Cheese in China – a gargantuan challenge

Most Chinese believe that cheese smells like a kitchen rag, but there definitely is a future for cheese in China.

First of all, you should know that most of the Chinese do not like cheese, or at least the typical cheeses Westerners eat every day. Indeed they think it smells horrible and find hard cheeses such as Gruyere or Emmental outright disgusting.

However, more and more Chinese people would like to try new things and to taste imported products, as is attested in many of the posts in this blog. This also includes cheese, especially in first-tier cities such as Shanghai, Beijing or Guangzhou. However, almost all cheese consumed by Chinese is processed, as this removes some of the most problematic properties (texture and odour). Reliable cheese-related statistics about China are notorious hard to get. According to a usually reliable Chinese soure, the country has produced 27,000 mt of cheese in 2016; 10,000 mt made from domestic raw milk and the remaining 17,000 mt being processed imported cheese. The OECD-FAO and USDA statistics are considerably higher, but I suspect that those figures include some yoghurt, which by some producers, in particular in the South, is named suanrulao ‘sour yoghurt’.

CnProcCheese

Government support

Chinese Vice Agriculture Minister Yu Kangzhen stated on Dec. 13, 2017, speaking at an event to encourage cheese consumption in schools, that efforts should be made to develop dry dairy products like cheese to improve dairy product structure and boost the dairy industry. Chang Yi, chairman of Beijing Sanyuan Food (see below), said at the event that China’s cheese consumption could grow by more than tenfold in future, and that he expected the cheese industry to maintain annual growth of 20% in the next five years.

Imports

While domestic production is growing, most cheese consumed in China is imported. China imported 97,000 mt of cheese in 2016, 6.9 times the volume of 2008.

Region share (%)
New Zealand 42.2
Australia 27.2
USA 18.6

The old world is obviously lagging behind, which is again a result of the Chinese dislike of unprocessed cheese.

Mozzarella is a major item in the list of imported cheese. Fonterra has recently opened a cheese plant in Australia to better supply the Chinese pizza market. According to a Fonterra spokesperson, already half of the Chinese pizzas are topped with mozzarella from Fonterra.  Mengniu and its partner Arla have launched mozzarella in 2018.

China is lowering its cheese tariffs from 12% to 8%, effective from December 1, 2017. This will certainly boost the sales of imported cheese.

Distribution Channels

93% in supermarkets and hypermarkets
4.8% in small independent grocers
1.9% in other food retailers
0.3% small outlets like hotels and upscale restaurants targeting expatriates

The supermarket is the no.1 distribution channel, because it is absolutely necessary to maintain the cold chain for cheese. Many small grocers cannot provide this quality service. With the development of the Internet and new ways of consumption, it is now possible to buy your cheese online.

Imports are still rising significantly. China has imported 16,446.9 mt of cheese during the first 4 months of 2017; up 41.25%.

Demand

Demand for cheese is driven by two factors: Chinese consumers looking for high quality dairy products and safe products prefer major western brands. Lifestyles are moving towards European standards of consumption.

The tastes of Chinese regarding cheese will develop gradually. Traditionally Chinese food is served with several dishes. And unlike us, Chinese don’t eat cold meal. However, pizza has made extremely popular in China after the arrival of Pizza Hut in the Middle Kingdom. Its success has inspired many Chinese entrepreneurs to venture into Italian restaurants, and cheese is an inalienable ingredient of Italian cuisine.

PizzaHutChina

Main brands

The site Manufacturing News has published the following list of China’s top 10 cheese brands of 2015

1 Yili
2 Bright
3 Suki
4 Milkana
5 Anchor
6 Mengniu
7 La Vache qui Rit
8 Sanyuan
9 Arla
10 Tala Eji

Half of these are indeed domestic companies, but most of them import bulk cheese and further process it into processed cheese in various shapes and flavours.

The oldest domestic cheese producer is Sanyuan (Beijing). It imported a Danish cheese production line in 1985, mainly to service the foreign diplomatic community in the Chinese capital. Sanyuan still produces this cheese under the Beijing Cheese (Beijing Ganlao) brand. It now has a capacity of 10,000 mt p.a.

