From zero to industry leader in 7 years, capturing 40% of the cheese market, what is Miaokelandu's secret? Behind the glory, what concerns lurk? In April 2006, Premier Wen Jiabao said during an inspection of the dairy industry: "I have a dream that every Chinese, especially children, can drink a jin of milk every day." Since then, Mengniu's slogan "A glass of milk a day, strengthens the Chinese" has spread to millions of households. Recently, the dairy industry has a new saying: "A glass of milk strengthens a nation, a piece of cheese revitalizes an industry." Humans have been consuming cheese for thousands of years, and some ethnic minorities in China have traditional foods that include cheese: Mongolians call it milk tofu, Xinjiang calls it milk cake, and dried cheese is called milk knot. But why has this cheese, silent for thousands of years, suddenly become so popular? 2021 is considered the key year for the rise of China's cheese industry. In less than five years, children's cheese sticks have gone from nothing to supporting a market of over 10 billion yuan. With many brands entering, cheese sticks can even occupy an entire shelf in supermarkets. The heat of Chinese cheese has even raised cream and cheese prices in many parts of the world. Among the many cheese brands, the most notable is Miaokelandu. In 2021, its revenue was 4.478 billion yuan, and in just five years, the company's performance grew nearly 25 times. Its market share increased from less than 4% in 2018 to 30% in 2021, jumping to the top of the industry in three years. In the first quarter of this year, Miaokelandu's market share approached 40%, making it the number one cheese brand in China. How did Miaokelandu successfully break out from a local brand in the northeast to the whole country? Although the cheese market is growing rapidly, as a small category of dairy products, can it really "revitalize an industry"? 01 Cheese: A Blue Ocean in the Ruins The saying "a piece of cheese revitalizes an industry" is not unfounded. First, compared to liquid milk, milk powder, and other sectors, cheese has the most impressive growth rate. After years of development, China's liquid milk, yogurt, and milk powder markets are relatively mature, while cheese, benefiting from the upgrading of dairy consumption, is in an early stage of rapid growth. According to relevant statistics, the compound annual growth rate of China's cheese category has been nearly 30% for five consecutive years. From foreign experience, cheese consumption indeed has broad prospects. In 1966, Japan's per capita cheese consumption was similar to China's current level; since then, Japan's per capita cheese consumption has grown to about 80 times its previous level. Second, cheese and other dairy products are important tools for deepening the supply-side structural reform of the dairy industry and optimizing the dairy product structure. In developed countries, 50% of raw milk is processed into cheese, and 18% into milk powder, with liquid milk accounting for only 30%. In contrast, in China, liquid milk accounts for 80%, while cheese accounts for a negligible proportion. As a high-end dairy product, cheese is one of the dairy products that uses the most raw milk: 1 kilogram of cheese requires 10 kilograms of fresh milk, which can effectively promote dairy farming. Moreover, cheese has a wide variety of types and a long shelf life, making it easy to flexibly organize production. It can act as a "reservoir" for regulating fresh milk production and dairy processing, promoting market stability. With the rise of the cheese market, it can provide buffer space for the dairy industry, avoiding cyclical fluctuations in raw milk prices and phenomena such as milk shortages or surpluses. The byproduct of cheese, whey powder, is also a raw material for infant formula, and China imports over 400,000 tons annually. Developing the cheese industry can drive whey powder production, improve domestic raw material supply capacity, and support the development of China's infant formula industry. In addition, cheese has transformed from a niche table food to a high-frequency children's snack, and this new way of consumption has allowed it to rapidly expand. Before Miaokelandu's rise, when the leading cheese brand, France's Bongrain, first brought cheese to China, it found that Chinese people did not like the natural salty taste of cheese and began to continuously improve product formulas. However, Bongrain was always confined to the Western food category, and the market size was limited. Foreign brands had not yet risen, and local brands did not pay attention, making the cheese market a "blue ocean in the ruins" within the red ocean of the dairy industry. It was not until the appearance of Miaokelandu's cheese sticks that the correct way to open cheese was found. Miaokelandu's founder, Chai Xiu, decisively seized this bone that no one else wanted to chew, "mobilizing all forces to sprint on the cheese track," finally opening up this blue ocean. 