In the past year or two, there are signs that more and more consumers have fallen in love with niche milk. They not only get hooked themselves but also spontaneously recommend it to others, with even hundreds of thousands of "种草" (product recommendation) posts appearing on social media. A key feature of these niche milks is that they come from local dairy companies, but against the backdrop of major dairy brands dominating the market, can these niche milks truly sustain their popularity?
01
Niche Milk Is Hot
Yuyuan, born after 2000, recently set a new goal for herself: to try every type of pure milk.
For her three years ago, this was completely unimaginable. For a long time, Yuyuan actually didn't like drinking pure milk. For many common pure milks on the market, she often found that she "couldn't finish half of it."
This situation only changed a little over a year ago. By chance, Yuyuan came across a post on a social platform recommending various niche local milks, and she tried buying some. This "opened a new door to the world" for her, and the niche milks, different from the common big brands, quickly fascinated her.
Yuyuan still clearly remembers the wonderful feeling when she first drank a Xinjiang milk called "Garden" (花园). In the following year or more, she developed a habit of drinking milk three or four times a week, and also tried all the niche milk brands like Yunnan Oya (欧亚), Guangxi Baifeiluo (百菲酪), Henan Kedi (科迪), and Xinjiang Tianrun (天润).
(Image source: Xiaohongshu screenshot)
Similarly, Chen Yan and Shanshan, both born in the 1990s and working as office workers, also got into niche milk in the past year or two.
One day in 2021, Chen Yan happened to see someone on Douban recommending a Xinjiang milk—Western Spring (西域春). He immediately bought it to try, and found that this milk "has a rich taste, with the aroma of milk, but not overly sweet or greasy," fitting his "ideal breakfast" of "milk + European bread." Chen Yan got hooked and started a "blind box" experience with some niche milks.
Shanshan, who had always been used to big brands, recalled that she first came into contact with niche milk during the wave of Xinjiang milk popularity in 2021. After repeatedly seeing recommendations for Xinjiang milk on social platforms, she was successfully "planted" with Garden milk. Because of its good taste, Garden milk was even once rated by her as "the best pure milk I've ever drunk," and she drank more than ten boxes in a year.
An obvious trend is that niche milk, which was once considered difficult to break out of its region, is accelerating its breakthrough of regional barriers and gradually becoming "popular" among a wider consumer base. In this wave of niche milk breakout, Xinjiang milk is undoubtedly the most prominent representative.
As early as July 2020, the Xinjiang Daily reported that "the unique resources have made Xinjiang dairy products increasingly popular among consumers, with an average annual growth rate of over 30% in sales to other regions in the past three years."
But "Xinjiang milk" truly became widely known in 2021. In March last year, top livestreamers on various e-commerce platforms, including Li Jiaqi, Viya, and Lie'er Baobei, opened special public welfare livestreams for Xinjiang. Brands like Maiquer (麦趣尔), Tianrun, Western Spring, and Garden were quickly introduced to consumers outside Xinjiang through these livestreams.
Afterwards, a wave of Xinjiang milk reviews and spontaneous recommendations swept across major social platforms, becoming a trend. Data from Yien Star Data shows that in the last three quarters of 2021, the number of posts with the keyword "Xinjiang milk" on Xiaohongshu was at a significantly high level. By 2022, this trend declined but was still higher than before March 2021. In these reviews and recommendation posts, Xinjiang milk could even be "tasted with top, middle, and base notes" like perfume.
More obvious changes were reflected in sales. Data shows that in the first three quarters of 2021, sales of Xinjiang milk on Tmall Supermarket increased by nearly 200% year-on-year, with 90% bought by young people born after 1990 and 1995. The topic "Post-95s boost Xinjiang milk" even trended on Weibo in October 2021.
With the breakout of Xinjiang milk, more local niche milks began to accelerate into netizens' recommendation and tasting lists. Yuyuan, Chen Yan, and Shanshan have all expanded their tasting targets from Xinjiang milk to other local milks over the past year or more.
As of now, posts related to various niche local milks on Xiaohongshu continue to increase, with "niche milk," "Xinjiang milk," and "milk review" each having tens of thousands to over a hundred thousand posts. Many food bloggers have even made reviewing various niche milks a "daily update project," and each milk review attracts many comments and traffic.
(Image source: Xiaohongshu screenshot)
02
Behind the Popularity
In fact, the history of Chinese consumers drinking milk is not long. From the 1970s to the early 2000s, under various favorable conditions, China's dairy industry began to enter a fast development track, and a large number of dairy companies emerged across the country.
Whether it's Inner Mongolia's Yili and Mengniu, Xinjiang's Garden, Tianrun, Xinnong, and Maiquer, or Hebei's Junlebao, Ningxia's Xiajin, Guangxi's Huangshi and Baifeiluo, Tianjin's Haihe, and Shanghai's Bright, most of these relatively well-known dairy companies across the country were established during this period.
