---
title: "The Winning Strategy for the Second Half of the Dairy Industry"
description: "This dairy special aims to answer two core questions: which dairy subcategories still have growth prospects, and where are the opportunities to win in the second half of the dairy industry? By analyzing category development opportunities, we seek growth points beyond premiumization."
author: "FBIF"
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published: "2019-01-07"
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# The Winning Strategy for the Second Half of the Dairy Industry

> This dairy special aims to answer two core questions: which dairy subcategories still have growth prospects, and where are the opportunities to win in the second half of the dairy industry? By analyzing category development opportunities, we seek growth points beyond premiumization.

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In this dairy special, we hope to answer two core questions:
> By sorting out the development stages of various categories, which dairy subcategories still have growth prospects? Where are the opportunities to win in the second half of the dairy industry?
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> By sorting out category development opportunities, find other business growth points besides category premiumization.
This article breaks down the dairy market into the following seven subcategories:
  * White milk
  * Yogurt
  * Milk powder
  * Milk-containing beverages
  * Ice cream
  * Cheese
  * Plant-based milk
  * Various by-products
Consumers are becoming more health-conscious in their food choices, and more food companies are expanding into soy milk and other plant-based dairy markets. Therefore, in this article, we will also include it in the analysis of innovation opportunities across the dairy category.
Comparing the category proportions of China and the global market, it is very intuitive to see that compared to the global average, China's liquid milk proportion is relatively high, while cheese proportion is relatively small.
Besides the different weights of domestic and foreign categories, the most intuitive difference is the size of the market pie, **which is determined by both demand and supply chain**. Demand is constrained by consumption habits, while infrastructure directly restricts supply.
With the expansion of the middle class, Chinese consumers' dairy consumption will continue to grow.
Milk-based dairy products are considered potential nutritional sources. Allergies/lactose intolerance affect dairy growth but also drive the development of dairy alternatives.
The future pie, i.e., growth, is influenced by several core factors:
> 1. Late-mover advantage in scaling mature market equipment and technology
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> 2. Growth from scenario entry points brought by dietary habits and market education
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> 3. Young people's consumption of new products enables startups to acquire first users
We divide the market into four quadrants based on two baselines: market size and expected growth:
> Large pie, low growth: mature categories
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> Large pie, high growth: developing categories
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> Small pie, high growth: growth categories
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> Small pie, low or unclear growth: problem categories
Based on these four classifications, we will analyze each category's **development logic, pain points, and trend possibilities**. Here we need to emphasize that **the big opportunity based on category distinguishes growth, but it absolutely does not mean that innovative brands in the category have no chance to become industry benchmarks.**
**01 Can mature categories break the glass ceiling?**
In the "large pie, low growth" categories, the core questions we need to think about are:
> How exactly does this business make money? Has the market reached its ceiling? Or can it go up another level after breaking through some obstacles?
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> If it is a market with low concentration, why is the competitive landscape so fragmented? Is it determined by industry characteristics? Or are there pitfalls? Why has no one filled this pit? Is it a very painful pain point for users, and can we solve it?
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> Do industries and brand owners artificially plan insurmountable competitive barriers?
**Milk powder category: For large brand owners, it may be a good opportunity for performance explosion**
The underlying growth logic of the milk powder market is: let more babies drink more expensive milk powder, so the core variables affecting category growth rate are:
> Population base/natural fertility rate
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> Second-child birth rate
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> Breastfeeding rate
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> Channel penetration rate
Since the first three variables are developing in a direction unfavorable to the milk powder industry, we believe the growth rate of the milk powder category is limited, and the next battlefield will revolve around penetration rate and price explosion:
  * Complete the channel sinking of high-end products to third- and fourth-tier cities
  * Lay out precise channels for e-commerce and maternal and infant products
  * Enter sub-segments and needs beyond infants and young children
Although we believe the growth rate of the entire milk powder category is limited, this is an opportunity for large brand owners. Because the registration system has cleared out a large number of small and medium-sized enterprises, merely filling the market gap they left is enough to support rapid performance growth.
