

As a new force in the dairy industry, One Cow Adopted started building upstream farms before the brand was established in 2014. Currently, One Cow Adopted has laid out the entire A2β-casein industry chain.

To solve the milk source problem of A2 milk, One Cow Adopted breeds A2 cows through gene screening methods such as blood collection, DNA extraction, gene fragment amplification, and intelligent group feeding management models. At the same time, One Cow Adopted also jointly developed liquid chromatography-mass spectrometry, providing an industry-recognized detection method for A2β-casein content. The product has also passed the on-site audit of the authoritative external inspection agency SGS, certifying that the A2β-casein content is stable at ≥0.9g/100mL.

Image / One Cow Adopted official WeChat

In the midstream production and processing end, One Cow Adopted uses dedicated vehicles for transportation, strictly cleans pipelines and equipment during production, and strictly distinguishes from ordinary milk in transportation and production, further ensuring the quality of milk sources. In terms of channels, One Cow Adopted's A2 milk has fully entered online e-commerce channels and laid out offline supermarkets, convenience stores, etc., forming full-channel coverage online and offline.

Since One Cow Adopted launched its first A2β-casein milk in 2020, the current products cover multiple series including ambient pure milk, ambient pure milk, refrigerated pure milk, milk powder, and ice cream, totaling 10 A2 products, all with 100% self-owned milk sources.

According to Frost & Sullivan's 2023 research data, One Cow Adopted's A2β-casein pure milk has achieved the number one sales in A2 milk nationwide and has obtained a market position confirmation certificate for the A2 milk industry.

At the same time, in recent years, other dairy brands have also accelerated their supply chain layout.

For example, Yili's Jindian A2β-casein milk is produced from limited organic pastures and has obtained dual organic certification from China and the EU; Mengniu's Three Little Cows pasture raises A2 genotype cows, providing A2β-casein milk sources exclusively for its DNA milk and Before Sleep 30 minutes; Wandashan selects high-quality A2 milk sources from limited pastures and launched the first domestic organic A2 product, the Heiwo series; the a2 brand uses patented DNA testing technology to select A2 cows.

Unlike new consumer enterprises, industry leaders have first-mover advantages in milk source layout and are backed by their brands, making them heavyweight players in the A2 dairy track that cannot be ignored.

In addition to upstream milk source layout, as a new consumer brand, One Cow Adopted is closer to young consumer groups in corporate strategy, brand image, and product design. Its empathy and interaction with users are also major advantages.

For example, in building user trust in the brand. On the official WeChat public platform of One Cow Adopted, users can watch real-time live broadcasts of the pasture at any time to understand the feeding situation of cows; at the same time, One Cow Adopted arranges offline meetings for users and invites users to visit the pasture.

Another example is the City Pasture Plan launched by One Cow Adopted, which directly 'moves' the pasture into the city, making it convenient for children and parents across the country to visit on-site, allowing the public to interact closely with cows, including feeding cows, taking cute baby photos, etc., making the public more intuitively understand the science of cows and the story behind a good glass of milk, achieving the purpose of education and entertainment. This further narrows the distance between the brand and consumers, giving the product and brand more connotative value.

In addition, One Cow Adopted also actively carries out co-branding activities combined with current hot trend elements that users pay attention to. For example, in early 2024, One Cow Adopted launched a Dragon Year marketing campaign with the Milk Dragon IP, co-branded with Tundun BOTTLEJOY, and co-branded with well-known milk tea and coffee brands, further expanding the target consumer group and broadening the brand boundary.

As a blue ocean track in the dairy industry, A2 dairy products have bright prospects. However, facing the pressure of slowing demand and intensified competition in the dairy industry, how to accurately insight into consumer needs, tell the category story well, use 'new quality productivity' to improve supply chain efficiency, do a good job in product quality control and innovation, avoid falling into the homogenization trap, and provide better products with 'quality-price ratio' are the keys for market participants to enhance product competitiveness.

This is true for both new consumer brands and leading brands.

*Note: The cover image in the article is from 摄图网, based on the VRF agreement.

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