02 Turning a Small Market into a Big Market In 2001, Chai Xiu founded Guangze Dairy in Changchun. An advertisement saying "Guangze Milk, Fresh Delivered Home" successfully brought the brand into the public eye. Although Guangze Dairy was well-known in the northeast, it was confined to the regional market under the pressure of dairy giants like Mengniu, Yili, Guangming, and Sanyuan. To break out nationally, if Guangze relied on its raw milk business to compete head-on with the giants, it would surely die. Finding a niche track and becoming the number one in that track is the best solution for a local brand to go out. Previously, Junlebao rose by relying on the yogurt niche category. In 2007, Chai Xiu sensed the potential business opportunity in the domestic cheese industry and decided to deeply cultivate this "blue ocean in the ruins." She immediately formed a joint venture with France's Bongrain to carry out cheese business, accumulating cheese production technology and operational experience. After 8 years of cooperation and exploration, Chai Xiu gained an in-depth understanding of the domestic and foreign cheese markets. The dream of becoming the "cheese champion" became increasingly clear. In 2015, she made a strategic transformation with the full force of the company. That year, she fully acquired Miaokelandu (Tianjin) Food Company and Danone's Shanghai factory. While Yili and Mengniu were competing for room-temperature liquid milk and room-temperature yogurt, she began to transform and enter the cheese niche track, developing special cheese suitable for Chinese tastes, with the ambition to "let cheese enter every family." In 2016, Guangze was listed on the A-share market, becoming the only A-share listed company with cheese as its core business. In 2017, Miaokelandu's cheese business revenue was 193 million yuan. Its mozzarella cheese and other products won recognition from many large chain customers in the catering and industrial channels, including Saizeriya, 85°C, Domino's Pizza, Haidilao, Yoshinoya, Tous Les Jours, FamilyMart, Starbucks, and Subway. Although Miaokelandu's cheese performance was good with the spread of Western food, Chai Xiu was still worried because she was still on the old track of cheese brands like Bongrain, without developing a fast-moving consumer goods (FMCG) hit product. To create an FMCG hit product, it must meet the three conditions of "rigid demand, pain point, and high frequency." But at that time, the domestic cheese consumption drive was weak, and for users, eating or not eating made no difference. How could cheese become a rigid demand, hit users' pain points, and be consumed frequently? Children's snacks became Chai Xiu's breakthrough. She used cheese's nutritional characteristics as the "essence of milk"—high protein and high calcium—to solve the problem of unhealthy children's candy. In addition, the user education of cheese flavors in milk cap tea from Heytea and Naixue, and baked products, further consolidated the mass base of cheese. In 2018, after Miaokelandu launched sweet children's cheese sticks on Tmall, they became star products immediately, quickly becoming a candy upgrade substitute for children by the elderly and young parents. That year, Miaokelandu's cheese business revenue surged to 456 million yuan. This small cheese stick not only led Miaokelandu to the top of the cheese market, promoting the acceleration of cheese consumption from B-end to C-end, but it even put the domestic cheese industry on the fast track. 