**Ice cream category: The hardest nut to crack in dairy categories**
The long-standing pain point of the ice cream category is that it is used by users as a seasonal snack, not as a dairy product with a fixed consumption scenario and stable purchasing behavior.
So the core problem is that ice cream has not established a stable purchase and repurchase scenario for users through benefit points. This directly leads to ice cream manufacturers being unable to fight seasonal changes, and because the target group's consumption behavior is random, precision marketing is ineffective. Users' first purchase behavior is highly dependent on channels and marketing activities, and channel costs remain high in the profit structure.
Although we see a trend of rising unit prices for ice cream, apart from the increase in average transaction value brought by premiumization and large packaging, there is currently no solution to help the ice cream industry establish a stable purchase scenario and regain growth.
But for innovative brand owners, the Chinese ice cream market is estimated to be around 96 billion yuan, but market concentration is very low. If we take the first place, Yili's 4 billion sales, the market share is less than 5%.
As a very mature category, the key to making profits is to test precision marketing, compress supply chain costs, and the key factors to establish absolute industry advantage have not yet appeared:
  * State clear, differentiated functional/emotional benefit points to create reasons for off-season purchases, improving inventory and capital turnover
  * Establish more stable consumption scenarios, in addition to ensuring repurchase rates, create direct communication with users to avoid high channel costs
  * Through a more advanced supply chain, control logistics costs and losses, and reversely drive profit margin growth
**Ambient white milk: When users just want a glass of milk, what should brand owners provide?**
We split white milk into ambient white milk and low-temperature white milk. In the late 1990s, domestic enterprises began to introduce ambient milk production lines. Before that, domestic was still dominated by low-temperature liquid milk; in 2006, ambient liquid milk occupied an absolute advantage. Ambient white milk is a typical mature category in the domestic market. As a mature category, the product differences between basic and high-end products are weak, revolving around "protein," "pasture," "packaging/brand," especially for small and medium brands, making it difficult to form differentiated competitiveness.
We need to ask a question: for users, all this is just "I just need a glass of milk," and the basic logic of ambient white milk revolves around "convenience." If we use this logic to look at the development of white milk, we will find that the current logic is problematic:
Based on the needs of sub-segments (children, middle-aged and elderly, women, lactose intolerant groups), the target user group will be limited. Besides being easy to hit the ceiling, the more practical problem is that the input-output ratio is easily unreasonable; at the same time, adjusting product ingredients turns the product into flavored milk, which may make target users feel it has become another thing like sour milk drinks or breakfast milk. Consumers' perception of flavored milk, or sour milk drinks and breakfast milk, is relatively low-end, cheap, and with messy additives, which contradicts the current market demand for clean labels.
The premiumization of white milk also shows obvious bottlenecks. For example, Mengniu launched China's first high-end white milk, Telunsu, in 2005. After 13 years of development, it experienced rapid growth, bringing excellent sales and profits to the company. However, Mengniu quickly encountered problems, so they upgraded packaging, did e-commerce, did social media, but users did not buy some strategies; in the past, brand owners used new product iterations, expanding product lines, and raising unit prices to drive new growth, but now Telunsu's protein is 3.6g/100g, and higher-end product lines also source milk from New Zealand. What else can be done for the next product iteration upgrade?
This brings us back to the key question: "Why should I drink ambient white milk?" If expecting growth, penetration rate and average transaction value need one of them to achieve a core breakthrough. We believe the momentum of high-end products can still rely on natural increment to maintain, but the core growth point will come from the growth of low-tier cities and special channels.
It is industry consensus that cold chain logistics has low penetration in low-tier cities, and the previous explosive growth of ambient white milk also relied on penetration into low-tier city channels. Since ambient white milk penetration is already so high in low-tier cities, why should we look at this market again?
