Introduction: After the 2008 "melamine" incident, China's dairy industry, after 10 years of development, has begun to show vigorous growth again. Milk has become one of the indispensable and beloved foods in people's lives. Supermarkets large and small are filled with a dazzling array of milk products, and occasionally internet-famous yogurt catches the eyes of the post-80s and post-90s generations.
20 Years of China's Dairy Industry The World Health Organization regards per capita dairy consumption as one of the important indicators of a country's standard of living. Developing the dairy industry is an important choice for enhancing national physique, especially improving the nutrition and health of adolescents, and is also a necessary prerequisite and important symbol for building a healthy China.
The development of the dairy industry plays a significant role in improving the dietary structure of urban and rural residents, enhancing the physical quality of the nation, and raising the living standards of the people.
China's dairy industry started late and from a low base, entering a phase of rapid growth from 1997. The 2008 "melamine" incident dealt a major blow to the dairy industry, with many dairy enterprises' production nearly coming to a standstill, and the industry's total output even experienced negative growth. After the incident, the state's rectification of the industry and enterprises' strengthened awareness of safe production led to a recovery period. Industry output, production value, and sales revenue all showed a slow and steady recovery, the domestic dairy consumption market began to warm up, and consumption gradually became more rational.
Specifically, the development of China's dairy industry can be divided into three stages:
01 Market-Dominated Era (1997-2008) In the 1990s, the industry's capacity was relatively small. Due to technological limitations, the market was dominated by low-temperature pasteurized milk, which was not easy to preserve, had limited sales radius, and was difficult to scale. Most enterprises were regional, and no national brand had yet emerged. At that time, Yili, now the industry leader, was still a small dairy enterprise nestled in the Inner Mongolia grasslands.
In 1999, Niu Gensheng founded Mengniu. Then the "Grassland Heroes" Yili and Mengniu launched room-temperature milk, began selling milk nationwide, drove the development of the entire milk industry, and rapidly expanded the market size. Yili began advancing its "Net Weaving Plan" in 2006, while Mengniu grew at rocket speed with a large distributor system plus marketing coordination. Guangming, the dairy giant that stuck to low-temperature products, gradually fell behind Yili and Mengniu, laying the foundation for the current dominance of room-temperature milk.
In this history, there are several time nodes and stories that must be mentioned.
In 1993, Yili underwent shareholding reform, transforming from a state-owned enterprise to a joint-stock company. Zheng Junhuai, known as the "Godfather of China's Dairy Industry," took the helm of Yili. In the same year, Tetra Pak, the packaging company that played a crucial role in the rise of the Grassland Heroes, officially began expanding its business in China.
On March 12, 1996, Yili shares were listed on the Shanghai Stock Exchange, becoming the first A-share listed company in the national dairy industry.
In 1997, Yili introduced Tetra Pak packaging lines, and the familiar boxed room-temperature milk was born.
In 1999, Niu Gensheng, who had been ousted by Yili, founded Mengniu. Under the predicament of "no factory, no milk source, no market," he started a legendary entrepreneurial story. Shortly after, Tetra Pak extended an olive branch to Mengniu, selling or giving away equipment worth tens of millions at a very favorable price, and Mengniu also launched room-temperature milk.
Here we should mention Tetra Pak, which has been described by the media as the "arms dealer behind the dairy battlefield." This is not only because it was rumored that Tetra Pak captured three-quarters of the profit from each carton of Tetra Pak milk, nor only because Tetra Pak pushed Mengniu and Yili, nestled in Inner Mongolia, to the throne of the Grassland Heroes, but also because Tetra Pak profoundly changed the landscape of China's dairy industry: the decline of fresh milk and the prevalence of room-temperature milk, reconstituted milk, and flavored milk.
With Tetra Pak's help, the Grassland Heroes, armed with room-temperature milk, captured the market at an astonishing speed. Fresh milk manufacturers were not idle either. By 2004, four Chinese dairy manufacturers and sellers mainly selling low-temperature milk—Guangming, New Hope, Yantang, and Sanyuan—had formed an alliance with International Paper (another packaging company). A battle between fresh milk and room-temperature milk broke out.
