Source: New Retail Business Review (ID: xinlingshou1001) "The market education for yogurt has a long way to go." The yogurt market is becoming increasingly "crowded." According to Euromonitor data, sales of yogurt products in China will increase from 45.6 billion yuan in 2012 to 220 billion yuan in 2022, with a compound annual growth rate of 9.2%; its share of the overall dairy market is expected to jump from 20% in 2014 to 42.2% in 2024. The expanding market share has attracted a number of dairy companies to accelerate their布局, especially in the low-temperature yogurt segment. On January 10 this year, Beihai Pasture, a yogurt brand under Genki Forest, officially put into production a yogurt production line built with an investment of 130 million yuan. It is reported that the production line has an annual capacity of 9 million units of yogurt, bringing in annual operating revenue of 1 billion yuan. On March 25, Jane Yogurt completed a total of 800 million yuan in Series B financing. Jane said that this round of financing will be fully invested in modern pasture construction, with a focus on supply chain construction. In the yogurt product market, as the room-temperature yogurt market gradually saturates and is dominated by major brands, late entrants find it difficult to find breakthrough space, so they have turned their attention to low-temperature yogurt. -01- Room Temperature vs. Low Temperature: Which Is Better? Yogurt is a sweet and sour milk beverage made from milk as raw material. After pasteurization, beneficial bacteria (starter culture) are added to the milk, and after fermentation, it is cooled and filled as a milk product. Divided by storage temperature, the yogurt people eat daily is divided into two categories: room temperature and low temperature. Room-temperature yogurt undergoes high-temperature heat treatment after fermentation, killing the lactic acid bacteria and other strains in the yogurt, and is packaged aseptically, allowing it to be stored at room temperature with a longer shelf life. Low-temperature yogurt is only pasteurized before fermentation, and the lactic acid bacteria and other strains have not been completely eliminated, so low-temperature yogurt needs to be stored at 2~6°C to ensure the survival of lactic acid bacteria while inhibiting the growth of other strains. Compared with room-temperature yogurt, low-temperature yogurt has a shorter shelf life. Based on different production processes, the two types of yogurt each have their own advantages: low-temperature yogurt retains active lactic acid bacteria, increases the beneficial flora in the intestines, forms an antibacterial biological barrier, and can improve human gastrointestinal function; while room-temperature yogurt is easy to store, not limited by sales radius, and is conducive to dairy companies developing rich sales channels, thereby increasing the market penetration of yogurt. Bright Dairy has been producing room-temperature yogurt since 2009, with first-month sales exceeding 10 million yuan. The two industry giants, Yili and Mengniu, did not immediately follow suit, but chose to wait and see for a period. In 2013, Mengniu launched Purezen, and in 2014, Yili launched Ambrosial. Both companies increased investment in advertising and marketing, and leveraged their strong channel capabilities for nationwide promotion, with obvious economies of scale. According to a report by China Commercial Industry Research Institute, the overall market size of room-temperature yogurt exceeded 30 billion in 2018, with the three major brands Ambrosial, Purezen, and Mosilian occupying 70%-80% of the market share, making it difficult for other brands to break through in the room-temperature yogurt field. A person in charge of "Adopt a Cow" said in an interview with New Retail Business Review: "In terms of the overall domestic market pattern, head brands still dominate. What Adopt a Cow is now focusing on is to provide consumers with higher quality and better experience products through innovation in high-end new products and scenario innovation." The high-temperature heating production process kills the lactic acid bacteria and other strains in room-temperature yogurt, and also greatly limits the nutritional innovation of room-temperature yogurt, which can only develop in the direction of flavor innovation, beverages, and desserts. In contrast, low-temperature yogurt can "play" more tricks. For example, adding more probiotic strains, or using methods such as "0 sugar 0 additives" to launch different products to meet consumers' health needs. At the same time, consumption scenarios have also begun to expand to multiple scenarios such as after meals, leisure, and meal replacement. Consumer Xiaoqi said that when losing weight, she carefully checks the ingredients of yogurt. Bright previously launched "Rushi" yogurt, which contains only raw milk and three probiotics in the ingredients, with no other additives. "It looks very healthy, and the taste is good. It also comes with honey that can be added according to personal taste. In contrast, room-temperature yogurt has more additives, and after that, I rarely drink room-temperature yogurt." Industry insider Qiming (pseudonym) told New Retail Business Review that domestic milk sources are relatively concentrated in the northern region, while the south has relatively