The reason is that we believe consumption upgrades can also be done in low-tier markets, such as upgrading from bagged products to basic Tetra Brik white milk. Since logistics is easy to achieve, relying on volume advantages can obtain more substantial profits. For example, Yili's 2017 marketing campaign "Do you need a glass of milk?" mainly promoted basic white milk. From the data, it is also obvious that in the basic white milk category, it is mainly aseptic bricks that are growing faster, while Tetra Fino and Bailibao proportions are not mentioned, which also reflects the consumption upgrade trend of basic white milk.
The intertwined social relationships in low-tier cities are excellent soil for social e-commerce, and ambient white milk is one of the most suitable product types for distribution. From social e-commerce to the entire e-commerce operation logic, e-commerce users order white milk based on two simplest logics: "activity discounts" and "heavy goods delivered upstairs."
In user interviews, we found that a considerable number of users consume milk not through actively drinking milk, but through passive penetration from catering channels and home baking. And non-dairy creamer can no longer meet user needs, so ambient white milk and even low-temperature milk are continuously penetrating. For some brand owners, the demand for white milk brought by coffee, milk tea, and desserts has become a new opportunity point.
**Low-temperature white milk: Core factors affecting purchase are rapidly changing**
According to industry statistics, in China's liquid milk consumption structure, pasteurized milk accounts for 10%, UHT milk (also known as ambient 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 China is only 10%, relatively low.
Because its market share is much lower than ambient white milk, people often think low-temperature white milk is a new category compared to ambient white milk as a consumption upgrade. On the contrary, it appeared in China in the 1920s, and ambient white milk is the latecomer.
From the current market, low-temperature white milk consumption is relatively unbalanced, with obvious regional characteristics. Consumption is concentrated in the Yangtze River Delta and Beijing, with Shanghai alone reaching 30% of national sales.
The sales radius limitation of low-temperature white milk is the core problem preventing it from becoming a big single product. The core lever to extend the sales radius of low-temperature white milk is shelf life and cold chain logistics. We will discuss cold chain logistics in detail in the low-temperature yogurt chapter; in this chapter, we mainly discuss shelf life.
The shelf life of low-temperature white milk has been increased from 3 days to 7 days or even 15 days, greatly expanding the distribution range. However, due to logistics limitations, the shelf life of low-temperature white milk cannot reach an ideal state. New packaging technology can extend the shelf life of low-temperature white milk to 30 days, greatly improving sales radius and inventory turnover.
But if the shelf life is really extended to 30 days, we need to face a problem: for users, why choose low-temperature white milk? Since the ingredient list of low-temperature white milk only has "raw milk," product differentiation is weaker than ambient white milk, so the brand function is extremely amplified. From past interviews with low-temperature white milk users in Beijing and Shanghai, for local brand owners, low-temperature white milk is almost a fortress.
We believe channel changes will bring changes in the core demand points of low-temperature white milk. Under the premise that milk ordering has not undergone revolutionary technological optimization, milk ordering will be on a downward channel for a long time. Besides being eaten by convenience stores, O2O and fresh food platforms are expected to eat a large share. The purchase logic of O2O and fresh food e-commerce users makes packaging and highlighting main selling points more important, only then can support rapid conversion of first orders.
**Milk-containing beverages: The core problem is educating users**
We split milk-containing beverages into formulated milk-containing beverages and fermented milk-containing beverages. Formulated milk-containing beverages are a typical sunset category. We can see that white milk and ambient yogurt are continuously dividing its market. We believe flavored milk will be its direct successor, providing higher nutritional value under the premise of the same taste choices, directly continuing users' past purchase habits.
△Data source: Nielsen
At the same time, formulated milk-containing beverages also have the potential for production conversion. Due to the high commonality of production lines, milk-containing beverages can be converted to ambient yogurt. At the sales end, because channel types and user brand awareness have strong continuity in low-tier cities, switching costs are low.
The core problem for lactic acid bacteria beverages is educating users, and the core concepts for educating users are "live bacteria," "sugar reduction," and "clean labels." We believe sugar reduction and clean labels will be accepted faster in the market, while active probiotics need to be presented in a more intuitive way through education after concept cultivation, so that their functions can be accepted by users.
