Tag Archives: dairy

Dairy: a leading source of nutrition in the Chinese food industry

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I have posted on dairy a number of times.

Central product group

Dairy is obviously a central product in the Chinese food industry. In this post, I will introduce the developments in the past 1 – 2 years prior to the date of posting. I will include background information from the above mentioned posts, so you can read this post by itself, without having to click on those links all the time.

Tradition

China is not known as a traditional dairy nation. However, milk and dairy products have been an essential ingredient of the diets of a number of ethnic minorities. These products have been introduced in Chinese cuisine in areas where they mixed with those of Han Chinese. Especially the various dairy products made by Mongolians have been known by the Han in the Northern regions of China. The following pictures shows a Mongolian woman exhibiting a number of dairy products.

Some of the better known products are: milk bean curd (naidoufu), cheese (nailao), milk curds (naigeda) Most of the Mongolian products are solid and sweetened. In this way they keep longer. The cheese, e.g., looks more like toffees in shape, texture and flavour.

When Westerners started settling in China, they introduced their dairy products and also started producing some. This was first of all for their own consumption, but several Chinese who regularly interacted with them acquired a liking for some dairy products. Yoghurt was easy to accept, as it was suitable for consumption even by people with a lactose intolerance. Sweetened condensed milk was also liked and became the first domestically produced dairy product. In some regions, in particular Guangdong whose capital has been China’s main foreign trade port for centuries, Chinese developed a number of dishes with (sweetened condensed) milk as the main ingredient. Milk tea (naicha) and fried milk (zhanai) are best known in this category.

A number of companies have developed industrial processes for producing these traditional products. No need to introduce milk tea, as this rage has been exported to several Southeast Asian countries and even to some Western nations with a large number of ethnic Chinese.

Ruiyuan Dairy (Xinjiang) is producing naigeda on an industrial scale. The company has two patents for this new process. Some of the redesigned traditional dairy products have little in common anymore with the original thing. A good example is the industrially produced naisu (‘milk crisps’) by Duoweier Bioengineering (Chifeng, Inner Mongolia). The ingredients list is quite impressive, but has nothing to do with the traditional product:

whole milk powder, starch, crystal sugar, vegetable fat, glucose syrup, vegetable oil, additives [emulsifiers (sodium caseinate, glycerol fatty acid ester), stabilizer (sodium biphosphate), silicon dioxide], dextrin, whey powder, water, glucose powder, maltose, cream, lactic acid, citric acid, food flavour.

The effect of the long ingredients list is softened by the Mongolian symbols on the packaging: a girl in traditional attire pouring milk and the yurts in the background.

History

The development of the modern Chinese dairy industry can be roughly divided in three stages:

  • 1949-1998; a period of gradual growth;
  • 1999-2008; period of rapid growth. Since 1999, the development of China’s dairy industry has entered the “golden decade”, and the demand for dairy products increased rapidly. That of the liquid milk market grew with an average of 60% per year. However, the weak spot in the value chain was milk collection between dairy farms and the dairy processers. This led to the famous ‘melamine incident’ in 2008.
  • 2009-present; It took a major effort for the domestic dairy industry to regain the confidence of Chinese consumers, but it succeeded a few years ago and the industry is growing reasonably well.

Current situation

Although the dairy stock is showing a continuous decline, it does not affect the milk production, because the milk per cow is increasing. China’s raw milk production reached 39.32 mln tons in 2022, a year-on-year increase of 6.77%.

Also in 2022, the per capita dairy consumption of Chinese consumers increased to 24.36 kg/ person/year, a year-on-year increase of 0.74% compared with 2021. The volume of 2015 was 21.41 kg/person/year.

Dairy is regarded as a major source of nutrition by the Chinese government. It is therefore strongly promoted. Chinese consumers also perceive milk and dairy products as a major source of nutrition, in particular for young children. Dairy is placed in the second tier in the current Chinese nutrition tree (pagoda in Chinese).