Ingredients: fresh milk, non-fat milk powder, salt, calcium chlorate, rennet, lysozyme, Lactococcus lactis cremoris, Lactococcus lactis diacetyl, Leuconostoc mesenteroides

Strikingly, most domestic companies that actually produce cheese in China are small, often privately owned, enterprises. There is Qishi (Inner Mongolia), China’s first producer of Mozzarella, but the most interesting case is no doubt Le Fromager de Pekin, a company set up by a Chinese, Liu Yang, who learned making cheese in France. Liu spent 7 years in France studying the language, business administration and cheese making. Upon his return to China in 2007, he stumbled through careers in translation and IT sales before opening Le Fromager de Pekin, which sells about 5300 pounds of cheese a year. Although Liu’s mission is to promote cheese to fellow Chinese, almost all of his clients are expatriates living in Beijing. Still, he’s convinced that will change. Watch this video report about his activities.

Case study: Yellow Valley: Gouda as only a Dutchman can make it

When Marc de Ruiter’s Yellow Valley business opened up in 2004, it was the first fair trade Gouda cheese producer in China. Known by almost half the expat population in Beijing. Here is a video impression from 2009.

Yellow Valley is located near Taiyuan (Shanxi). It is a small production facility on the premises of a dairy farm. Here, Marc de Ruiter, a Dutch agriculturist, produces his original Gouda cheeses. He is supported by two full-time employees – one cheese maker and one who handles marketing and sales. Two part-time employees take care of the online sales activities via China’s e-commerce platforms. The small Gouda cheese making business grew more successful over the years and the Yellow Valley products were widely known in China’s largest cities. After China was hit by the melamine milk scandal, Yellow Valley had to close down, like many small dairy-processing businesses.

YV

After the close-down from 2011 to 2015, Marc found a way to restart. “Producing ‘farmhouse based cheese’ was the loophole I needed. It requires a lot less licences and permits. The cheese can only be sold directly and online – not in stores.” The Yellow Valley ‘new style’ offers a wide range of traditional and special products, like the original Cheese, the Aged, Herbs de Provence and Cumin varieties and even with local cheese favourites with onions and garlic. There is even a spicy variation red Currently, nearly 90% of its sales go through WeChat, Weidian and Taobao channels.

After the reopening of Yellow Valley in mid-2015, Marc aims to increase production. The company is expanding its facilities to 65+ square metres of production space, a ripening chamber and an exhibition space.

What is missing?

So the Chinese are surely developing a taste for cheese, but what would it take to bring this market to maturation? One problem is that cheese is hard to integrate in Chinese cuisine. You can try to design a recipe for cheese-filled dumplings, but this may make them taste more like an Italian dish than a Chinese snack. The same would happen, if you would sprinkle grated cheese over a bowl of Sichuan-style dandan noodles. It may actually be tasty, but I wonder if it would ever become a hit. One solution could be to do tests with adding molds like those used to produce furu (fermented bean curd) to cheese and develop an indigenous moldy cheese. Huangshan Tianfeng Foods Co. produces a version of the traditional Chinese rice cake niangao flavoured with cheese.

Another problem is that the little natural cheese that is actually produced on Chinese soil is not linked to the local food tradition, the local terroir. When I first lived in China in the 1970s, we could buy cheese from Heilongjiang province (the home region of Mr Liu Yang), close to the Russian border. That was real natural cheese. However, production seems to have halted; pushed from the market by imported cheese and locally produced processed cheese. An idea for Mr Liu Yang would be to promote his Beijing-produced cheese as the ideal companion of Beijing’s famous baijiu (distilled liquor): Erguotou; a beautiful marriage between the old and new local tradition.

Cheese has set a firm foot on Chinese soil and it certainly there to stay and to grow.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

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The revival of famous food and beverage brands of the past

We are experiencing a moment in time in which the Chinese are looking back at the nation’s long history with more appreciation for traditional values and things Chinese to be proud of. This includes a number of old famous food brands (laozihao in Chinese) that have (almost) gone lost in during the years of rapid economic growth. Of the 2000 traditional brands in China, about 27% are food and beverage businesses, according to a research report from Beijing Technology and Business University.

Several of the Beijing-based brands used to enjoy national fame — Yili, Sanyuan, Beibingyang, Liubiju, and Wangzhihe. Curiously enough these old Beijing brands still have large numbers of loyal customers but also mirror the development of typical State-owned enterprises in the capital. A number of famous old brands based in other regions of China are being revived as well. The national government has started to protect those brands with a system of certification.

Beibingyang

The Beibingyang Beverage Co’s soda water, for example, can be seen in snack bars and small restaurants in the city where it is quite popular, with demand always far outstripping supply on hot summer days, according to Ma Chunying, Party head of Beijing Yiqing Holdings Ltd, a Beijing-based food manufacturer, who added, “Beibingyang Beverage grew out of an ice plant that started in 1936, so it’s nearly 80 years old.”