03 Becoming Number One in Three Years With a signature product, 2019 marked the first year of brand development for Miaokelandu. In just three years, it captured nearly 40% of the national market, achieving astonishing growth. On February 18, 2019, Miaokelandu launched its slogan "For cheese, choose Miaokelandu" and placed advertisements in prime time slots on CCTV and multiple local satellite TV channels. From February 25, in 16 major cities including Beijing, Shanghai, Guangzhou, and Shenzhen, on 100,000 building screens of Focus Media, a 15-second advertisement for Miaokelandu cheese sticks, adapted from the nursery rhyme "Two Tigers," was played at a high frequency of 480 times per day. Under the advertising blitz, Miaokelandu quickly became an internet-famous hit product. The company also rapidly penetrated traditional retail channels such as Carrefour, Walmart, Auchan, Yonghui, Lawson, Suguo, Bubugao, Wumart, CP Lotus, Ito Yokado, and Aeon, and maintained its e-commerce leadership through platforms like Tmall, JD.com, Suning.com, and Pinduoduo. It also continued to expand in new business formats such as Hema Fresh, Dingdong Maicai, Miss Fresh, Mia, and Youzan. In 2019, its terminal outlets exceeded 100,000, and its products, including cheese sticks, cream cheese, cheese slices, cod cheese, hand-torn cheese, and whipping cream, gradually went national. That year, the company achieved operating revenue of 1.74 billion yuan, a year-on-year increase of 42.32%, of which the cheese segment revenue was 920 million yuan, up 102.20%, and cheese stick sales reached 500 million yuan, a growth of 300%. At the end of 2019, the pandemic suddenly hit, disrupting the market rhythm. In 2020, Miaokelandu continued to press forward, launching fruit and vegetable cheese sticks and gold-pack cheese sticks, and inviting Sun Li as brand ambassador to enhance brand image. Multi-platform promotions across e-commerce, TV, building screens, high-speed rail, offline, influencer live streaming, and new media (WeChat official accounts, Xiaohongshu, Xiachufang, Douyin) made "For cheese, choose Miaokelandu" deeply rooted in people's minds, consolidating its first-mover advantage. During the pandemic, Miaokelandu took advantage of the opportunity of people cooking at home to increase the layout of home table cheese products. Small-packaged home mozzarella cheese made joint efforts in community group buying and baking e-commerce channels, ultimately achieving annual revenue of 331 million yuan for the home table series (a year-on-year increase of 108.82%). The catering and industrial end was greatly affected by the pandemic, but Miaokelandu seized the opportunity of market recovery in the second half of the year and the shortage of supply from foreign brands, providing customized cheese products and one-stop solutions for customers like Domino's Pizza, ultimately achieving annual revenue of 272 million yuan, a counter-trend growth of 29.90%. That year, Miaokelandu had 2,626 distributors, and its sales network covered approximately 290,600 retail terminals. With the combined effects of terminal layout improvement and community group buying, its cheese stick business further rose. In 2020, Miaokelandu's revenue reached 2.48 billion yuan, an increase of 63.20%, and with a 19.8% market share, it ranked second in the industry (first: France's Bongrain at 25.0%, third: France's La Vache Qui Rit at 5.9%). With both channels and marketing, Miaokelandu's products were in short supply. So the company increased the construction of new factories and equipment upgrades to enhance capacity and seize market share. In 2021, the company's total annual cheese production capacity reached 7.84 million tons, a year-on-year increase of 107.47%. With expanded capacity, how to maintain high-speed growth became the third-year challenge for Miaokelandu. Miaokelandu's cheese sticks are traditional low-temperature products. China's low-temperature cold chain terminals are mainly concentrated in first- and second-tier cities, totaling about 600,000 to 700,000. With a large number of competitors entering the cheese stick market, Miaokelandu, which has already captured nearly half of the cold chain terminals, finds it difficult to continue leapfrog development. Alternatively, China's room-temperature market terminals are about 5 to 6 million. If Miaokelandu can capture this piece of the pie, it will naturally usher in another performance explosion. In 2009, Guangming's "Mosilian" opened the era of room-temperature yogurt, and in 2014, Yili's "Ambrosial" room-temperature yogurt, relying on its room-temperature channel advantages, became a super hit product with annual sales of 31.6 billion yuan in just six years. Now, the market share of room-temperature yogurt far exceeds that of low-temperature yogurt. In 2021, Miaokelandu strategically established a room-temperature business division, and subsequently its room-temperature cheese sticks were launched, successfully gaining