According to data from the National Bureau of Statistics, The total volume of dairy products in 2022 was 31.177 mln mt, up 2.84%. Liquid milk accounted for 93.79% of this volume. It was followed by milk powder, accounting for 3.23%. Half of the latter was infant formula; the other half consisting of a wide range of powders for various consumer segments. The remaining 2.98% consists of various products, like: yoghurt, butter, cheese, condensed milk, cream, ice cream, etc.

A2 milk

The Chinese market for A2 milk is growing rapidly. At a time when the birth rate is declining, A2 Milk Company reportedly does very well with double-digit growth in revenue and profit. The company’s financial report for the first half of 2023 shows that early infant milk powder sales reached NZ$ 270.7 mln, an increase of 43.5% year-on-year. Liquid milk sales in China and other Asian regions also increased by 34.6% to NZ$ 7.5 mln. Revenue from other nutritional products also increased by 83.7% to NZ$ 17.8 mln.

Culturally, Chinese are susceptible for ‘rare healthy products’. Chinese influencers are generally positive about A2 milk powder. Discussions among specialists show more varied opinions. Many experts doubt whether A2 milk is really worth the premium price.

Other milk sources

Milk comes from cows. This is so well known that the standard Chinese word for ‘milk’ is niunai ‘cow milk’. Milk from other sources is also available. Of these, goat milk is large enough to influence the total milk supply. Other sources have sprung up in recent years, which come in small quantities and have a more fancy image.

Goat milk has the image of being slightly easier to digest that cow milk. It has been around for longer in China. The main production regions, Shandong, Shaanxi and Yunnan do not form a geographic cluster. It is more a matter of local tradition than climate or geological conditions. The value of goat milk market in 2020 was RMB 10.4 billion; up 3.9% compared to 2019. Approximately 30% of the goat milk powder consumed in 2020 was imported.

Camel milk is on the rise in China, but quantities are small. China produced 18,200 mt of camel milk in 2021, a little more than in the previous year. In 2020, 11.7% was used for producing ice cream, 20.7% for camel milk powder, 8.6% for fermented products, 4.2% for others and the remaining was consumed as liquid milk.

South China produces small quantities of water buffalo milk and Inner Mongolia small quantities of horse milk.

Plant based milk

This is a big product category in China. in 2022, 22.4% of the Chinese population suffered from lactose intolerance. Vegetable protein drinks are regarded as a good alternative. The total turnover 2021 was RMB 123.4 bln, 10.47% higher than the previous year.

The nomenclature has changed with the coming and going of fashions. Protein drinks (danbai yinliao) was the first name and is still widely used. With the growing influence from the Western vogue for milk alternatives, the term nai (milk) was introduced and gained some hold. This change of term made it easier to let these products (or better, their producers) cash in on the healthy image of milk and dairy.

A broad range of plants is used to produce protein drinks: soybeans, almonds, walnuts, coconuts, peanuts, hickory, sesame, rice, oat. Soybean drinks are the oldest and remain the largest category.

China’s top dairy companies have adopted an ‘if you can’t beat them’ strategy. Mengniu and Yili, the top 2, have launched their own protein beverages recently. Yili announced its plans during a public meeting at the end of 2014. Mengniu has entered into a joint venture with US-based WhiteWave Foods Company, a leading consumer packaged food and beverage company in North America and Europe early 2013. The JV is marketing WhiteWave’s Silk brand protein drinks in China. This product is common in the US and is an affiliate of Alpro, a brand in Europe, though its positioning in China is quite unique. With its convergence of flavours, Silk’s positioning as a 100% natural solution, targeting those that are lactose intolerant, could spell success for Silk in China, especially as consumers become ever more sceptical regarding the origin, nutrition, safety and environmental impact of the food and beverages they buy.

Cheese

Cheese consumption is increasing at an incredible speed during the past few years, considering that not so long ago, almost all Chinese were abhorred about the smell of cheese. Cheese supply volume in China has surged from 140,000 mt to 270,000 mt during the period 2017-2022. This figure is expected to maintain double-digit growth, far above the world average for the coming years.

