"A bottle of milk a day makes a strong Chinese nation" was once a slogan to encourage people to drink ambient milk, but this once cost-effective nutritional product now seems to be rejected by increasingly health-conscious Chinese people. Low-temperature milk is taking center stage. "Ambient milk has lower requirements for milk sources and can be reconstituted from milk powder, commonly known as 'canned milk'." "Low-temperature milk tastes better and is healthier." From a nutritional perspective, low-temperature milk seems to be a healthier option than ambient milk. According to BOCOM International forecasts, 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 ambient milk to fresh milk. Against this backdrop, New Hope Dairy, which has always focused on the "fresh" business, is also starting to tell a new story with its low-temperature milk business. As a leading regional dairy enterprise, over the past decade or more, New Hope Dairy has been telling the "fresh" story, deploying different product lines through its various sub-brands to enhance brand image and net profit; at the same time, it has made large-scale acquisitions, successfully entering the "ten-billion club" in 2022. However, although the "fresh strategy" helps improve brand image and net profit, the territory New Hope Dairy has carved out through acquisitions may not quickly penetrate consumers' minds in the short term. Coupled with the accelerating internal competition in the low-temperature milk market, New Hope Dairy's national expansion still has a long way to go. A New Story for Low-Temperature Milk "I fell in love with low-temperature fresh milk at the first sip. The taste is rich, thick, smooth, and icy cold. Now you can't find ambient milk in my home." Xu Jie, a post-95s consumer who likes to try new things and is a loyal fan of low-temperature fresh milk, said that she started trying low-temperature milk in 2020 and developed a habit of drinking it because of its taste and flavor. "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." Xu Jie said that her choice to try low-temperature milk was mainly for health reasons. She recommended to the author, "Based on my years of drinking milk experience, I still recommend fresh milk. The most recommended are 3-4 day low-temperature fresh milk or 5-7 day shelf-life bucket milk, because these types have the least additives and the most complete nutrition." Xu Jie has done her homework: low-temperature milk has high requirements for milk sources, must use fresh, pollution-free nearby milk sources, and the milk must be processed within 24 hours from milking, with cold chain throughout, making it fresher, safer, more natural, and more nutritious. "Ambient milk has lower requirements for milk sources and can be reconstituted from milk powder, commonly known as 'canned milk'. And if it can be preserved for so long, I always feel there's some black technology in it." Image / Photo by 摄图网, based on VRF agreement In fact, since the pandemic, consumers have become more focused on healthy eating. Compared with ambient milk, low-temperature milk has obvious advantages in nutritional content and "freshness" perception, gradually gaining popularity among consumers. According to Kantar data, the national penetration rate of low-temperature fresh milk increased from 18% in 2018 to 39% in 2023, and the penetration rate of high-end milk increased by 5.9 percentage points year-on-year. In addition, data shows that low-temperature milk has achieved steady growth across all channels, with sales on Tmall, JD.com, and Douyin in Q1 2024 increasing by 24%, 6%, and 12% year-on-year, respectively. Under this trend, New Hope Dairy, which has been committed to the "fresh" business in recent years, seems to be entering a harvest period. It is understood that over the past decade or more, New Hope Dairy has been telling the "fresh" story, deploying different product lines through its various sub-brands to target different consumer pain points. For example, as early as 2011, New Hope Dairy launched products with the concept of "selling only on the same day", introducing the 24-hour series to emphasize freshness; Asahi唯品 focuses on the high-end fresh milk market; the Huorun series drives growth through new products. New Hope Dairy's "fresh" story is starting to work. According to financial reports, in the first half of 2024, the "24-hour" series of fresh milk continued its national matrix layout, with Hunan Nanshan launching "Golden 24 Hours", and the mid-to-high-end series growing by over 30% year-on-year; the high-end brand Asahi唯品 fresh milk grew by about 15% year-on-year, achieving an overall growth of about 15% for high-end fresh milk; the Huorun series achieved 15% year-on-year growth driven by new products. In