**02 How can developing categories grasp the core factors driving growth**
In the "large pie, high growth" categories, the core questions we think about are:
> How does this market make money? Will the factors driving past growth change the rules of the game, or can they continue to support the category's growth?
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> Are there pain points in the products currently provided to users? Are users willing to pay a premium for these pain points? Can these pain points be solved?
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> Are there sub-markets and non-mainstream markets with obvious ceilings that can be reached?
We will split yogurt into ambient yogurt and low-temperature yogurt. The growth core of ambient yogurt comes from the improvement of penetration rate.
If benchmarking the distribution channels and scale of white milk, we believe ambient yogurt will concentrate on penetrating third- and fourth-tier cities. The core growth point is squeezing the market share of ambient lactic acid beverages, white milk, and flavored milk (from consumer insights, consumers have a higher preference for ambient yogurt among the above four categories).
The penetration rate of ambient yogurt will rise until it cannot meet the demand for capital return rate, but we believe the growth of ambient yogurt is indeed slowing down.
In the low-temperature yogurt category, we use Elon Musk's "first principles" to help us think about the key factors affecting the endgame of low-temperature yogurt. We believe three variables will drive the growth of low-temperature yogurt:
  * **Dairy companies' need to improve profit levels of low-temperature dairy products**
  * **Consumers' demand for low-temperature products**
  * **Retail terminal growth rate**
The most critical variable here is the "retail terminal growth rate" driven by the supply chain. Under the premise that single-store sales (PSD) will not undergo qualitative changes, relying on channel sinking to increase sales has two sub-questions:
**How many retail terminals can support the sale of low-temperature products?**
Should we prioritize going deeper in cities with cold chain systems, or go to cities without cold chain systems?
Only when convenience stores upgrade from traditional mom-and-pop stores, and a large number of mom-and-pop stores are standardized and cold-chained, can brand owners control the input-output ratio, and low-temperature dairy products can truly complete channel sinking. Otherwise, before that, brand owners still need to rely on hypermarkets and self-operated channels to drive growth.
When channels continue to increase the proportion of private labels, the key to controlling self-operated channels is to gain growth through online and offline non-mainstream channels. We believe that in the next year, traffic dividends come from offline. Only by creating enough good experience and user communication offline can we finally divert traffic online with sufficient brand momentum.
In addition to cold chain penetration, based on Mengniu and Yili's 8%-10% warehousing and logistics cost ratio, a key proposition is whether these variables have further room for reduction in the next 3-5 years, or even reduce To C logistics warehousing costs to the same order of magnitude as To B?
**Warehousing and logistics cost = packaging cost + warehousing cost + trunk logistics cost + branch logistics cost**
Expected cost reductions come from fresh food e-commerce reversely promoting warehouse construction, and supply chain digitalization improving inventory turnover.
And we think what can be bet on is the large-scale commercialization of collaborative robots and drones, which may significantly reduce packaging and branch logistics costs, so that some To C brands do not have to rely on channel providers, can complete batch distribution while obtaining higher gross margins, and ultimately gain channel advantages.
Unlike other categories that have already been spread to every corner, where they can only gain growth by improving repurchase rates and average transaction value (so-called consumption upgrade), low-temperature yogurt can win growth simply by improving penetration rate and the resulting economies of scale.
**03 Growth categories**
In the "small pie, high growth" categories, the core questions we think about are:
  * Is this a sub-market with limited ceiling? What means does this industry have to help them enter the mass market?
  * Are there bottleneck factors (user habits, cold chain) limiting industry growth? After adding marketing costs, is the capital return rate actually lower than other markets?
**Cheese**
Li Shengli, chief scientist of the National Dairy Industry Technology System, mentioned that "foreign consumers eat cheese and drink milk, we mainly drink milk." She said one of the shortcomings of China's dairy industry is the unreasonable dairy product structure. China's liquid milk accounts for 80%; in developed countries, 50% of raw milk is processed into cheese, and 18% into milk powder, with liquid milk only 30%. China's cheese industry is underdeveloped, leaving little buffer space for dairy products.