Although the average cheese consumption in China is far below many Western countries as well as Japan and Korea, it has significantly increased from 80g/person/year in 2017 to 130g/person/year in 2021. At the 2022 China Cheese Development Summit Forum, the Dairy Association of China released an action plan, proposing that the national cheese production would reach 500,000 mt by 2025. Much of the cheese sold in China is processed, but non-processed is increasing.

An interesting development is that Chinese cheese producers are focusing on developing one-bite cheese snacks, for all ages, but in particular for children. This is partly a result of the pressure of the Chinese authorities to increase dairy consumption among children. Such products include cheese sticks, cheese slices, cheese strips, etc. Cheese stick is the most popular one, which was first launched by Milkana, but was popularized by Milkground. Presently, promoted by the increasingly intensive market competition, dairy enterprises have rolled out a wide range of cheese sticks with distinctive features. Apart from various funny shapes, including ‘cheese lollies’, they are also experimenting with flavours. Here is an ad of Milkana strawberry flavoured cheese sticks.

A new cheese stick brand, Cheespirit, launched a series of innovative products on May 28, 2023: ‘Vegetable & Fruit Growing Up Cheese Sticks’. The company claims to have selected 8 kinds of ‘super vegetables and fruits’ to create high-calcium and high-VC cheese sticks, containing 3% dietary fiber. The calcium is 100% milk calcium, with a 1.8:1 calcium-phosphorus ratio. The product contains 40% whey protein, as well as algal oil DHA and various trace elements derived from vegetables and fruits, providing nutrients such as protein, dietary fibre, vitamins and other basic nutrients needed by children. It contains no preservatives. It uses two innovative two-colour-flavours: Lele orange (tomato, carrot and apple compound flavour) that contains β-carotene; and absolute purple (purple sweet potato, purple cabbage blueberry complex flavour) containing anthocyanins to help the children’s growth.

Yoghurt

Yoghurt in the broadest sense of the word (soured milk; suannai in Chinese) is the only dairy product consumed regularly by Chinese city dwellers around the founding of the PRC. As the bacteria consume most or all of the lactose, people with a lactose intolerance can eat yoghurt safely. Yoghurt was available in Beijing in clay pots with a paper lid. Milk and a culture were added to the pots, which were then kept to ferment until the yoghurt, a liquid with curds, was ready for consumption.

In the perception among Chinese consumers as well as in the promotion of dairy products, the differences between yoghurt, yoghurt drinks, fermented milk drinks, etc., is rather vague. There is a huge supply of fermented formulated dairy products. The most salient common trait is that the fermentation has lowered the lactose content, which makes the products available for a wider range of consumers. Other shared traits are that they are relatively sweet (sweetened with sugar or artificial sweeteners) and very often flavoured with fruit (real fruit, fruit flavours, or combinations).

Modern yoghurt production set off during the 1980s and the development of new products has never really stopped. Especially during the past decade, yoghurt has become a pet product of the Chinese dairy industry, a field in which the R&D departments could realize their wildest dreams in textures, flavours and packaging designs. One could even state that yoghurt has become a kind of fashionable product. Fads come and go and many products seem to have a very limited life span. Still, the developments in this sector contain interesting points to take away.

The nationalist trend

The renewed interest in traditional culture in China (the nationalist trend [guochao) is also reflected in the celebration of traditional holidays, like the Mid-Autumn Festival. Although dairy is regarded as a foreign food group, yoghurts have been launched in connection with traditional holidays. Yili has issued a limited edition of its Ambrosial yoghurt for the Mid-Autumn Festival.

Even Beijing’s pastry maker Daoxiangcun, that is not a dairy company, has launched a one-time Dragon Boat Festival yoghurt flavoured with mooncake, the traditional pastry eaten during that festival and of which Daoxiangcun is a main supplier.

