Yogurt on the rise in China

The drinking yogurt market is exploding in China due to significant and sustained investment and a new demand for healthier drinks on the go, according to a report by Canadean. Drinking yogurt will become the third most consumed dairy drink in China by 2016, as the volume consumption of drinking yogurt will exceed that of flavoured milk as well as grain, nut, rice and seed milk alternative drinks. According to Canadean, this is mainly due to significant and sustained investments taking place in the Chinese yogurt market. Michael Loubser, beverage analyst at Canadean, says: “With insufficient supply of raw milk and rising raw milk prices in 2013, Chinese dairy producers devoted resources to maintaining steady milk supplies by investing more in milk sources and cattle ranches. These investments are now bearing fruit, with the drinking yogurt category expected to experience steady growth well into 2019.”

Since 2013 major dairy production companies have been building up alliances and working together with dairy farmers to boost growth in the Chinese dairy industry. In May last year, for example, Mengniu and Danone signed a framework agreement to establish a joint venture for the production and supply of chilled yogurt products. At the same time Mengniu increased its stake in China Modern Dairy to 28%. Yili Group also formed an alliance with the Italian dairy firm, Sterilgarda Alimenti, and signed a memorandum of understanding with Dairy Farmers of America regarding strategic purchasing and farming service cooperation.

Significant investment, however, is not the only reason why the Chinese drinking yoghurt market is growing rapidly: With increasing disposable income and exposure to the highly marketed benefits of drinking yogurt, more and more consumers demand healthier, nutritious dairy drinks in China. According to Canadean, the ambient drinking yogurt segment is doing particularly well: in 2013 ambient drinking yogurt grew by an impressive 110%, and it is expected to grow further in 2014, to take a 70% of the drinking yogurt market. Loubser says: “Consumption habits have shifted, and a significant portion of the market is now ‘on the go’ which makes yogurt drinks, especially ambient variants, very convenient for busy consumers.”

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