terms of overall performance, in the first half of 2024, New Hope Dairy achieved operating revenue of 5.364 billion yuan, a year-on-year increase of 1.25%; net profit attributable to the parent company was 296 million yuan, a year-on-year increase of 25.26%. The company's performance growth is mainly due to New Hope Dairy's focus on low-temperature dairy products, with "fresh" as the core theme, and making low-temperature fresh milk and low-temperature specialty yogurt key focus categories. New Hope Dairy, which has always built its moat around the word "fresh", has encountered the rapidly growing low-temperature milk track and told a new story. The Long Road to National Expansion "There's a brand called Yongyou, which is local milk from Ningbo. I personally think it's very tasty, but I've never seen it since I moved to Beijing." Wang Lei, born in Ningbo, told the author. In fact, low-temperature milk has a short shelf life and high storage requirements, requiring high cold chain transportation, which limits its sales radius due to milk source and cold chain cost constraints. Generally, pasteurized milk with a shelf life of 5-7 days can only be quickly distributed within about 300 kilometers of the milk source at a reasonable cost; if far from the milk source, costs increase significantly. Even in recent years, many dairy companies have launched "ultra-pasteurized milk" with a sterilization process between pasteurized milk (commonly known as fresh milk) and ultra-high temperature sterilized milk (commonly known as ambient milk). This product loses some active substances but extends the shelf life to 14-20 days, with a sales radius of only 500 kilometers. New Hope Dairy's core product, the "24-hour" series, has a sales radius of only 100-150 kilometers because it ensures completion from production to shelf removal within 24 hours. This also means that low-temperature milk is limited by its sales radius, which also makes this industry mainly dominated by local regional dairy enterprises. But New Hope Dairy clearly has national ambitions. Over the past decade or more, New Hope Dairy has been expanding its territory through continuous mergers and acquisitions of various local dairy enterprises across the country, aiming at the national market. Since 2002, New Hope Dairy has launched two rounds of "acquisition waves". The first round acquired regional dairy companies such as Chengdu Huaxi, Hangzhou Shuangfeng, and Hebei Tianxiang, attacking the East China and North China markets; the second round acquired Hunan Nanshan to enter the Central China market, followed by acquisitions of Suzhou Shuangxi, Sichuan Sanmu, etc., to continue coverage and penetration. After listing on the A-share market in 2019, the company continued to acquire part of the equity of Aoniu Dairy, further intensifying its national layout. So far, New Hope Dairy, headquartered in Chengdu, Sichuan, has begun to accelerate its layout in East China, Central China, North China, and other regions, in addition to its base in the Southwest market. "But the regional dairy companies acquired by New Hope Dairy already have a certain brand awareness locally, and they each operate independently without affecting each other." Liu Xiaoqian, a media person focusing on dairy companies, thinks this approach has advantages, making it less difficult for New Hope Dairy to acquire and integrate businesses. In the first half of this year, New Hope Dairy's revenue in the Southwest, East China, North China, and Northwest regions was 1.875 billion yuan, 1.503 billion yuan, 536 million yuan, and 679 million yuan, respectively. In the first half of this year, North China became a new growth point for New Hope Dairy. While the Southwest and Northwest regions experienced negative growth, North China's revenue increased by 20.21% year-on-year, with its revenue share rising from 8.42% in the same period last year to 9.99% now. "But the short-shelf-life low-temperature fresh milk products produced by the regional dairy companies acquired by New Hope Dairy still have a limited radiation radius, and it is even difficult to form a superimposed advantage or help New Hope Dairy create a brand effect." Liu Xiaoqian told the author that brand power is very important for dairy companies, but the name "New Hope Dairy" has clearly not entered the minds of consumers in these regions. In fact, when the author communicated with consumers in Hebei, Beijing, and Northeast China about their impressions of New Hope Dairy, most responded with "I haven't noticed it" or "I'm not familiar with it." During visits to two large supermarket chains in Hebei, the author also found that there were no New Hope Dairy-related products on the shelves. Image / No New Hope Dairy products found on shelves "I've