Yoghurt and milk tea

Milk tea is a vogue that reached Mainland China from Taiwan and quickly became bigger than in its home market. Young Chinese are willing to line up for hours to get a cup of their favorite milk tea. The latest stage in this fad is milk tea based coffee, i.e. coffee with all kinds of ingredients you can add to milk tea. It has even added a new word to Chinese vocabulary: milk-tea-ization (naichahua). This term is also used for various fads in the Chinese coffee scene. Soft drink maker Genki Forrest has cashed in that by launching a milk tea inspired yoghurt.

Black yoghurt

Launching black versions of existing food products is another trend in China. Black food is traditionally linked to health. Moreover, there is a small but stable group of young people interested in gothic music, including the black outfit that come with it. A number of black yoghurts have been launched during the 2020s. E.g., there is Yiming’s yoghurt coloured with inkfish ink and black sesame seeds.

New raw materials

The plant-based trend has not only reached China as well, it is booming there. There is a plant-based meat tradition in China developed by Buddhist monasteries. Buddhist monks and nuns were not allowed to eat meat, but like their European counterparts, did not want to disregard their craving for the texture and flavour of meat and fish. They developed a broad range of imitations that are still served in traditional vegetarian restaurants and restaurants operated by monasteries.

Solid yoghurt

A recent development is the launch of cubed frozen yoghurt by Yili. Yili claims that it is using a special dry freezing process developed by the space industry that retains the 100 mln lactobacillus bacteria in each cube. The probiotic used is patented by Yili.

Yoghurt candy

The step from solid yoghurt to yoghurt candy is a small one. Xinlüjia (Shantou, Fujian) produces a yoghurt candy called Old Yoghurt (Laosuannai). An interesting aspect (sales trick) is that you can heat the product first in your hand, then open it, and pull it into long shreds. That may not appeal to all people, but the manufacturer apparently believes it will attract younger consumers.

Ice cream

The developments in the Chinese ice cream market have been so rapid during the past few years, that they have been hard to follow. In this post, I will focus on a specific innovative category: savoury ice cream. Until recently, ice cream was typically a sweet to very sweet treat. Now, the most peculiar flavoured ice creams are appearing all over the country. I have selected a few representative products.

Shred meat (rousong) is a Chinese meat-based snack produced by slowly roasting meat for a long time until it is very tender, but still dry, unlike stewed meat, and then shredded. It is usually not consumed on its own, but is used as an ingredient in various foods. Here it is combined with chopped spring onions (the English says chives, but the Chinese, which I take as the original, says onions). It can work. Shred meat is traditionally used to flavour sweet-savoury pastries.

Hot and spicy

A chili flavoured variety was to be expected, so here it is. Spicy food used to be restricted to a few regions in China, but chili has become a vogue in almost the entire country. The packaging promises a lot of fire. I like chili chocolate (the mild type), so I expect to like this too.

More innovative dairy products will be developed in China in the near future. Keep an eye on this post and do not hesitate to contact me for tailor made market reports.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success. Peter has been involved with the Chinese food and beverage industries since 1985.

China’s butter market

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Just like cheese, Chinese consumers have never been fans of butter. This is not primarily based on health concerns. Most of them dislike the odour and flavour of butter

According to the ‘2021-2027 China Butter Industry Development Status and Development Trend Forecast Report’, butter in China has a small output, low market awareness and low per capita consumption. In 2020, China’s butter production was only 110,000 mt, up from 98,000 mt in 2016.

As one of the typical ingredients for Western meals, butter has gained a foothold in Chinese kitchens with the gradual popularity of Western pastries, in spite of the common dislike of butter itself. In 2020, China’s demand for butter was 195,000 mt; up from 160,000 mt in 2016.

Imports

China’s butter production is small, and the market demand mainly relies on imports. In 2020, China’s butter imports were 86,000 mt; up from 63,000 mt in 2016; China also exported 1000 mt of butter in 2020. In 2020, New Zealand accounted for the highest proportion of China’s butter imports, with 66,832.357 mt; followed by France with 5,633.668 mt; and Australia with 3,004.053 kg.

