Organic Dairy Market in China Spurred by 2008 Chinese Milk Scandal

China is the second largest economy across the globe and is currently undergoing a major consumer revolution. While in the past, consumers favoured factors like price point and functionality of the product, they are now willing to purchase products which offer premium quality as well as better taste. This shift amongst the preferences of the consumers in the region can be accredited to the inflating disposable incomes and improving standards of living. Thus, China is emerging as one of the fastest growing markets for organic dairy products in Asia. In comparison with the conventional dairy products, organic dairy products are widely being adopted in the region owing to their high nutritive content. As per the Chinese organic dairy market report by IMARC Group, the market reached a value of US$ 737 Million in 2017.

The 2008 Chinese Milk Scandal which included adulteration of milk, infant formula and other food materials with excessive amounts of melamine resulted in six fatalities and hospitalisation of 300,000 of babies. This made the consumers extra cautious about what the livestock is fed with and how it is raised, thus creating opportunities for the organic milk and milk products that are derived from animals which are given only organic feed and not treated with bovine growth hormones (BGH). Additionally, manufacturers are increasingly elaborating their product portfolio by introducing new flavour variants in order to meet the fluctuating tastes and preferences of a large number of consumers. Moreover, the improving distribution and supply chain infrastructure in the region is another primary force impelling the growth of the organic dairy products market. Apart from this, China is presently witnessing rising incidences of chronic and lifestyle diseases which have stimulated the demand for organic dairy products. However, high price point is hindering the growth of the market in China as these products are nearly thrice as expensive as the conventional dairy products. Looking forward, the Chinese organic dairy market size is expected to reach US$ 1,759 Million by 2023, exhibiting a CAGR of around 16% during 2018-2023.

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Segmentation on the basis of province and product type

On the basis of province, the market is segmented as Guangdong Province, Jiangsu Province, Shandong Province, Zhejiang Province and Henan Province. Amongst these, Guangdong Province accounts for the majority of the market share as it is the most populous provinces of China and its economy is large enough to be compared with that of the several countries. Nonetheless, it is currently facing an increased competition from the other regions of China as well as Asian countries like Malaysia and Vietnam.

Based on type, the market is segregated as organic fluid milk, organic infant formula, organic yogurt, organic cheese, organic butter and organic cream. At present, organic fluid milk holds the majority of the Chinese organic dairy market share. Consumers in China have a strong consumption desire for organic fluid milk as they are rich in vitamins, anti-oxidants, omega-3 fatty acids and conjugated linoleic acid (CLA). Moreover, they offer numerous health benefits which include boosting metabolism, reducing muscle and joint pain, strengthening of the immune system, and lowering the risk of cancer as well as heart diseases.

Tetra-packs and pouches dominate the market

On the basis of packaging, tetra-packs and pouches represent the largest segment which is followed by bottles, cans and others. This can be attributed to the fact that tetra-packs and pouches are primarily made from paper and thus, are lightweight, re-cyclable and easy to transport. Furthermore, the tetra packaging assists in keeping the product fresh without the need of refrigeration or adding preservatives.

Supermarkets and hypermarkets represent the largest distribution channel

Based on distribution channel, supermarkets and hypermarkets enjoy the leading position in the organic dairy market in China. Supermarkets and hypermarkets have gained immense traction in the region as they offer one-stop shopping experience to the buyers by providing a variety of brands as well as products to choose from, leading to an increased brand awareness amongst consumers. Other distribution channels include organic speciality stores, convenience and grocery stores, discount stores, online/e-retailing, direct sales and others.

Presence of few key players

The organic dairy market in China is concentrated in nature with the presence of only few major players such as China Shengmu Organic Milk Limited, Inner Mongolia Yili Industrial Group and China Mengniu Dairy Company Limited. As Chinese society is viewed as ‘collectivist’, manufacturers are heavily investing on advertising which is targeted towards groups instead of individuals.

About IMARC Group: IMARC Group is a leading market research and consulting company that offers management strategy and market research worldwide. The company has done multiple projects on the organic dairy industry, which has enabled the clients to successfully setup and expand their businesses. Some of the company’s offerings include:

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• Innovation and Product Development