entry to lower-tier cities with underdeveloped cold chain systems. But conquering the vast room-temperature channels is no easy task, as the gap between Mosilian and Ambrosial demonstrates. That same year, Mengniu extended an olive branch to Miaokelandu. Mengniu invested 3 billion yuan in Miaokelandu, and after the transaction, it became the operating platform for Mengniu's cheese business, with a commitment to gradually exit the liquid milk market after three years. "Attached" to Mengniu, it not only gained a teacher in quality control and management but also began to rely on Mengniu's powerful channels to penetrate the room-temperature market aggressively. By the end of 2021, Miaokelandu's low-temperature retail terminals had grown to 400,000, and room-temperature terminals reached 200,000, covering more than 96% of prefecture-level cities and over 85% of county-level cities, with the room-temperature track still having broad prospects. In 2021, the company's revenue was 4.48 billion yuan, a year-on-year increase of 57.31%, and net profit was 150 million yuan, up 160.60%. The cheese segment revenue was 3.33 billion yuan, of which the ready-to-eat nutrition series (cheese sticks) was 2.51 billion yuan, catering and industrial was 470 million yuan, and home table was 350 million yuan. In 2022, to find new growth engines, Miaokelandu began to seek opportunities in the home table segment. Its mozzarella cheese capacity utilization rate was only 65.41%, so the company proposed a strategy of "cheese entering Chinese cuisine," launching products like "sweet cheese slices for porridge," starting with the younger generation to cultivate national cheese consumption habits. 04 Dilemma Although Miaokelandu, which has been forging ahead, has won the top spot in the industry, its path ahead is not all smooth. The technical threshold for cheese sticks is not high, but the gross margin is 50%, and the mature OEM model lowers the entry barrier. Major giants have swarmed in, and snack brands, channel players, and startups have also come to dig for gold. Product homogenization and price wars are intensifying on this track. The influx of many brands inevitably leads to fierce competition. In the future, as cheese competition escalates, companies will either compete on low prices to acquire customers or develop towards quality improvement. But currently, Miaokelandu does not have an absolutely wide moat except for its first-mover advantage. If a price war breaks out, Miaokelandu's advantage is not obvious. Its cheese raw and auxiliary materials (including raw milk, cheese, etc.) are mostly sourced from international and domestic procurement, lacking cost advantages. During the pandemic, its raw material procurement costs increased by 2%, and the company's profits fell by 4%. From the perspective of quality improvement, the current trend in the fresh milk sector of competing for (organic pasture) milk sources, Miaokelandu also has no advantage. Its products currently rely on secondary processing of imported raw materials. Although Guangze Dairy has a dedicated pasture for liquid milk, the pasture is located in the urban area, and the farming method is relatively primitive and extensive, with low levels of specialization and technology, which directly affects the future quality competition between Miaokelandu and major brands. The market also has some concerns about Miaokelandu's ability to launch new hit products. Although its performance has been rising, its R&D expenditures from 2016 to 2021 were only 10.066 million, 7.18 million, 13.977 million, 22.3 million, 38.86 million, and 40.09 million yuan. In 2021, its R&D expenses accounted for only 0.9% of revenue, and some netizens pointed out that many of its R&D personnel have only high school education. In contrast, Miaokelandu's sales expenses from 2016 to 2021 were 36.386 million, 122 million, 205 million, 359 million, 710 million, and 1.159 billion yuan. The huge sales expenses put Miaokelandu in the awkward situation of increasing revenue without increasing profit, which has been widely criticized. Relying on a single cheese stick, Miaokelandu has opened up a new world for the industry, but to support a cheese market of over 100 billion yuan in the future, one cheese stick is certainly not enough. To fully take on Mengniu's cheese business segment in the future, it still has much homework to do. Source: Lishi Kuai Xiao (ID: lishikuaixiao) Author: Jin Mei
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