BBYsoda

Beibingyang (Northern Ice Sea) used to be China’s top brand soft drink, but disappeared 15 years ago, when it proved unable to reposition itself in the world dominated by Coca Cola and the likes. Yili announced its return in 2011.

Yiqing literally means ‘First light’ and is an abbreviation of the Beijing First Light Industry Corp., a management vehicle of the part of the industry that used to be operated by the Beijing Bureau of Ligh Industry, which in turn was the local branch of the Ministry of Light Industry. This ministry was demoted to the China Light Industry Association and the former ministry’s local branches were reorganised into holding companies that managed the individual companies. ‘First’ refers the lighter types of industry like food.

Beibingyang is performing well. The company has filed a turnover of RMB 600 mln for 2017. It has also launched a type of peanut-based protein beverage of its own, under the Beibingyang brand. It has also started to pack its soda in PET bottles mid 2018 (see pictures).

For me personally, reading the brand name Beibingyang brings back my own memories of my year in China in 1975-76.

Yimin ice cream

The resurrection of Shanghai Yimin No 1 Food Factory, one of China’s oldest ice cream makers, is creative: the brand chose a new durian flavoured sundae to announce its comeback. Yimin’s vanilla ice cream has some history to it. Now the brick-shaped dessert sells at RMB 8 yuan apiece. Back in its heyday in the 1950s, its price was RMB 0.25. Its popularity continued through the 1980s and 1990s. Its size and shape resembled a soap bar (see photo above). And consumers would dip it in soda water, mix it with cookies and fruits, or even allow it to melt so they could use the fluid as a dressing on fruit salad. Those were the days when air conditioners and refrigerators were still few and far between at homes. At its peak, Yimin’s vanilla ice cream commanded nearly 80% of the local market. But then, the ubiquitous imported ice cream brands mauled the 95-year-old firm’s offerings. Let’ watch and see if the new flavour can help Yimin recoup some of that old market share.

Moqi

Moqi Peach Drink is not even a very old brand. Launched in 1984, and booming by 1992, the brand faded away before the end of the century. It grew a dull and old-fashioned image and was no match for the ‘modern’ international soft drinks. However, Moqi was relaunched on February 5, 2018.

Yili

Yili bread (not to be mixed up with Yili, China’s top dairy company), another Yiqing Holding brand, especially the type filled with jam, was known in practically every household in Beijing in the early 1960s and ’70s, and, Ma adds, “This bread keeps the traditional flavor and texture of dozens of years ago and which is still popular, and along with Beibingyang soda water, in the words of one customer “still brings back childhood memories”. In fact, reading the brand name Beibingyang brings back my own memories of my year in China in 1975-76.

YiliBread

These sentiments for old brands fit in with the current trend in China to go back to traditional Chinese values and respect the good things of Chinese culture. Protecting a number of national brands is another distinctive trait of the current Chinese government, as I indicated in the post on infant formulae.

An employee of Yili bread, Zhang Chunlin, explains why it still tastes good after so many years of development by saying that the company insists on using the traditional fermentation method, which produces the particular flavor and nutritional benefits and that the food safety is a major concern for Yili and Beibingyang, which claim to have strict production standards for raw materials and processing. Yili bread does not have any food additives or trans-fat, which can increase the risk of disease.

Sanyuan

When it comes to food security, no one feels stronger about it than Sanyuan, according to a company spokesman, which is a Beijing Sanyuan Foods Co brand and one of China’s leading dairy producers. Sanyuan started life as the Pingjiao State Farms Administration office in 1949, the year of the founding of the PRC; another government agency turned company.

SYmilk

China’s diary business was badly hurt by the 2008 scandal in which several giant Chinese companies were found to be adding melamine, a chemical that can cause kidney and other damage, to their food, while Sanyuan’s products, a relatively smaller operation, proved to be safe. Since then, the government has imposed tighter quality controls on the industry, and has tried to restore consumer confidence. Sanyuan acquired most of the assets of Sanlu, China’s largest dairy company until it got bankrupt as a consequence of the melamine incident.

In a spot inspection, in 2011, China shut down 426 dairy producers and told another 107 to suspend operations until they made improvements. Then, in 2014, the Beijing government gave RMB 10.8 mln to the Sanyuan Group to develop safer, healthier infant milk powder.

One Sanyuan Foods manager said that in addition to about 30 tests for heavy metals, pesticide residue and chemical additives, the company has advanced testing facilities for antibiotics and somatic cells.