Trends

With increase of home baking, the demand among Chinese consumers for butter is bound to increase. When buying butter, consumers are most concerned about whether the butter is fresh, followed by the popularity and price of their brand. However, the higher the dosage, the higher the user’s requirements for whether the butter itself is rich in milk, beating state, and milk source.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success

Top 5 Chinese food and beverage companies for selected industries

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The Chinese site Food Forum has published the top 5 companies for a number of industries. I am listing them in this blog. It is useful to stay in touch with who is on top in China. I have added links to posts in which a company is introduced, but I advise interested readers to search for posts discussing all these companies using the search function of this site.

Dairy

RankCompany2021 turnover (RMB 100 mln)
1Yili1084.62
2Mengniu881.41
3Bright265.10
4Feihe225.45
5Junlebao203.00

Beverages

RankCompany2021 turnover (RMB 100 mln)
1Wahaha519.15
2Nongfu Spring296.96
3China Food197.84
4China Resources113.79-122.36
5Baiyunshan108.51

Alcoholic beverages

RankCompany2021 turnover (RMB 100 mln)
1Moutai1060.59
2Wuliangye617.31
3China Resources333.87
4Tsingtao246.39
5Yanghe246.39

Seasoning

RankCompany2021 turnover (RMB 100 mln)
1Haitian235.97
2Yangpu Nanhua113.02 (2020)
3COFCO Sugar87.11
4Fufeng86.01
5Yihai59.43

Leisure food

RankCompany2021 turnover (RMB 100 mln)
1Three Squirrels97.70
2Liangpin Puzi91.44
3Qiaqia59.85
4Weilong Meiwei48.00
5Lyfen40.50

Cereal products

RankCompany2021 turnover (RMB 100 mln)
1Chef Kong732.50
2Uni-President242.63
3Wantwant239.85
4Dali201.74
5Jinmailang200.00

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success.

Top Chinese regions for various foods

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It has been a while since I placed a post about the regional variation of food in China. That post focused on typical local produce and traditional dishes and snacks.

Today, I am posting some information about the regional distribution of the production of a few major product groups. There is a certain relation between that distribution and the information in the previous post, but also distinct discrepancies, linked to facts like the presence of a major producer, the location of large urban centres in a province, etc. There are also interesting differences between more traditional products and foods related to the modern life style. In other words, today’s post is a genuine ‘Chinese food and culture’ one.

I will illustrate the distribution in the form of tables indicating the top 3 production regions (provinces) of each product in terms of percentage of the total national volume of 2021. The total of those percentages is a good indication of the degree of concentration of that product.

Dairy

The dairy industry is traditionally concentrated in the norther half of China, which makes sense as dairy cows prefer a cooler climate. A consequence of this was that most Chinese in the south would drink milk reconstituted from milk powder. Recently, the production of fresh pasteurised or UHT milk has increased considerably in the major urban regions. Look at the differences in the distribution of milk powder and liquid milk production.

Milk powder 
Heilongjiang37.1
Shaanxi15.2
Inner Mongolia11.2
Total63.5
Liquid milk 
Hebei13.6
Inner Mongolia12.3
Shandong8.0
Total33.9

Heilongjiang, Shaanxi and Inner Mongolia are all traditional dairy regions. Hebei as well, though much smaller. However, Hebei, Beijing and Tianjin form an economic conglomerate, and is the home of some of the country’s top dairy processors.

Wheat

Although most Westerners still perceive Chinese as eating rice as a staple, the Northern Chinese traditionally eat wheat products. The most popular wheat product traditionally is flour. Chinese use it to make dumplings, mantou (steamed bread), noodles, and many other products at home. This does not always agree with the pace of life of the modern city dweller and even Chinese living in smaller towns do not want to spend so much time in the kitchen. This is reflected in the distribution of the flour and instant noodles.

Wheat flour 
Henan25.9
Shandong19.7
Hebei14.6
Total60.2
Instant noodles 
Henan20.5
Guangdong10.4
Tianjin6.7
Total37.6

Henan and Shandong together form China’s main wheat belt, hence Henan’s top position for both products. However, the production of instant noodles does not necessarily take place in those provinces. Guangdong and Tianjin are located in major urban regions (the Pearl River Delta and the Beijing Hebei Tianjin region) and local production there makes distribution a lot easier.