Amid a fierce national debate over "freshness" and "banning freshness," on the afternoon of February 2, 2005, the Standardization Administration of China held an expert seminar on the "fresh" label for liquid milk in its meeting room. About 40 people attended, including experts or heads from the Ministry of Health, Ministry of Agriculture, Standardization Administration, China Dairy Association, China Dairy Industry Association, National Food Industry Standardization Technical Committee, Sanyuan, Mengniu, Yili, and Heilongjiang Dairy Group.
Interestingly, a letter from Tetra Pak's Director of Communications, Yang Bin, to leaders of the China Dairy Industry Association was brought into the meeting and distributed to all participants, strongly expressing support for the "ban on fresh."
We now know the outcome of this battle: low-temperature fresh milk could no longer use names like "fresh milk" on its packaging, but only standard names such as "sterilized milk (milk)" and "pasteurized milk (milk)." Subsequently, low-temperature fresh milk, which had been marketed as "fresh and nutritious," was forced to change its name. It wasn't until January 1, 2008, that the "fresh ban" was lifted, and pasteurized milk could be called fresh milk again, but low-temperature fresh milk had already lost most of its market share and was beyond recovery. Room-temperature milk and flavored milk, named "pure milk" and "breakfast milk," won a complete victory and almost monopolized the liquid milk market.
Although no one admitted it, the "fresh ban" dispute was still considered a battle between the fresh milk faction represented by Guangming and Sanyuan and the room-temperature faction represented by Yili and Mengniu; a battle between the China Dairy Association (room-temperature camp) and the China Dairy Industry Association (fresh milk camp); and a battle between International Paper and Tetra Pak.
Since then, low-temperature dairy companies, led by Guangming, which had already ceded the industry leadership in 2003, could no longer contain the advance of room-temperature milk nationwide. The Grassland Heroes established their dominance.
02 Milk Source-Dominated Era (2008-2016) After the 2008 melamine incident, the industry overcorrected from the previous stage. The entire industry was making up for food safety, emphasizing milk source construction. A large number of large-scale pastures were built, accompanied by the recovery of dairy consumption confidence and demand. The dairy industry entered a brief growth period in 2012-2013. During this period, a number of brands with milk source advantages emerged. Relying on milk source advantages and the ability to open channels, they fought with price discounts. These dairy companies reached their peak during the 2013 milk shortage. Subsequently, in 2014, large-scale pastures began to increase supply, leading to a comprehensive surplus of milk sources. Coupled with the double squeeze of low-priced imported milk powder, more than half of the milk source enterprises began to incur losses. In 2016, leading enterprises were forced to join the industry price war. The heavy promotions by the leaders crushed the last straw for many small enterprises struggling to survive. The industry's years of consolidation basically came to an end.
03 Era of Whole-Industry-Chain Integration Capability (2016-present) After the industry consolidation ended, coupled with the consumption recovery in 2017, the early layouts of industry leaders began to pay off. The industry gradually recovered, driven by categories more in line with consumption upgrades, such as yogurt. In this era, the core is the ability to integrate the industry chain, which places higher demands on the overall operational capability of companies. Continuous innovation has become a new requirement for enterprises in the context of consumption upgrades.
The market share of leading enterprises has further increased. Regional enterprises and emerging brands, avoiding the fierce competition in the room-temperature market, focus on low-temperature products and, with years of channel cultivation in their regions, seize regional markets. Examples include Guangdong Fengxing, Yantang, Chenguang, and Xiangmanlou; Fujian Changfu; Jiangsu Weigang; Henan Kedi; Beijing Sanyuan; and Gansu Zhuangyuan. Emerging brands, through innovative products and strong operations on new e-commerce channels, capture the post-80s and post-90s markets.