They also have a complete industrial chain, from cow breeding, feeding, and processing, to sales and cold chain transport to after-sale service and use information technology and intelligent systems to identify the cows and calculate the amount of exercise and, in processing everything is automated.

Five Star Beer

Established in 1915, Five Start was one of China’s oldest beer brands, but when it failed to redefine itself in the new competitive environment, it was finally taken over by Tsingtao in 2000. The new owners discontinued the brand. In September 2015, Tsingtao announced that it will revive the Five Star brand, for the time being concentrating its marketing in Beijing and the Northeast.

china-five-star-lager

Wangzhihe

Wangzhihe, of the Wangzhihe Group, a subsidiary of Beijing’s Ershang Group, goes back to 1669, so it has a long history with fermented bean curd. The parent group owns dozens of national brands with long histories, including Liubiju sauce and pickles, and Yueshengzhai pickled beef and mutton.

WZHlogo

The literal meaning of Ershang is ‘Second Commerce’. Like Yiqing, it is a management vehicle for the state owned enterprises under the former hierarchy of the Ministry of Internal Commerce. That ministry merged with the Ministry of Foreign Economic Relations & Trade into the current Ministry of Commerce. And again, the companies involved were distributed over a number of holdings.

Wang Jiahuai, GM of the Wangzhihe Group, says, “It takes at least 100 days for the furu (fermented tofu) while the natto (Japanese soy food) ferments in about one week. There is a wide gap in texture, fermentation and nutrition between Chinese furu and the Japanese natto.”

Wangzhihe’s furu got national recognition as a cultural heritage item, in June, 2008, Wang added, so, it gives all its suppliers an evaluation and certification before letting them work. They are mostly in the northeastern provinces of Jilin, Liaoning and Heilongjiang, which have high-quality soya beans.

In denying a rumor that furu contained nitrite, a food additive that can cause cancer if taken in excessive amounts, he said, “Wangzhihe uses a biologic method to ferment furu, and it won’t harm your health,” then went on to explain, “People get used to eating furu as a side dish and do not know much about its nutrition and cultural connotations so, a major mission of our company is to develop the traditional processing and do more research on microbial fermentation and nutrition.”

Liubiju

Liubiju Pickle is “China’s Time-honored Brand”, enjoying a history of over 400 years. It was originally created in 1530 A.D. as a small store bu brothers surnamed Zhao in Xishe Village, (Linfen, Shanxi). Later, it specially dealt with pickle business. The name Liubiju was taken from the motto coined by the shop’s founder and means “House of Six Musts,” referring to prime raw materials, choice ingredients, the best yeast, pure water, proper curing, and flavorful pickles.

LBJsample

The pickles in Liubiju have carefully-chosen materials and strict processing procedures. Natural saucing method is adopted and abided by strictly. All materials come from fixed places. For example, soybeans are purchased from Majuqiao of Fengrun (Hebei) and Yongle Store of Tongzhou (Beijing), and the wheat flour are from Laishui (Hebei) and. cucumber from Daxing (Beijing).

In 1988 all the sauce and pickle makers in Beijing, including Liubiju, merged to establish the Beijing Pickles Company, later renamed the Liubiju Food Company.

Tianfu Cola

The Chinese cola brand Tianfu, that in 1991 was good for 80% of the Chinese cola market, will be relaunched around the Spring Festival of 2016. Back in 1980s and 1990s, the Chongqing-based company was the largest soft drink maker in China with a strong hold of 70% of the soft drink market. Tianfu Cola was sold beyond China and started to gain market recognition in Russia and America. In 1994, the company set up a joint venture with American cola producer Pepsi, which was not successful. By 2005, Tianfu Cola’s market share had plummeted to 1%. The company blamed the failure to the decision to cut the production of Tianfu Cola to make way for the production of Pepsi-Cola. In 2006, the company sold its stake in the joint venture to Pepsi. However, Pepsi refused to give back Tianfu’s production right. In 2010, Tianfu took Pepsi to court accusing the US firm of stealing the secret recipe for its beverage, with success. Tianfu will still use its natural traditional Chinese medicine herbal recipe to produce the drink, which was developed in cooperation with the Sichuan Research Institute for Chinese Medicine.