From the supply side, this is actually a category with asymmetric competitive advantages for local brand owners:
  * European natural cheese has a ceiling in variety richness and total volume due to import restrictions
  * Ethnic minority cheese products like Rushan and Naigan have extremely complex processes to switch to industrial production, ultimately only appearing in local markets as handmade products
But from the demand side, since the market introduction and user education of cheese come from multinational brands, the current core growth point of cheese is still user habit cultivation. Integrating cheese into Chinese users' dietary structure essentially means two things:
  * Make cheese more in line with Chinese users' eating habits
  * Enter the market through multiple scenarios and multiple sub-segments
Since cheese products entered the Chinese market, the most criticized issue by brand owners is taste. Although there are thousands of cheeses worldwide, most flavors that overseas consumers are accustomed to are not flavors accepted by the mass Chinese consumers when migrated to China.
Here we are honored to communicate with Dr. Chen Dongfang, Vice President of Firmenich Asia Pacific R&D Center, on his views on cheese entering the Chinese market and taste:
When discussing how to cultivate local market awareness of taste, he mentioned that his personal view is that cheese flavor and texture need to be milder and more popular than traditional foreign cheeses.
To achieve localization needs, development can also be based on current Chinese market products and population preferences. Starting from yogurt as a starting point for upgrade, using more solids and cheese cultures can help users adapt to differentiated flavors. There are already some products on the market, such as fresh cheese, which in essence still use yogurt technology. Through the use of cheese cultures, they bring some mild fermented flavors of cheese, which is a taste cultivation for yogurt users, or even category cultivation.
Current products, in order to highlight cheese flavor, start with heavier flavors like cheddar or even blue cheese, which is essentially a great leap forward that does not consider user habit formation.
Cheese snacks are expected to be a business with lower user thresholds, simpler distribution channels and logistics solutions. From the channel dimension, the most obvious opportunity points are still the catering channel and the children's cheese market.
Cheese, as an ingredient for catering and home cooking, enters user habits from the menu itself, combined with the emotional points of "indulgence" and "enjoyment" of food, guiding potential users' memory points and needs, and converting them into target users in the long run.
Children's cheese not only meets current profit needs but also is a low-cost cultivation of the future cheese market. Reviewing Yakult's cultivation in the Japanese market, the children's market is essentially a business that satisfies both children and parents:
  * **How to make children feel it tastes good and want to drink it**
  * **How to make parents feel it is worth it**
Yakult's taste, specifications, and packaging considered children's eating habits and needs from the beginning (increasing sweetness, smaller sizes), while educating parents with intestinal vitality and children's intestinal issues, making both parents and children happy.
Returning to the most core question, what role should cheese play in entering Chinese people's dietary structure?
Cheese should be a fermented product with health attributes, but it is actually a very vague concept. But because the category concept is vague, it is the problem and opportunity for category entry.
**04 Problem categories**
For "small pie, low or unclear growth" categories, our core focus is:
> Is there demand for this product migrating to China? Why haven't companies that did poorly in China done well? Is it their own management problem, or is the market really not viable?
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> What are the domestic and foreign companies doing well? Can we learn from them?
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> Are there any structural factors that can support explosive growth in this category in the short term?
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> Milk-containing foods
From the perspective of the entire food and beverage industry, consumer demand for fruit tea, pure juice, packaged water, yogurt, and sports drinks continues to grow, while chewing gum, low-concentration juice, bulk candy, instant coffee, and chocolate continue to decline.
The underlying label of category growth logic is the change in user attitudes towards product concepts. The dairy concept, due to health, brings natural goodwill to users, causing non-dairy brand owners to pin some product growth points on adding milk-containing ingredients. Currently, we have found similar cases in frozen snacks upgrading to milk-containing jelly. In the long run, the associated growth of milk-containing foods will put forward demands on upstream dairy suppliers. For dairy suppliers, it is an opportunity to smoothly transfer low-end production capacity and reduce inventory backlog, ultimately reflected in final profits.