never heard of this brand. In our area, Sanyuan's low-temperature milk is more well-known and has a larger consumer base. Other brands like Mengniu, Yili, and Junlebao also sell well." Wang Fang, a promoter in the fresh milk section of a supermarket chain, said. Although New Hope Dairy has accelerated its layout in the North China and Northwest markets, how to build brand influence through acquired local dairy companies and accelerate penetration in mainstream channels nationwide remains a long road. Surrounded by Strong Competitors New Hope Dairy's challenges are not limited to this. According to BOCOM International forecasts, 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 ambient 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 milk market with sales exceeding 10 billion yuan, which means the market has unlimited imagination space. Therefore, the number of dairy companies entering this market is increasing, and new challengers are emerging, making competition in the low-temperature fresh milk market increasingly fierce. After 2018, Mengniu and Yili successively entered the low-temperature pasteurized milk field. Mengniu established an independent fresh milk division in 2018, and by 2019, Mengniu's fresh milk products covered 24 provinces and 50 key cities; it also established the Shiri Xianyu sub-brand to enter the high-end low-temperature milk market. Yili launched three new low-temperature fresh milk products at the end of 2019 to increase its presence in the low-temperature milk track. "Previously, there were only a few types of low-temperature milk, such as Guangming, Sanyuan, and Wandashan. Now the fresh milk display cabinets are getting bigger, and there are more and more brands, with new products from Jianai, Mengniu, Yili, and Junlebao emerging endlessly," Wang Fang told the author. Not only are dairy companies entering the low-temperature milk market, but the author also found that traditional supermarket channels are launching their own private-label fresh milk brands to join the fierce market competition. Image / Channels launching their own fresh milk products With fierce external competition and excess raw milk, competition among dairy companies is further escalating. According to data from the National Bureau of Statistics, in 2023, China's raw milk production reached 41.97 million tons, an increase of 6.7% year-on-year. Dairy product consumption recovered at a low level, and raw milk production still had a temporary surplus. Dairy processing enterprises faced pressure from raw milk surplus and inventory reduction, and it is expected that raw milk purchase prices will remain low. According to the latest data from the Ministry of Agriculture and Rural Affairs, in the third week of August, the average price of raw milk in 10 major producing provinces, including Inner Mongolia and Hebei, was 3.21 yuan per kilogram, unchanged from the previous week, down 14.6% year-on-year. In this context, the "promotion war" in the dairy industry has also followed. "Brands are all fighting promotion wars. Whether online or offline, you can see liquid milk, yogurt, milk powder, and other categories being sold at reduced prices, with more discounts for more purchases," Wang Fang introduced. Almost every day there are promotions like "spend 29 get 10 off" or "spend 35 get 15 off". Because distributors are cutting prices to promote sales, terminal purchase prices are cheaper than before, and most series are on sale. Image / Low-temperature milk "promotion war" "The entire first half, including the third quarter, the market was still quite chaotic. On the one hand, several leading dairy companies face inventory reduction pressure; on the other hand, due to the decline in raw milk prices, some small and medium-sized enterprises are using low-cost, low-price products to grab market share. We also see small and medium-sized dairy companies eroding some of the market share of leading companies," explained Zhang Ping, CFO of Mengniu, at the performance meeting. Yili also mentioned that the average selling price of dairy products declined somewhat in the first half. Under the fierce price war, New Hope Dairy can only adopt a strategy of exchanging promotions for volume. In the first half of 2024, New Hope Dairy increased its promotion expenses by 18.69% to 474 million yuan, accounting for 54.8% of sales expenses, up from 48.12% in the same period last year. Even so, revenue in New Hope Dairy's "base" is also declining. In the first half of 2024, New Hope Dairy's revenue in the Southwest region was 1.875 billion yuan, down 6.87% year-on-year; while revenue in the Northwest region fell 12.68% year-on-year to 679 million yuan. With enemies on all sides, New Hope Dairy is likely to face a tough battle ahead.