Candy

Candy 
Fujian29.7
Guangdong21.8
Hubei10.7
Total62.1

China has a wide range of traditional sweets, but candy is a Western product. This is probably the reason that production is concentrated in the richer southern coastal provinces of Fujian and Guangdong. These are also sugar cane regions. Hubei is an exception.

Alcoholic beverages

Alcoholic beverages 
Sichuan13.7
Shandong10.9
Guangdong9.3
Total34.0

Sichuan has been the top producer of traditional Chinese spirits (baijiu) for many years. Although beer and wine are growing in China, the big money makers are still the spirits. Shandong’s position is probably related to the availability of cereals, but it is also the home of Tsingtao Beer and is China’s oldest wine region. Guangdong’s third position is based on beer, which is undoubtedly due to the fact that the Pearl River Delta is one of China’s most affluent regions.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success

Pink is the colour of spring and hope for 2020 in China

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Spring has arrived in a world that is still in the grip of the COVID-19 epidemic. However, the epidemic is clearly on its retreat in China and the nation’s food and beverage suppliers are celebrating this with an outburst of pink-coloured products. This blog does not require a lot of explanation; the pictures speak for themselves. Moreover, this post is a good overview of China’s most popular foods and drinks at this moment.

Domestic brands

Mengniu Dairy

Yili Dairy

Shipin Puzi (nuts, seeds, etc.)

Xiangpiaopiao, (2023 turnover: RMB 362.5 billion) the top manufacturer of the immensely popular milk tea

Bee & Cheery (Baicaowei) (snacks, candy)

Rio (cocktails)

Hsufuchi (candy, biscuits)

International brands

A commendable number of international brands is participating in this pink spring campaign.

Starbucks

Nestlé

Dove

Glico

Oreo

Lay’s

Hoegaarden

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success.

Camel milk in China – fad or trend?

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For dairy consuming Westerners, the word milk, without any specification, is automatically linked to cows. This is not always the case in other regions of the world, including most parts of China. Goat raising regions produce goat milk, which is also quite familiar in Europe. However, Mongolians also drink horse milk, usually fermented. A few regions commercially process donkey milk. The latter two are available in China, but on a very small scale. One type of non-bovine milk that seems to be catching on in China is camel milk.

Decrease and increase

According to the latest available statistics, 405,300 camels were being raised in China at the end of 2019, up from 242,800 in 2011. In fact, the number of camels was 640,000 in 1981, but the number started decreasing as fewer and fewer camels were used for transportation. The recent rise is due to the new interested in camel milk. Almost 90% of the camels in China live in Xinjiang and Inner Mongolia.

Milking camels

A camel typically produces 1.2 mt of milk p.a. compared to 8 – 9 mt of a Holstein cow. That makes camels rather inefficient milk producers. The following table shows the historic development of camel milk output in China

Year Output (mt)
2014 14,100
2015 13,800
2016 14,000
2017 14,600
2018 15,200
2019 16,900

In 2018, Xinjiang was the largest production region with 52.94%, followed by Inner Mongolia with 26%.

Pricing

The purchasing price of raw camel milk increased considerably during the same period.

Year Price (RMB/kg)
2014 30
2015 32
2016 35
2017 42
2018 48
2019 50

Nutrition

Camel milk is high in: calcium, iron, and vitamins B and C. It is therefore thought to be good for preventing osteoporosis. It also contains fair amounts of lysozyme, lactoferrin and immunoglobulin.

Camel milk also helps lower blood sugar. Per litre, camel milk has 52 units of insulin, 3,000 times more than cow milk. It is a natural, multifunctional dairy product with high nutritional value.

The density of camel colostrum is between 32 and 35, while normal camel milk is around 28. “The lactose content in camel colostrum is also higher.