The "Grievances and Grudges" of the Twin Stars of China's Dairy Industry The golden 20 years of China's dairy industry were introduced above, and among them, the current duopoly Yili and Mengniu must be mentioned. The development of the "Grassland Heroes" is basically a microcosm of the development of China's dairy industry.
01 Growth History of Giants: Alternating Development of the Twin Heroes Since Mengniu's founding in 1999, the competition between Yili and Mengniu can be divided into three stages:
Stage 1: 1999-2006, Yili Leading Yili underwent restructuring in 1993 and listed on the A-share market in 1996. It had long been the number one dairy brand in Inner Mongolia. With room-temperature milk, it expanded sales nationwide, replacing Guangming as the national dairy leader. Mengniu, founded in 1999 under the leadership of Niu Gensheng, who had been ousted by Yili, used a large distributor system to distribute products nationwide and, through strong advertising operations, developed at "rocket speed." It listed on the H-share market in 2004, becoming the "second national dairy brand."
Mengniu, founded in 1999, took only 4 years to go from outside the top 1,000 in the industry to the top three. Its 2003 prospectus claimed a marketing strategy of "What you drink is not milk, it's advertising," which Yili has also adopted to this day. On October 15, 2003, when China's first astronaut Yang Liwei went into space, Mengniu became the sole milk sponsor, and "China Astronaut Special Milk" has been used ever since. In 2004-2005, Super Girl became a phenomenal TV show in China, attracting huge audiences. Mengniu seized this marketing opportunity, greatly expanding its brand influence.
Stage 2: 2007-2010, Mengniu Leading, with the Melamine Incident Setting the Stage Mengniu, the dark horse, continued to create miracles. Niu Gensheng took 8 years to increase Mengniu's sales from only 40 million yuan in 1999 to 21.318 billion yuan in 2007, surpassing Yili's 19.36 billion yuan for the first time. Mengniu also became the first domestic dairy company with revenue exceeding 20 billion yuan, becoming the new king of China's dairy industry. It continued to surge, breaking the 30 billion yuan sales record first, and remained the champion for four consecutive years. Compared with Mengniu's rocket speed, Yili began to steadily advance its "Net Weaving Plan" in 2006 (precise management system, innovative marketing models, milk source construction upgrades, achieving integrated production, sales, and market operations, and intensive cultivation of each market).
The 2008 melamine incident dealt a heavy blow to the entire dairy industry. As the domestic dairy leader, Mengniu and Yili's milk powder was also found to contain melamine, and Chinese-made milk powder became the target of public criticism. However, the melamine incident seemed to become a turning point for Yili and Mengniu's performance, and their treatment of distributors at that time also laid the groundwork.
After the melamine incident, all products before that date had to be removed from shelves and destroyed, and losses were inevitable. However, in terms of bearing losses, Mengniu and Yili had different strategies. Mengniu required its distributors to share the responsibility, splitting the losses 50-50, which caused many distributors to face cash flow problems, becoming the last straw. Yili chose to bear the full losses, which won the praise of many distributors and gave desperate people hope for China's dairy industry. Compared with Mengniu, Yili established a positive image. When the dairy industry began to recover, many distributors defected to Yili, especially in the Shandong-Henan region, which had the largest market share. These two regions later became the largest consumption areas for Yili dairy products.
The melamine incident also exposed the shortcomings of Mengniu's "rocket speed" development. Compared with Yili, which had a history of over 30 years, Mengniu had developed for too short a time and too fast, lacking deep roots, and faced the risk of cash flow rupture. In July 2009, COFCO, together with Hopu Fund, invested in Mengniu, with COFCO becoming the largest shareholder, which also laid the groundwork for the subsequent development of the two giants and the competitive landscape.
Stage 3: 2011-present, Yili Leading Again After the pain of the melamine incident, Yili continued to accumulate steadily. After COFCO's entry, in 2011, founder Niu Gensheng officially resigned as chairman of the board. With management changes and internal reforms, under COFCO's management style, which was clearly state-owned, Mengniu lagged behind Yili in channel management and market development. Yili steadily advanced its Net Weaving Plan, achieved results in marketing and brand building, and regained the lead over Mengniu in 2011, maintaining it to this day.