In the first round of fierce competition in the industry, Yili and Mengniu were the undisputed winners. By taking the lead in introducing and applying UHT sterilization technology, they were able to quickly spread long-shelf-life, cold-chain-free, safe, and convenient room-temperature milk across the national market, helping them complete their national channel and brand layout early on, leaving competitors far behind.
The room-temperature milk market was quickly dominated by Yili and Mengniu. Local dairy companies at a competitive disadvantage had to avoid their锋芒 and focus on the "low-temperature milk strategy," maximizing the advantage of proximity to milk sources to achieve differentiated competition. However, due to the short shelf life of low-temperature milk, they remained confined to their regions for a long time, making it difficult to expand outward.
The development of e-commerce brought new opportunities for niche milk, allowing these dairy companies to finally go out. However, until the advent of livestreaming, the effect was not obvious. The low awareness and brand recognition of local milk in other cities meant it was hard for them to become the first choice for consumers outside their region. To appear at the top of search results for "milk" and achieve the goal of "reaching target audiences," they needed to invest significant marketing costs.
Around 2017, Song Qiao, born after 1995, tried buying Xuedun milk from Gansu, recommended by a college classmate, and quickly became a "自来水" (voluntary promoter), recommending it to family and friends. But for a long time, regional milk brands like Xuedun were still spreading within a "one-on-one" niche scope, with little buzz.
(Image source: Xiaohongshu screenshot)
It wasn't until around 2020, with the rise of livestream e-commerce and the popularity of new channels like Xiaohongshu and Bilibili, that local milk began to seize the opportunity and gradually break out.
The emergence of new channels certainly provided regional dairy companies with an opportunity to break out of regional restrictions, but the deeper reason for niche milk's breakout and popularity may lie in the increasingly difficult satisfaction of consumers' diverse milk-drinking demands. Especially as young people gradually become the main consumer force, the demand for diverse and novel tastes among the mainstream consumer group is becoming more important.
Chen Yan said that although his first contact with niche milk was related to recommendations on social platforms, in essence, it was because after drinking the surrounding milk for too long, he "wanted to develop new flavors."
Dairy analyst Song Liang analyzed that the Chinese market is a market with obvious diversified and individualized demands. Consumers have very low loyalty to brands and products, and instead "particularly like to pursue freshness."
"Some consumers, after drinking big brands to a certain extent, will want to pursue some niche brands," Song Liang said. This proactive behavior by consumers gives some brands an opportunity, but whether they can seize it tests a dairy company's capabilities in many aspects.
03
Taking the Initiative
The "breakout" and "popularity" of niche milk is certainly inseparable from the diversified demand drivers of consumers and the changes in new channels, but it also stems more from the "proactive actions" of local dairy companies under new opportunities.
(Image source: Xiaohongshu screenshot)
In fact, as early as several years ago, with the intensification of competition, many local dairy companies had already begun to actively seek change.
For example, Tianrun, as early as 2014, the year after its listing, wrote "focus on expanding markets outside Xinjiang" into its annual report. In 2015, Tianrun officially launched the Ecolean series of low-temperature yogurt new products such as "Rose Red," "Chocolate Broken," and "Ice Cream Melted," and used these as its main products. Through diversified and differentiated marketing, gradually improved cold-chain transportation, avoiding the main battlefield of big brands, and attacking from lower-tier channels upward, it broke through. In 2018, sales of the Ecolean series low-temperature yogurt exceeded 1 billion packs, becoming the top-selling single product under Tianrun.
As a result, Tianrun's revenue from outside Xinjiang rapidly increased from 0.17 billion yuan in 2015 to 5.57 billion yuan in 2018, with its share of total revenue growing from 2.98% to 38.2%.
In the 2018 annual report, under the product development strategy of "leading in low-temperature, strengthening room-temperature, and breaking through in milk drinks," Tianrun also classified its dairy products by revenue source into low-temperature and room-temperature dairy products for the first time, achieving revenues of 9.25 billion yuan and 5.06 billion yuan respectively, accounting for 63.4% and 34.7%.
This is also a common approach for many regional dairy companies. Since 2017, as big brands successively entered the low-temperature fresh milk track, many local dairy companies began to penetrate the room-temperature milk market, quietly launching their own room-temperature milk. The niche milks that were widely recommended on various social platforms after 2021 are mostly such local room-temperature milks.
Reflected in financial reports, among listed companies that disclosed corresponding data, at least two companies, Tianrun Dairy and Huangshi Group, have seen their room-temperature dairy revenue share exceed low-temperature dairy for the first time since 2021. Taking Tianrun Dairy as an example, the latest data shows that in the first half of 2022, Tianrun Dairy's room-temperature and low-temperature dairy revenue were 6.48 billion yuan and 5.35 billion yuan respectively, up 21.67% and 9.22% year-on-year, accounting for 52.53% and 43.33% of total revenue.
(Image source: Tianrun official website screenshot)
In addition to upgrading canning, packaging, and sterilization technologies to promote room-temperature products "going out," and the rapid development and improvement of cold-chain logistics to deliver low-temperature products to consumers faster, local dairy companies have also made considerable efforts in product marketing.