Tianfu

Yimin 1

In Shanghai, Yimin No 1 Food Factory is trying to regain its earlier leading position with a new high-end ice cream. Founded in 1913, Yimin No 1 Food Factory is one of the first ice cream makers in China. Originally a conglomerate that produced beverages, canned foods and snacks, the company later made ice cream and sold it under the brand “Bright” during the 1950s (Bright became one of China’s leading dairy companies). At its peak, Bright accounted for 80% of ice cream sold across the country. By the early 1990s, the company produced 15,000 mt of ice cream every year, 18 times the amount when it was started four decades ago. But with the aggressive expansion of foreign brands in the late 1990s, the brand fell down the pecking order in the market. Its main consumers today are middle-aged consumers looking for a slice of nostalgia. In 2017, the company recorded RMB 200 mln of sales across its product categories, up 10% from the previous year. However, a low profit margin and a dissipating market share, especially in areas outside Shanghai where people are less attached to the history of the brand, remain big concerns for the company. Yimin is hoping that a new polar bear logo for their high-end offering could eventually become a prominent IP like characters from Disney, in turn drawing more young people to try their product which is available in three flavours — vanilla, cheese and strawberry yoghurt.

Adapting to modern demands

Most of these time-honoured brands stick to traditional methods, but also try to improve through modern technologies, which they consider inevitable if they hope to meet the demands of customers beyond Beijing, change is necessary.

Wangzhihe says it has more tailored marketing strategies for different parts of China and products that cater to local tastes, with Wang pointing out that the people of northern China prefer the red furu while southerners like the white better.

Yiqing Holdings says it has been trying to adjust to meet market demands and, in 2011, opened its first store in the Yili chain in Beijing, and in doing so got to know more about the market and got customer feedback. In the past, businesses such as supermarkets and snack bars just went to the plant themselves to get the goods and the company just stood by, passively waiting for buyers, something that was really out of step with the times.

Ma explains, “There are 65 chain stores in all and that is expected to reach 100 by the end of this year,” while Li Qi, the president of Yiqing Holding, in commenting on their development, says they consider the development of the Beijing-Tianjin-Hebei region as a business opportunity for their brand strategy.

The company was also a sponsor of last year’s Asia-Pacific Economic Cooperation meetings in Beijing and its sponsored products cover food and beverages and sponsoring such grand international event was a good way to become known globally.

Other regions in China will undoubtedly have similar clusters of old trusted brands produced by new style state owned enterprises that are no longer directly operated by the government, but still closely monitored and protected by it. I will report on these regions in the near future.

Old brands introduced in previous posts

A number of earlier posts in this blog introduce other old famous brands. I will list them here, with links to the relevant posts.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

 

Yoghurt in China – innovative but old is still hip

Yoghurt is the most widely acceptable dairy product among Chinese consumers.

Yoghurt has always been one of the more popular dairy products in China. The value of the Chinese yoghurt market for 2017 is estimated at RMB 89 bln. An important reason is that it is easier to digest by people with lactose intolerance. Yoghurt is also less ‘creamy’ in taste that liquid milk, and lacks the alien smell of most Western cheeses.

The Chinese yoghurt market is dominated by the two Inner Mongolian giants Yili and Mengniu and their Beijing cousin Sanyuan and Shanghai-based Bright as the Benjamin. The following table shows the yoghurt market shares of the major companies in January 2018.

Company Share (%)
Mengniu 28
Yili 27
Sanyuan 21
Bright 15
Tianrun 3
Junlebao 3
Yiguo Fresh 1
Weiquan 1
Others 1

Old yoghurt newly formulated

However, even though a large variety of yoghurts is available in the local supermarkets, Chinese consumers have started to grow bored with the relatively sweet and rather liquid products.

To counter the demand for a new type of yoghurt, a number of Chinese dairy companies started launching more viscous products a year and a half ago, resembling products like Greek yoghurt or quark. In fact, Yili (Inner Mongolia) has launched a Greek yoghurt early 2016 (see photo). They are market as ‘old yoghurt’, trying to create a ‘traditional’ image; yoghurt as it originally used to be.

YIliGreek

 

Huishan Dairy (Liaoning) has launched a type of Russian yoghurt early 2017, branded Wolingka.

After so many food safety incidents, an investigative journalist of the Beijing Evening News purchased old and regular yoghurt of three leading brands, to compare the ingredients used in each product, as listed on the packaging. He has furthermore interviewed a number of experts in this field.

The results allow us to have a look into the kitchen of the present day top producers in this industry in China, and one with a rare degree of detailedness. We will start with offering a translation of the information of the 8 products (4 brands of Old Yoghurt and 4 types of normal yoghurt of the same brands). For each product, the following information will be provided: brand and product name, ingredients, and price. I will then summarise the judgments of the journalist and the experts and end with some comments from my side.