It seems that Mengniu, after being taken over by COFCO, lost its sharp marketing acumen. Yili, using the same marketing strategies that Mengniu used during its rise, turned the tables. Anmuxi sponsored "Running Brothers," QQ Star sponsored "Dad, Where Are You Going?," and Jindian sponsored "I Am a Singer." Yili secured all these top variety shows, reaping significant benefits. Mengniu, on the other hand, seemed to rely only on increasing sales expenses and promotions to maintain its sales.
In the liquid milk business, which accounts for the highest sales proportion, Mengniu, under its original management in the 2000s, quickly expanded nationwide through a large distributor system and, with strong marketing events like space and Super Girl, won the national sales championship for many years. After 2012, Yili's liquid milk sales, accumulated through deep channel cultivation, began to catch up and surpass Mengniu. In recent years, through the strong growth of major products like Anmuxi, Yili has comprehensively overtaken Mengniu.
Perhaps seeing this situation, Niu Gensheng could no longer sit still: in September 2016, Niu Gensheng returned to Mengniu as a member of the "Strategy and Development Committee." There is hope that Niu Gensheng's unconventional return can bring new vitality to Mengniu and find the "rocket cow" of the past. After all, Mengniu and Yili have similar sales, but Mengniu's market value is only half of Yili's.
02 Current Landscape: Yili Temporarily Leads Overall, Both Aim for the 100 Billion Target After reviewing the growth history of the dairy twins, let's look at the current competitive landscape from their 2017 first-half financial reports.
1) Overall Financial Data: Significant Growth, Narrowing Gap Data source: Yaoshi Mengyin Undoubtedly, Yili continues to lead the industry with its scale advantages in revenue and net profit and strong growth rate. In this report, Mengniu's gap with Yili in total revenue and net profit has narrowed, reversing the unfavorable situation of falling further behind since 2011. As for its net profit being only one-third of its rival, industry insiders point to three main reasons:
- Low proportion of high-end product sales, especially in the milk powder segment;
- Yili's raw milk costs are lower, mostly from small and medium pastures in Northeast and Inner Mongolia. Mengniu's milk sources mostly come from large pastures like Modern Farming and Huishan, squeezing profit margins;
- Mengniu's supply chain system is less efficient, with logistics belonging to third parties, resulting in higher costs; Yili has its own logistics and distribution system, with lower costs.
2) Products: Similar Star Products, Yili's New Products Grow Faster Data source: Yaoshi Mengyin It can be said that at the product level, Yili and Mengniu are evenly matched, or they converge.
Both focus on liquid milk as the main battlefield, with revenue accounting for 70%-80% of the total, and each has star products like Jindian and Telunsu as flagship products. They continue to innovate and enrich product categories. In the past two years, they have been making efforts in high-end and segmented scenarios, targeting different groups with differentiated selling points.
Although Yili and Mengniu inevitably engage in "hand-to-hand combat" with similar product categories and prices, Yili has an advantage in milk powder and cold drinks, which is one of the advantages maintaining the gap.
Mengniu's revenue is more concentrated compared to Yili, mainly relying on high-quality products like Telunsu and Chunzhen; Yili's product structure is more diversified, and its new product marketing is effective, with star products like Jindian, Anmuxi, Changqing, and Meiyitian continuing to grow steadily.
Star products, in fact, go through a rapid rise phase and eventually decline. Therefore, for dazzling new stars like Anmuxi, Chunzhen, Jindian, or Telunsu, maximizing brand premium is understandable, but thinking of Mosilian, which was once overtaken, cultivating fundamentally innovative "successors" as soon as possible is an important task for both.