It can be said that an important reason why niche milk was able to usher in a wave of "popularity" after 2021 is that this time, facing the opportunities brought by livestream e-commerce and the "grass-planting economy," local milk brands acted quickly enough—they not only frequently cooperated and interacted with top influencers and bloggers but also operated their own Douyin and other social platform accounts early on, with distinctive playstyles.
A typical example is Maiquer. In 2021, it not only entered Li Jiaqi's livestream multiple times and frequently cooperated with top influencers, but also maintained continuous brand self-broadcasting on e-commerce platforms like Tmall, absorbing the valuable traffic brought by top streamers. Ximu Tianshan, which often ranks in the top three of Xinjiang dairy with Tianrun and Maiquer, turned its Douyin account into a VLOG, where herders immersively explain novel knowledge like "What do cows with a daily food cost of 80 yuan eat?" and "Why are cow tails painted with red unknown substances?" to gain popularity.
On social platforms like Xiaohongshu, these niche milk brands also mastered the "grass-planting" secret. Besides cooperating with various bloggers for reviews, they often attract a host of "自来水" to spontaneously recommend them.
The effect is also significant. In 2021, Maiquer successfully made it to the TOP 5 of Tmall Double 11 dairy beverage brands, and during the 618 shopping festival in 2022, it even became the No. 1 in the pre-sale amount of Tmall liquid milk room-temperature dairy brands. Of course, it also paid a hefty marketing cost. Data shows that in the first half of 2022 alone, Maiquer's sales expenses reached 1.2 billion yuan, a year-on-year increase of 109.22%, accounting for about 17% of its total revenue.
Song Liang believes that in this context, the local dairy companies that performed well mainly share three common characteristics: first, they took the lead in adopting new retail methods, thereby bypassing the barriers of traditional channels; second, most of the products promoted by these brands are high-end products with certain differences from their original products, "such as zero sugar, no additives, zero fat, etc."; third, these products are good at leveraging internet thinking, first planting grass on the internet, then quickly promoting, and further rapidly distributing to offline stores, rapidly growing their performance in a short period.
04
After the Popularity
Niche milk has been building up for a long time in terms of "becoming popular," but problems often appear unexpectedly.
In June 2022, Maiquer, which had just become popular, was exposed for excessive propylene glycol content in its pure milk, shocking the entire internet. But for a long time, Maiquer was actually the "white moonlight" (ideal) in the minds of many consumers.
"Maiquer is really delicious. If no one stopped me, I could drink five or six a day," Chen Yan recalled. But because of this, the food safety incident hit him hard. "If there's a quality problem, I definitely won't consider it in the short term."
Fang Ying, who has tried more than a dozen niche milks, also admitted that since Maiquer was taken off the shelves, she has not been able to find a milk that can replace its taste. "I'm picky about the taste of milk. If I can't find a substitute in the end, and if it can be relisted in the future with no quality issues, I might still buy it."
While consumers are leaving, Maiquer has paid a heavy price. Due to the provision for inventory write-downs and expected related expenses for the products taken off the shelves, sealed, and recalled in the propylene glycol incident, in the first half of 2022, Maiquer's revenue increased by 47.06% year-on-year to 7.08 billion yuan, but its net profit attributable to the parent company turned from profit to loss, plunging 1700.99% year-on-year, with a huge loss of 1.75 billion yuan.
(Image source: Visual China)
While Maiquer "overturned," this sensational flavoring incident also caused a crisis of trust for the entire Xinjiang milk industry.
According to Shanshan, Garden, also a "Xinjiang milk," was exposed by a blogger as having problems after the Maiquer propylene glycol incident. Although there was no official proof, and the product customer service told her that "the blogger's remarks were actually to ride on Maiquer's heat to smear Xinjiang milk and promote their own brand," Shanshan ultimately said goodbye to "Garden" and switched back to some big brands she had drunk before.
"Under the circumstance that consumers' preference for Xinjiang gradually affects their preference for Xinjiang milk, Xinjiang milk should have done a more solid job in product quality and innovation to better cater to consumer needs," Song Liang analyzed. But in reality, because Xinjiang dairy companies are relatively small in scale, they are relatively chaotic in internal control management, sales, and product innovation, making them prone to problems. "Once a problem occurs, it's equivalent to smashing the brand."
Song Liang believes that currently, the market share of leading dairy companies is about 60%. For small and medium-sized dairy companies and regional dairy companies, there is certain development space. But for these companies to develop better, they also need to face tests in product innovation, brand building, internal management, supply chain construction, and marketing promotion.
"The current competition is all-around, not just about doing one thing well," Song Liang said.
After niche milk becomes popular, the test for regional dairy companies is even greater because the market they face is broader. If they cannot strictly control product quality, it will be difficult to achieve long-term popularity under the dominance of dairy giants.
Note: Consumers in the article are pseudonyms. Source: AI Finance and Economics (ID: aicjnews) Author: Zhou Xiangyue