 

Junlebao

Traditional Old yoghurt Raw milk, sugar, whey protein powder, streptococcus thermophilus, lactobacillus bulgaricus additives (HPDSP, gelatin, pectin, monoglyceride, aspartame, acesulfame-k) RMB 2.48/139 gr = RMB 0.018/gr
Yoghurt Raw milk, streptococcus thermophilus, lactobacillus bulgaricus, additives (HPDSP, gelatin, pectin, aspartame, acesulfame-k) RMB 10.50/800 gr = RMB 0.013/gr

 

Bright

1911 100 years Old Yoghurt Raw milk, sugar, whey protein powder, streptococcus thermophilus, additives (HPDSP, gelatin, pectin, agar, food flavors) RMB 4.90/160 gr = RMB 0.031/gr
Yoghurt (sugar free) Raw milk, whey protein powder, streptococcus thermophilus, additives (HPDSP, gelatin, pectin, agar, food flavors) RMB 8.80/800 gr = RMB 0.011/gr

 

Mengniu

Inner Mongolian Old Yoghurt Raw milk, sugar, whey protein powder, thin cream, streptococcus thermophilus, lactobacillus bulgaricus, additives (gelatin, agar) RMB 3.80/160 gr = RMB 0.024/gr)
Yoghurt Raw milk, sugar, lactobacillus bulgaricus, streptococcus thermophilus, additives (HPDSP, agar, aspartame, acesulfame-k) RMB 8.00/800 gr = RMB 0.01/gr

 

 

Yili

Old yoghurt Fresh milk, sugar, streptococcus thermophilus, lactobacillus bulgaricus, additives (gelatin, diacetyl tartaric acid ester of mono(di)glycerides, HPDSP, pectin, acfesulfame-k, aspartame) RMB 3.95/15o gr = RMB 0.026/gr
Probiotic plain yoghurt Fresh milk, sugar, whey protein powder, streptococcus thermophilus, lactobacillus bulgaricus, bifidus, lactobacillus acidophilus, additives (HPDSP, pectin, gelatin) RMB 10.90/800 gr = RMB 0.014/gr

 

Sanyuan

Old Beijing plain yoghurt Raw milk, sugar, streptococcus thermophilus, lactobacillus bulgaricus, additives (gelatin, diacetyl tartaric acid ester of mono(di)glycerides, pectin, xanthan) RMB 3.80/180 gr = RMB 0.021/gr
Plain yoghurt Raw milk, sugar, streptococcus thermophilus, lactobacillus bulgaricus, additives (gelatin) RMB 9.50/800 gr = RMB 0.012/gr

 

The journalist’s findings

Retailers generally like the Old Yoghurt, which they describe as ‘selling itself without any marketing effort’. Most consumers interviewed while buying it state that Old Yoghurt has an ‘original’ taste and ‘reminds one of the past’.

The price difference is significant. It is smallest for Junlebao, but for the other brands, the Old Yoghurt is on the average twice as expensive per gram as the regular variety.

However, these differences in price are not reflected in the lists of ingredients. Actually, these are remarkably similar for the Old and regular varieties. Moreover, the differences between the various brands are also very small. Even more peculiar is that an ingredient that is typical for Old Yoghurt in one brand is typical for the regular variety for competitive brand.

Apparently the only real difference between these two types of yoghurt is that dosage rates of thickeners, giving Old Yoghurt the thick mouth feel that traditional yoghurt used to have.

The experts’ opinion

The journalist has interviewed a number of dairy scientists on this topic. All agree that Old Yoghurt is a ‘concept’ rather than a real product. Real traditional yoghurt was a solidified milk, produced by fermenting raw milk with certain bacterial cultures in stone jars. There is nothing mysterious about it.

All brands of Old Yoghurt described by the journalist contain gelatin; and so do even some of the regular yoghurts. The thicker mouth feel is thus emulated by means of additives. The current Old Yoghurts are certainly not healthier than the average yoghurts.

My comments

This is a fascinating discussion. Actually, in European regular media we rarely find such detailed reporting on the use of food ingredients to ‘construct’ images of food products. Evidently, the food safety incidents that have taken place in China during the past couple of years have sensitised the awareness of Chinese consumers to an extent that consumer associations in Western countries can only dream of.