3) Marketing: Yili Focuses on Top-Tier, Mengniu's Precision Slightly Lags Data source: Beverage Distributor's Treasure Book In terms of variety show sponsorship, Yili's Anmuxi sponsored the popular variety show "Running Man" for three consecutive seasons and signed its members Angelababy, Li Chen, and Dilraba. Mengniu's only comparable move might be its first-time sponsorship of the popular online variety show "U Can U Bibi," which also aired its fourth season. Ma Dong and He Jiong creatively promoted the slogan "Chunzhen, no additives; after milk, speak the truth."
In recent years, creative mid-roll ads in films and TV series have increasingly become the first choice for advertisers. In "Spring Breeze Ten Miles," Yili's Yoghurt's three creative mid-roll ads were all performed by the female lead Zhou Dongyu. Compared to Yili's preference for top satellite TV and big IPs, Mengniu has more product placements in films and TV series.
In public and government sponsorship activities, Yili signed as the only official dairy partner for the Beijing 2022 Winter Olympics and Paralympics, becoming the world's first "Double Olympic" health food company. Mengniu, besides appearing at the BRICS Forum, is also an official partner of NBA China, Shanghai Disneyland, and China's space program.
Comparing the two companies' sales expenses, behind the high revenue is increasing marketing investment and distribution costs. Yili's advertising expenditure ratio is significantly higher than Mengniu's, showing a high emphasis on market publicity and significant marketing results. Mengniu's marketing seems to lack the sharpness, precision, and dominance of the Niu Gensheng era. In executing the marketing strategy of "What you drink is not milk, it's advertising," Yili clearly does better.
In the face of today's fragmented attention and diverse choices, both can invest more thought into how to accurately and effectively reach consumers and extend viewers' attention to entertainment programs to the brand itself.
4) Channels: Large Distributor Model vs. Deep Distribution Model Data source: Yaoshi Mengyin The advantage of the large distributor model is that it allows enterprises to quickly gather a group of powerful distributors nationwide. As long as they are given sufficient profit margins, they can distribute products at the fastest speed, helping enterprises grow rapidly. However, the side effects of the large distributor model are that distributors vary in quality and become too large to control, leading to insufficient momentum and lack of terminal control. Distributors may only occupy territory without deep cultivation, or severely squeeze the profits of secondary wholesalers, or lack motivation to grow, bargaining with manufacturers. This can easily lead to enterprises being held hostage by large distributors.
The deep distribution model requires a large initial investment and relatively slow results. It requires steady progress, promoting channel segmentation and flattening. But after establishing a systematic distribution network, it has higher control and execution compared to the large distributor model. There are many similar examples in the food industry: Wuliangye and Moutai, Great Wall and Changyu, Synear and Sanquan.
Since the 2008 melamine incident, Mengniu's energy has been focused on survival, personnel turmoil, and capital operations. Yili has been advancing its Net Weaving Plan since 2006 without interruption, with annual goals for channel construction. Now the results are evident. Mengniu's sales system is gradually reforming, and the effects await market testing.
5) Upstream and Downstream Expansion: Yili's Second Net Weaving, Mengniu's External Expansion In terms of milk sources, in 2012, Yili raised 5 billion yuan through a private placement, investing on a larger scale in milk source demonstration parks, driving more than 2,400 quality milk source supply bases nationwide through demonstration parks, and supporting upstream large-scale cooperative pastures in the industry chain. In production and processing lines, it invested in liquid milk, milk powder, yogurt, and cold drinks projects. In 2014, Yili established the world's largest dairy base in New Zealand, signed a contract to build a factory with DFA in the United States, established a research and development center in Europe, and began going global. The whole process can be described as a second net weaving, laying a good foundation for the company's future development.
Since COFCO took over, Mengniu's pace of external mergers and acquisitions has accelerated significantly. In 2010, it held 51% of Junlebao's shares, greatly expanding yogurt production capacity. In 2013, it first acquired Yashili for about HK$11.4 billion, completing the largest merger in China's dairy industry; secondly, it increased its stake in Modern Farming, becoming its largest shareholder; thirdly, it merged Danone's yogurt business in China, and in the same year, Danone became a strategic shareholder. In 2014, Mengniu and Yashili acquired all of Dumex China's equity from Danone for 150 million euros. In 2017, it increased its stake in Modern Farming to 57.9%, securing a supply of high-quality raw milk.