**Plant-based yogurt: A low-lying area in the value chain**
Although plant-based dairy products are not strictly dairy products, due to the rapid growth of plant protein beverages in the past two years and their substitution relationship with white milk, it has become a category that cannot be ignored in dairy analysis. There is already a lot of analysis on the market, so we will not repeat it.
Here we want to talk about a sub-category - plant-based yogurt. Based on this single product, we want to discuss: from the enterprise side, where are the core opportunity points for plant-based fermented milk products? What are Chinese consumers' core demands for plant-based products?
The core difference between plant-based and ordinary dairy products is the difference in content. We clearly find that China's milk supply cannot keep up with demand, while the supply and flexibility of plant-based raw materials (besides soybeans, high-protein plants like coconut and peas can be considered) are significantly better than milk.
From the cost side, taking fermented soy milk as an example, the costs of other items are similar to fermented cow's milk. The milk fermentation production line can be converted to produce plant-based fermented products after adding some equipment, but the raw material cost is only one-tenth of cow's milk. Based on China's high milk prices, it has very strong cost competitiveness.
The most critical point is that plant protein beverages are a premium product for overseas consumers, but for Chinese consumers, they are too daily (soy milk, almond milk, coconut juice), making it hard for users to feel it is something new. But plant-based yogurt is a complete cognitive blank.
Alpro products acquired by Danone
Overseas, a large number of plant-based yogurts have appeared, such as soy yogurt Alpro, coconut Greek yogurt Daiya, coconut yogurt Yoconut. Looking closely, users' purchase factors are very practical:
  * **Delicious**
  * **Good-looking/novel**
  * **Healthy**
In communication with Mr. Greg Steltenpohl, co-founder and CEO of Califia Farms, "good-looking" was the second most important factor they mentioned. When consumers make their first purchase, especially in e-commerce scenarios, since they cannot taste it, the core factor determining purchase is "good-looking."
Califia Farms plant-based milk product range
The most worth thinking about here is that even overseas, with a large number of vegetarians, "plant-based" has not been used as the main concept. When launching new products in China, the idea of using "the power of plants" to attract a large group of users needs to be very cautious in practice.
We usually understand that in this sub-market, health (gluten-free, vegetarian) ranks higher than deliciousness. But in fact, the founder of Califia Farms introduced that their review of plant-based yogurt hitting the core user need is "**no difference in taste from animal-based yogurt**." After solving basic survival problems, among factors affecting long-term purchase, **the first priority is still deliciousness**.
So the key question becomes "how to make it delicious?" Since soy protein fermentation contains almost no fat, the texture after fermentation will differ significantly from milk fermentation in taste and flavor. You can improve the taste by adding plant fats, such as Swedish oat milk OATLY, which increases fat content by adding vegetable oil.
We believe that if plant-based yogurt wants to increase premium, it can use "soy protein + high-end ingredients" as a dual plant protein solution. Soy protein is used as the base (low cost), and ingredients that consumers perceive as high value increase the premium. When the product is launched at the terminal, it can cut into deliciousness and fat reduction, as users always do not want to become greasy middle-aged men and women.
**05 Don't blindly chase category premiumization**
In the final chapter, we hope to set aside isolated categories and point out from a business perspective the common misunderstanding in current category development thinking, namely that the future of a category must be premiumization. **In fact, in the consumer goods field, no matter what sub-industry, the underlying logic is the same:
User quantity * Purchase frequency * Average transaction value
And the decisive factors affecting user quantity and purchase frequency, besides spending more money to build user habits, are core penetration rate improvements supported by the supply chain.
In previous years, the penetration rate of ambient products has saturated. From the manufacturer's perspective, what penetration can strengthen is "products with higher average transaction value based on cold chain needs."
Raising average transaction value is a stopgap measure for brand owners against the background that user habits and penetration rates have no good solutions.