higher consumption of dairy products. Previously, there was a saying in the industry called "northern milk transferred south." But because low-temperature milk has a short shelf life and requires cold chain transportation throughout the process, the entry threshold for dairy companies is high. In addition, due to the cold chain transportation radius, the low-temperature yogurt market often shows that dairy companies perform well in their respective regions, such as Weigang in Nanjing and Bright in Shanghai. The above factors have also led to a much lower concentration in the low-temperature yogurt market than in room-temperature yogurt, which in turn provides breakthrough points for new brands; coupled with the continuous improvement of the cold chain system, it also provides feasibility for low-temperature yogurt to penetrate lower-tier markets. As a result, many emerging brands have seized the opportunity and entered this track one after another, not only further expanding the scale of the low-temperature yogurt market, but also intensifying competition. How will the domestic low-temperature yogurt develop in the future? It is better to look to neighboring Japan. Japan, already a major yogurt country, has not only a wide variety of low-temperature yogurt, but has also shifted to functional types. Its development process has many lessons for China to learn and draw on. -02- How Did Japan Become a Major Yogurt Country? According to statistics, China's per capita yogurt consumption rose from 3.5 kg in 2013 to 6.6 kg in 2017, while Japan's per capita yogurt consumption had reached 11 kg by 2017—compared with Japan, China's per capita yogurt consumption is still at a relatively low level. If measured by yogurt consumption amount, China's per capita yogurt consumption in 2017 was 11.1 US dollars, far lower than Japan's 68.3 US dollars, and even lower than the world average of 11.4 US dollars. So, how did Japan become a major yogurt country? During the Meiji Restoration, Japanese people's living habits began to move closer to European and American countries, and reached a climax after World War II. With the continuous penetration of Western eating habits, the Japanese public's acceptance of various dairy products continued to increase, and the unique taste and health benefits of yogurt gradually attracted attention. In 1950, Meiji Dairy first started industrial production of yogurt, and its honey yogurt "Meiji Honey Yogurt" became a pioneering product in the process of popularizing it to Japanese households. Subsequently, other dairy companies gradually began to produce yogurt. Thanks to the development of Japan's manufacturing industry, yogurt manufacturing technology also progressed. Meiji Dairy developed a continuous yogurt fermentation device in 1964, and in 1969 developed a filling device capable of transporting particulate food, thereby gradually enriching the yogurt categories. During this period, Bulgarian yogurt was introduced to Japan by Meiji. Bulgarian yogurt was completely different from the previous yogurt flavors in Japan, leaving a deep impression on consumers. This also became an important factor in promoting the significant increase in yogurt consumption in Japan. After that, the Japanese economy began to decline, and the aging problem became increasingly serious; this greatly reduced the consumption confidence of the Japanese people, and Japan thus entered a low-desire society. However, because consumption habits had been formed, yogurt not only was unaffected, but actually achieved steady growth. With the superposition of social factors, people's continuous attention to health, and the maturity of dairy companies' research on probiotics, Japanese yogurt began to shift to functional types and became a trend. Today, Japan's functional yogurt has various effects, such as preventing lifestyle diseases, maintaining brain health, improving sleep, and beautifying the skin. Functional yogurt mainly benefits from research on different probiotic strains. In 1998, Meiji researchers selected the strain with the best intestinal conditioning effect from more than 2,500 preserved strains—LG21. According to relevant papers, this strain can survive in gastric acid, and can inhibit Helicobacter pylori, providing protection for the intestines. In 2000, the yogurt "Meiji Probio Yogurt LG21" fermented with the LG21 strain was launched, and immediately achieved a huge response in the market. Source: Meiji official website Subsequently, Meiji launched R-1 yogurt that can prevent colds and influenza; in 2015, Meiji launched PA-3 yogurt, which is the world's first lactic acid bacteria product with the effect of lowering uric acid levels (hyperuricemia may induce gout). In the same year, Snow Brand Milk Products released its first functional yogurt. The yogurt with the SP strain added can effectively reduce visceral fat in adults, and can also promote the production of antibodies after vaccination, enhancing the body's resistance to influenza. This strain is backed by nearly 20 years of long research and a large number of clinical experiments. In 2018, the product was certified as a Food for Specified Health Uses. Snow Brand's yogurt advertisement Takanashi Dairy launched a functional yogurt containing Lactobacillus rhamnosus in 2019, which can relieve dry skin and moisturize the skin from