Yili and Mengniu, both from Hohhot, have been "loving and fighting" for nearly 20 years. There is no denying that they have become deeply rooted national brands. They also share the same small goal of "crossing the 100 billion yuan threshold by 2020."
The wave of consumption upgrades is rolling in. On this magical and great land of China, supported by a population of over a billion, China's size can fully accommodate two 100-billion-yuan dairy enterprises. We have reason and confidence to believe that we deserve better products and brands. Yili and Mengniu still have a long way to go to become the next 100-billion-yuan dairy companies and the next "Coca-Cola and Pepsi." We wish them success in achieving their goals soon.
Outlook for the Future Development of China's Dairy Industry 1. Favorable Environment Promotes Consumption Growth According to the "National Dairy Industry Development Plan (2016-2020)," China's per capita dairy consumption is only one-third of the world average and one-half of developing countries. With the increase in urban and rural residents' income, urbanization, and the implementation of the two-child policy, there is great potential for growth in dairy consumption. It is estimated that by 2020, the total national demand for dairy products will be 58 million tons, with an average annual growth rate of 3.1%, 0.5 percentage points higher than the average annual growth rate during the "12th Five-Year Plan" period.
2. Industry Market Concentration Will Further Increase According to the "China Dairy Quality Report 2017," at the end of 2016, there were 627 dairy processing enterprises above designated size (annual sales of over 20 million yuan) in China, a decrease of more than 100 compared to 2008. The top 15 dairy processing enterprises by sales had sales of 179.4 billion yuan, accounting for about 53.9% of the national total.
By 2017, Yili and Mengniu accounted for 22% and 21.8% respectively, together close to 50%. Guangming, ranked third, only accounted for 4.8%. So overall, Yili and Mengniu have basically formed a duopoly. The industry landscape is already clear: Yili and Mengniu are in the first camp; Guangming is between the first and second camps; the second camp is represented by Junlebao, Sanyuan, and New Hope with sales of 5-10 billion yuan; the third camp consists of regional dairy enterprises with sales within 2 billion yuan. With the "Grassland Heroes" expanding through asset restructuring, mergers, and acquisitions, strengthening control over milk sources and sales channels, the duopoly's market share is expected to reach 70% in the next five years, and regional market share will be highly concentrated in strong regional brands. Small and medium-sized enterprises without competitive advantages in products and channels face elimination.
3. Product Innovation and Major Products Become Main Profit Sources A product structure dominated by major products has become an industry trend. As an important profit source for dairy enterprises, major products can provide stable cash flow, reduce sales expenses, and enhance brand value. Examples include Yili and Mengniu's pure milk, organic milk, and room-temperature yogurt series. Regional dairy enterprises have weaker capabilities for short-term, large-scale promotion of innovative products, and their major products mainly rely on years of market accumulation, such as Yantang Dairy's red date and wolfberry milk.
With changes in the consumer market, consumption upgrade demand has become the main driver of market growth, and product innovation has become an important competitive strategy and profit source for dairy processing enterprises. Room-temperature yogurt is one of the successful cases where product innovation and R&D brought growth momentum to the dairy industry. Guangming's Mosilian, Yili's Anmuxi, and Mengniu's Chunzhen successively successfully tapped the room-temperature yogurt market.
In the future, opportunities for emerging brands to break into the national market still exist, with differentiated high-profit products being the core. Regional dairy enterprises' advantages are more concentrated in deep cultivation of local markets, with product innovation closely centered on regional market consumers, thus forming differentiated product competition strategies.
