June 3, 2025
 

China's milk output in 2024 drops as dairy industry struggles to keep up with changing tastes

China's milk production in 2024 dipped for the first time in five years, after years of steady growth, as shifting consumer preferences outpace the industry's ability to adapt.

The key to reversing the trend lies in closing the gap between traditional dairy offerings and the evolving demands of modern consumers, industry insiders said.

China's liquid milk production slumped 2.8 % last year from the year before to 27.4 million tonnes in total, according to data from the China Dairy Industry Association. Prior to this, output had been growing at more than 2 % a year for the past five years.

Dairy producers above a designated size across the country logged a drop in dairy product production of 1.9 % in 2024 year on year to 29.6 million tonnes, according to data from the National Bureau of Statistics. This is the first negative growth in recent years and is in stark contrast to 2022 and 2023, when output expanded by 2 % and 3.1 % respectively.

This has had an impact on revenue. The top three dairy companies, namely Yili Group, Mengniu Dairy and Bright Dairy, all logged a dive in earnings of between 8 % and 10 % last year from a year earlier. Yili posted revenue of CN¥115.8 billion (US$16 billion), Mengniu reported CN¥88.7 billion (US$12.3 billion) and Bright Dairy logged CN¥24.3 billion (US$3.37 billion).

There are two main reasons behind the slump, Liu Jiangyi, chairman of the China Dairy Industry Association, said at the association's annual meeting recently held in Nanjing. First, a complex domestic and foreign economic environment has led to a slowdown in consumer spending, and second, the market is reflecting both a drop in demand for regular milk and a dependence on imported premium dairy products.

China's dairy industry has been dominated for a long time by different types of liquid milk, but consumption is now on the decline. Last year, the average Chinese person consumed 41.5 kilogrammes of dairy, a 5.6 % drop from the year before.

Imports of liquid and fermented milk are also tumbling. However, imports of higher-end items such as cream, condensed milk and whey protein are going up. For example, cream imports jumped 9 % last year from a year ago to 290,000 tonnes.

The dairy sector is being completely reshaped, Wang Hua, a marketing manager at Swedish food packaging firm Tetra Pak, said at the meeting. Snacking has become a growing trend and this is driving up demand for ready-to-eat cheese. The fitness boom is also boosting interest in protein supplements and weight management products.

As milk sales slow, more dairy companies are hiking their investment in the health and nutrition market. Bright Dairy as well as Hohhot-based Yili and Mengniu all said at their recent earnings calls that they plan to focus more on functional products and advanced dairy processing going forward.

Future innovation needs to revolve around three main goals, Liu Zhenmin, chief scientist at Shanghai-based Bright Dairy, told Yicai. These are developing probiotics targeted at specific health needs, deepening research into dairy nutrition and creating functional dairy products aimed at healthy aging. In his view, meeting the nutritional needs of China's silver-haired population can open up a large new market, demonstrating the huge potential of products that support healthy aging.

-      Yicai Global