But essentially, when we analyze user needs, excluding conspicuous consumption, no one likes high prices, but they also don't like cheap.
**Actually, what they mean is "great value":** I bought something with a psychological price of 10 yuan for 5 yuan. Essentially, it must provide cost-effectiveness that exceeds user expectations, making users feel they got a bargain. If you want to raise prices by 10%, you need to be prepared to improve user experience by 20%.
And from "cost-effectiveness exceeding user expectations" to infer "great value," we will find that consumption upgrade does not mean raising prices across the board. In long-term in-depth user interviews, we found that users have two-sided needs:
  * **In daily life, value "economical and practical" for hard needs**
  * **On weekends and holidays, pursue ultimate experience**
But even when users pursue ultimate experience, we find they always expect to maintain the best cost-effectiveness between experience and cost. Returning to the essence, what brand owners really need to do is essentially create an experience far exceeding expectations at a cost acceptable to users.
The current misunderstanding that brand owners often fall into is continuously transfusing profits from mid-to-low-end product lines to high-end categories in hopes of increasing volume, but it is difficult to achieve expected profits.
For first-tier brand owners, the high-end category market size has an obvious ceiling in the early stage. Even with a lot of marketing resources, they cannot break through the volume, and instead, the low input-output ratio drags down overall performance.
For second-tier brand owners, it is even more unfavorable. Since their strength is significantly lower than first-tier, even if they burn all their resources, it is difficult to achieve expectations.
**To escape the misunderstanding, there are two core solutions:**
  * Use more precise placement to enter target user groups at low cost
  * Make upgrades that provide excellent value in existing mid-range and basic product lines
The first solution is more biased towards technical digital marketing. What we really think is important is the second solution: how to combine high-end concepts that users will pay for with basic and mid-range products to achieve a balance between premium and user reach, maximizing total volume.
As mentioned earlier, users pursue "great value" in life, and life is two-sided: daily life is "economical and practical," weekends/holidays are "ultimate experience." In "economical and practical," the number of users and repurchase frequency that achieve "great value" is significantly greater than the latter. Although the relative unit price is low, you can rely on economies of scale to make money from the supply chain.
The word "high-end" has a strong sense of jumping, and great leaps are not easy to succeed. High-end should not be a niche concept. A larger market share comes from the upgrade of existing user groups and the conversion of other users, and finally the penetration of consumption unit price and product concept.
Making a "great value" consumption upgrade from the "economical and practical" angle is significantly easier than high-end. You only need to be "a little better than others." In the past two years, we have focused on the rapid growth of many regional brand owners. The underlying logic is to make a regular product a little better, achieve sufficient volume, occasionally become an internet-famous product, and finally break through the regional market.
**06 Conclusion**
As Dr. Ross Crittenden, Executive President of Emerging Markets at Valio and speaker at FBIF2018, mentioned in our interview, the most interesting thing about business analysis is that in the long run, its underlying logical framework can actually see the endgame, but in specific categories, until the last moment, you really don't know who the winner is.
Dr. Ross Crittenden, Executive President of Emerging Markets at Valio, giving a speech
For example, specific products are really unpredictable. For instance, no one could have imagined that the rise of cheese tea would make the cream business very good.
But for brand owners, starting from obtaining long-term high net profit margins, the long-term strategic direction can be foreseen: by constructing scenarios to more deeply cut into user habits, establishing brand momentum, reducing costs and expenses through technological progress and focusing on core capabilities, ultimately improving profitability.
In addition, the sub-health trend of our nationals is serious. Mintel data shows that the proportion of people in sub-health state rose from 75% in 2012 to 86% in 2015.
**For an industry like dairy, which inherently has strong health attributes, it is bound to develop foods that can improve the national health status and explore longer-lasting and more beneficial development points!**
Welcome to leave a message and discuss with us: How to win the second half of China's dairy industry? Which category do you favor most?
Article source: FBIF Food & Beverage Innovation (ID: FoodInnovation)
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