4. Consumption Structure Gradually Changes, Low-Temperature Milk Has Great Development Space In the overall dairy consumption structure, liquid milk and milk powder account for a relatively high proportion. From 2012 to 2016, after rapid growth, China's consumption of liquid milk and milk powder stabilized. The "China Dairy Quality Report 2017" shows that in China's liquid milk consumption structure, pasteurized milk accounts for 10%, UHT milk accounts for 40.6%, fermented milk accounts for 21.3%, and flavored milk accounts for 28.1%. In the United States, Australia, and other countries, pasteurized milk accounts for more than 80% of total liquid milk consumption, while in China it is only 10%, relatively low. In the future, with the gradual improvement of cold chain transportation, consumption upgrades, and optimization of consumption structure will also provide new development opportunities for dairy processing enterprises in the low-temperature field.
Compared with national dairy enterprises, regional dairy enterprises focus on channels and consumer taste needs in specific regions, forming significant local brand advantages in the low-temperature field. In the future, driven by consumers, regional dairy enterprises and emerging brands will have long-term, high-speed, sustainable growth potential in the low-temperature field.
5. Diversification of Sales Channels For dairy sales, sales channels are generally divided into modern channels, traditional channels, special channels, and e-commerce channels.
Modern channels mainly include shopping malls, convenience store chains, and shopping centers. They rely on standardized core operating points to quickly replicate and expand to form chain scale, and increasingly show a strong position in the supply chain. In modern channels, dairy enterprises face challenges not only from brand competition but also from the struggle for control of marketing resources.
Traditional channels mainly include wholesale markets, farmers' markets, and grocery stores. Due to the characteristics of traditional channels, such as a large number of terminals, scattered distribution, and relatively low individual turnover, dairy enterprises have a high degree of decision-making power in product mix, pricing, and promotion policies. Channel operating costs are mainly reflected in sales rebates and activity support.
Special channels mainly include schools, hospitals, cinemas, and restaurants. Customers in special channels are mainly direct sales customers, with low operating costs, but their contribution to dairy enterprise revenue is limited.
E-commerce channels have formed in recent years with the rapid development of the Internet, mainly including Tmall, JD.com, WeChat, and other vertical and content-based e-commerce platforms. E-commerce channels directly correspond to end consumers, have a wide radiation radius, and have large growth space. E-commerce channels help promote major products and new products. At the same time, the combination of e-commerce channels with other channels and the formation of O2O operating models can provide consumers with diversified and convenient shopping methods. For emerging brands that do not have advantages in other channels, e-commerce channels are their main battlefield for significant achievements.
6. Huge Consumption Potential in Rural Markets In recent years, the consumption level of rural residents in China has continued to grow rapidly, from 3,538 yuan in 2007 to 10,752 yuan in 2016, with an average annual compound growth rate of 13.15%, higher than the growth rate of urban residents' consumption level. With increasing income, rural residents have reduced grain and oil consumption in their dietary structure and increased consumption of other healthy foods. The growth rate of dairy consumption is much higher than that of eggs, aquatic products, and fruits, and has gradually become an important part of the dietary structure of rural residents. At present, dairy consumption in first- and second-tier cities has become saturated, with weak growth. China's rural population still accounts for about 43%, and third- and fourth-tier cities and rural township markets will become new growth points for dairy sales in the future.
Finally, let's briefly summarize: in this duopoly dairy market, where are the opportunities for emerging brands to enter? First, there must be innovative, differentiated, high-profit major products; Second, seize segmented markets, attracting consumers in terms of taste, nutrition, and psychology; Third, innovate in low-temperature milk, especially yogurt; room-temperature milk is already an ultra-red ocean market; Fourth, make good use of content-based e-commerce, vertical e-commerce, and platform-based e-commerce channels for strong operations and strong marketing. E-commerce channels are the only channel where emerging brands are almost on the same starting line as mature brands, and they can even surpass oligarchs in operational level. In other traditional and modern channels, emerging brands do not have advantages.
Source: New Consumption Insider (ID: cychuangye), with text and images abridged.