The issue revealed here by a Chinese journalist is by no means a typically Chinese phenomenon. One can buy semi-finished muffins and other types of cake in Europe, than can be baked at home to enable consumers to serve hot freshly baked muffins to their guests. TV commercials advertise these products showing people in the street smelling that (grand-)mother is baking cake. We are not aware of protests by consumers or consumer associations about such commercials. What European consumers seem to miss is how it is possible to smell a cake being baked from such a large distance.

Our ‘(grand-)mother’s apple pie’ is also emulated with premixes containing artificial flavours. These are further combined with emulsifiers and other additives, to ensure that even the most inexperienced person can bake such a pie or muffin. These additives are all approved for use in food, but so are the ingredients of Old Yoghurt in China. The Chinese journalist is not exposing excessive use of ingredients or the use of illegal additives. He is simply pointing out that consumers need to be aware of the fact that current Old Yoghurt is not related to the traditional thick yoghurt that Europeans use to eat when they were young. In this respect, Chinese consumers and media seem to be a step ahead of their European counterparts.

A few days after this publication on Old Yoghurt, another article appeared interviewing two more dairy experts. Their judgment was significantly milder. Old Yoghurt was first launched by a relatively small company in Qinghai, a region where people are traditional consumers of dairy products. Once that product became a success, it was imitated by dairy companies all over China. However, these companies lacked the skills to produce a thick type of yoghurt in the traditional way. The move to thickeners is then easily made.

The experts further point out that gelatin, starch and most other thickeners are natural products that are used in a large number of foods, and even in the kitchens of many consumers. Their use as food ingredients has been approved and there even is no maximum dosage rate for this kind of ingredients. The dairy experts do point out that there are better ways of producing a thicker kind of yoghurt, like lowering the water content of the milk. This requires more technical skills than adding thickeners. The current problems of Old Yoghurt in China are therefore directly related to the large number of relatively small companies, lacking skilled staff.

Recent developments

The most recent development is that the more and more producers are replacing the term ‘old yoghurt’ with other fancy names. Yili has launched a ‘Pureday Clotted Yoghurt’ and Junlebao a ‘Laojuezhuang European Sour Cheese’ (laojuezhuan literally means ‘cheese estate’. The names and design of the packaging shows that the basic proposition, that these are traditional European products, is now emphasised even more than before.

PuredayLaojuezhuang

The formulations have not changed dramatically:

Yili’s ‘Pureday Clotted Yoghurt’ Sugar, whey protein, fresh milk, butter oil, egg yolk powder, additives (gelatin, DATEM, HPDSP, pectin), flavours, streptococcus thermophilus, lactobacillus bulgaricus RMB 5.50/138 gr = RMB 0.039/gr
Junlebao’s ‘Laojuezhuang European Sour Cheese’ Sugar, whey protein, fresh milk, condensed milk, additives(gelatin, DATEM, HPDSP, pectin, xanthan), lactic acid culture RMB 4.70/139 gr = RMB 0.034/gr

Organic yoghurt

Organic yogurts are proving popular for health-conscious office workers and young parents. Discerning shoppers seem willing to pay that little bit more for the right products as supermarkets start stocking an array of upmarket brands. Classy Kiss, a yogurt rolled out from Green’s Bioengineering (Shenzhen) Co Ltd, posted significant sales growth in third and fourth-tier markets. It recently launched an organic brand, which sells at around RMB 14, one of the most expensive products from its dairy range. Earlier, it also launched a yogurt designed to help improve the digestive system after a meal. The company hopes it will be able to cash in on the growing demand for healthy products. Sales of functional and fortified yogurts in China are expected to rise 23% to RMB 43 bln in 2017 compared to 2016. By 2022, sales are expected to surge 56% to RMB 75 bln.

Drinkable yoghurt for the young

Younger Chinese consumers have taken a fancy to creamy, sweet, flavored yogurt and yogurt-based drinks. Category sales have surged about 20% annually since 2014 to reach RMB 122 bln in 2017. Chinese consumers perceive yoghurt as “nutritious”, “helps to boost immunity”, “easy to digest” and “suitable for children and the old”. Yogurt has become a leading product in the domestic dairy market. But compared to other countries, yogurt consumption in China is relatively low at 3.43 kg per person per year (Japan leads with 9.66 kg and the figure for the United States is 4.92 kg). The recent uptrend in yogurt sales in China has positive implications for the larger dairy market. Overall dairy sales in China are expected to exceed RMB 480 bln by 2022 on a compound annual growth rate or CAGR of 6.6%.