the inside; Danone developed Densia bone-strengthening yogurt for people over 60 in Japan, which is rich in calcium and vitamin D, with a protein content of up to 9% and no added sugar. Functional yogurt is becoming increasingly popular in Japan, and its market share continues to expand. In 2015, the three functional yogurts launched by Meiji Dairy sold more than 100 billion yen. For people who pay more and more attention to health, if drinking yogurt can prevent diseases, then functional yogurt will inevitably become the first choice. Because consumers' demand for functional yogurt is different from the demand for existing yogurt, the existing yogurt market size in Japan has not shrunk due to the penetration of functional yogurt. Population aging, diversified consumer demand, and consumers' pursuit of personalization... From these perspectives, China and Japan have many similarities. Compared with Japan, Chinese consumers' awareness of the functions of lactic acid bacteria is still vague, and the functional yogurt market is still in its infancy, with large room for development. -03- Functional Yogurt: Getting Started Nowadays, domestic dairy companies are paying more and more attention to the research of probiotic strains. Ding Gangqiang, vice chairman of the Chinese Institute of Food Science and Technology, introduced that under the strategic layout of "Healthy China," innovation in the field of disease counterattack by probiotics has attracted industry attention. With the implementation of the "Healthy China 2030" Planning Outline, probiotic research will usher in a blowout period. Bright Dairy previously applied for a patent for Lactobacillus plantarum ST-III, which can regulate blood lipids. This strain has been used in the "Changyou" series of yogurt; another Lactobacillus casei LC2W, which can regulate blood pressure, has also applied for a patent and is currently used in the "Jianneng" series. Yili Dairy launched its first self-developed Bifidobacterium lactis BL-99. Research has shown that this strain can improve the body's immunity, while regulating the intestinal flora and promoting the growth of bifidobacteria and lactic acid bacteria in the intestines. Currently, this strain has been applied to the "Yixiao" series of yogurt. Mengniu Dairy launched the first Chinese breast milk-derived active probiotic M8 with independent intellectual property rights in 2019. This strain has functions such as treating constipation and diarrhea, and has been applied to the "Subtraction Life" series of products. In this regard, the person in charge of Meiji Dairy China told New Retail Business Review that in recent years, people's attention to lactic acid bacteria has continued to increase, but consumers' understanding is still shallow, and it is almost impossible to understand that each lactic acid bacteria has different characteristics. In the future, if consumers deepen their understanding and form the habit of choosing yogurt based on the characteristics of lactic acid bacteria, a market for "special probiotic yogurt" (functional yogurt) that meets different needs from the existing yogurt market will emerge, and the growth of low-temperature yogurt will be faster. It is worth mentioning that Meiji Dairy's two functional yogurts, LG21 and R-1, also took the lead in landing in East China in April this year. Except for the flavor and capacity improved according to Chinese consumers, the rest are produced to the same standards as in Japan. The above person in charge said: "China is the most important market for Meiji overseas, and we are actively investing. If we can contribute to the healthy diet life of Chinese customers, there is also the possibility of introducing (more yogurt products) in the future." It is not difficult to see that China's dairy companies have begun to make efforts in functional yogurt, but whether it is strain research or market cultivation, it takes a lot of time. However, it is certain that with the increase in residents' disposable income and the enhancement of consumers' health awareness, coupled with the relevant publicity of dairy companies, consumers will form a new eating habit of choosing yogurt based on the characteristics of lactic acid bacteria, and the yogurt market will also usher in a new stage. From room temperature to low temperature, and then to functional yogurt, the continuous development of the yogurt industry requires dairy companies to invest in research and development of more strains with different effects on the one hand, and on the other hand, it also requires vigorous publicity and education of the market—what is the difference between room-temperature yogurt and low-temperature yogurt? What details should be paid attention to in storage and transportation? What groups of people are suitable for drinking which type of yogurt... New Retail Business Review visited some chain convenience stores in Shanghai and found that many store staff often do not distinguish between room-temperature yogurt and low-temperature yogurt, and simply put all dairy products for sale into the low-temperature freezer for convenience. From this point of view, the market education and promotion of yogurt still has a long way to go. Note: At the request of the interviewees, Qiming and Xiaoqi in this article are pseudonyms. Tips will be paid 400-2000 yuan once adopted.