Le Pur yoghurt

A noteworthy new arrival on in China’s domestic yoghurt industry is Le Pur. The name embodies the company’s simple and down-to-earth ambition of providing pure and delicious, quality yoghurt. With its dairy imported from countries such as the UK and New Zealand, and other ingredients, such as freshly-picked blueberries sourced from Shandong Province, hazelnut jam from Germany and vanilla from Madagascar, Le Pur aims to provide only “genuine ingredients.” Le Pur’s founder and CEO Denny Liu, a graduate of the Wharton School and a former employee of the Blackstone Group. Liu was also a special adviser to world leading industrial companies like PepsiCo. In late 2014, Liu gave up his career and started to make dairy from scratch. Within a year, he started Le Pur and gained over 40,000 fans on Le Pur’s official Sina Weibo and WeChat public accounts. So far, the number of fans has grown to around 320,000. Just a few months after launching Le Pur, Liu branched out into online to offline operations, and the company’s daily sales volume grew to around 1,000 bottles, according to cyzone.cn, a news platform for start-up businesses in China, on May 10, 2015. One of Le Pur’s marketing strategies is its down-to-earth interaction with consumers. In their concept store in Sanlitun, they showcase the yoghurt’s production line in a 30-square-meter room. The store has never lacked visitors. Le Pur also involves its customers in the choice of flavour and package design.

 

Related items in this post:

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

 

 

Food companies in China’s top 100/500

The list of the 2014 Top 500 Chinese enterprises in terms of turnover included the following food and beverage companies.

Rank Company Turnover 2013(RMB bln) Business
84 COFCO 189.05157 Food in general, see our blog on COFCO vs Nestle
94 Bright 159.38217 Dairy
165 Wahaha 78.27856 Beverages
168 New Hope 77.89271 Dairy
195 Wuliangye 63.09445 Spirits
253 Yili 47.77887 Dairy
257 Shuanghui 47.20541 Meat
299 China Salt 39.82552 Salt
307 Luzhou Laojiao 38.53574 Spirits
321 Zhengbang 36.04589 Meat, poultry
330 Wens 35.18706 Meat, poultry
337 Moutai 34.62301 Spirits
407 Qingdao 28.29098 Beer
430 Xiwang 27.12007 Corn processing
451 Weiwei 26,18069 Soybean milk
470 Daohuaxiang 24,86100 Spirits, beverages
482 Hope-Full 24,11415 Soybean processing

 

The two companies in the top 100 are both state owned enterprises that have succcessfully adapted to the new economic reality in China. Still, the second two are private enterprises.

Spirits remains the best represented type of business with four companies on this list. If we broaden the scope to alcoholic beverage in general, we can add Qingdao and COFCO (Great Wall Wine) as well, to make 6 out of 17 companies.

However, as Mengniu Dairy is now a subsidiary of COFCO, the current list also de facto comprises 4 dairy companies, 2 of which are in the top 100.

You may want to compare this list, which is based on the 2013 turnover, with the list of the Top Food Companies of 2014, which ranks the enterprises according to their estimated brand value.

Food & Beverage in China’s 2017 top brands

The 2017 China Top 100 brands have been published late May. I have extracted a sublist of the food and beverage companies in that list and simply add it to this blog, so we can compare the results with the situation of 2014. First the list.

Rank Brand Industry
6 Moutai spirits
9 Wuliangye spirits
19 Yili dairy
21 Mengniu dairy
25 Wahaha beverages
64 Chef Kang noodles
67 Shuanghui meat
73 Luzhou Laojiao spirits
74 Tsingtao Beer beer
80 Bright dairy
84 Kouzijiu spirits
85 Junlebao dairy
92 Huiyuan fruit juice
93 Changyu wine
95 Gujing Gongjiu spirits
96 Yingjia spirits
97 Daoxiangcun pastry
98 Quanjude Peking duck

Spirits stand out as the leading industry with 6 out of 18 brands in the national Top 100. Dairy is the runner up with 4. Quanjude is a restaurant chain rather than a manufacturing company, but it also markets vacuum packed ducks ready for consumption. Regular readers of the blog will recognize most of the names. Don’t hesitate to use the Search function to look for more information of each company in other posts.

Almost all companies have rising dramatically, in particular Moutai. Three years ago, only 3 F&B companies were included in China’s top 100, now 18. This corroborates what has been said about the Chinese food industry in numerous recent publications: it is rapidly becoming a pillar of the national economy.

This post concentrates on the top companies, but Eurasia Consult has a database of Chinese food & beverage producers of more than 30,000 companies.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.