Prospects

Insiders expect that the Chinese demand for camel milk will increase steadily during the coming years. The value of the market was RMB 974 mln in 2019, but is expect to increase to RMB 2.228 billion by 2024. Online supermarket Tmall has reported a turnover of camel milk powder of RMB 81.83 mln per month in 2020; 40 times the amount in 2019.

Products

A number of commercial camel milk products are available in China. In this post, I am introducing Tuoneng. The pictures respectively show the canned milk and the packaging line.

Xuelian Dairy was founded in Shaanxi province in 1978. It acquired a dairy company in Xinjiang in 2003 and launched its first camel milk based formulae in 2015. The picture shows its colostrum camel milk formula.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success.

China’s two dairy giants – Yili and Mengniu – compared

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China’s two dairy giants

The Food & Drink 2022 report of Brand Finance, the world’s leading brand valuation and strategy consultancy, issued its , identified the world’s leading dairy brands. Two of the top three were Chinese brands: Yili (1) and Mengniu (3).

This is a short post responding to the rapid developments in the Chinese dairy industry and its impact on the global dairy market.

The announcement by Rabobank that China’s top dairy companies, Mengniu and Yili, rank 9thand 10threspectively on their Top 20 Global Dairy companies was still fresh, when the news of Yili’s acquisition of New Zealand’s Westland caused a stir in the dairy world. I can imagine that many people in this business hardly know either of these companies. The fact that both are located in the same city, Huhhot, the capital of Inner Mongolia, will make things even more intriguing. I do not need to say much about their background, as you can find that in my earlier post: ‘Mengniu – game changer of the Chinese dairy industry’.

In this post I will give a look into the product range of these companies and how each product group contributes to the turnover of each company. These are figures of the first half of 2018.

Yili

Type%
Other1
Soft drinks9
Milk powder10
Other liquid products52
Ambrosial yoghurt15
Satine milk10

Mengniu

Type%
Other1
Soft drinks6
Milk powder9
Other liquid products58
Just Yoghurt9
Deluxe milk17

The first conclusion is that both tables are strikingly alike. Mengniu and Yili are still closely following one another in their competition.

These tables further show that milk powder, that has been China’s main dairy product for decades in now a minor product group, at least for the country’s leading dairy companies.

A quarter of their turnover is now derived from specialty products, the final two products in each table.

Both Yili and Mengniu are mature dairy companies operating at a global level.

The following table shows the increase of the ice cream derived turnover of China’s top two dairy companies (RMB billion) from 2020 to 2022.

Company20202022
Yili6.1589.567
Mengniu2.7045.653

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success.

Who is making food (ingredients) in China? – the structure of the Chinese food industry

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One of the first things you need to know about a (potential) Chinese partner is to what system it belongs

This is a blog about food, drinks and their ingredients. However, as Chinese society, including its economy, is organized in a very unique way, it is useful to get more insight in its basic structuring. In fact, several aspects of that structure have been mentioned indirectly in various posts, in particular those about Mengniu Dairy and Yanjing brewing.

Economic sectors

An important type of context is the industrial sector. Chinese economy is divided in a number of industries, headed by a central ministry or organization with ministerial status in Beijing. Each province and autonomous region has a Department corresponding with the central organization. Lower administrative regions have, again corresponding, Bureaus. Chinese usually refer to this as the system (xitong) to which they belong. According to the official parlance, a state-owned enterprise is the property of the entire people, but the central administrative organization of its industrial sector has been given the power to manage the enterprise in the name of the people. The central organization will then delegate that power to its corresponding lower level organization. Those organizations also establish and operate schools and colleges related to their sectors.

An example will help clarify the situation: food manufacturing is typically regarded as Light Industry in China. A state-owned flour plant in Suzhou (Jiangsu), will therefore be typically managed by the municipal Light Industry Bureau, which will report to the provincial Light Industry Department, which operates under the China National Light Industry Council in Beijing. This is the reason why so many company names in China start with the name of the city or province in which it is located: it refers to the main governing body. I have mentioned the Changyu Winery in earlier posts. Its official name is Yantai Changyu Wine Group, which indicates that its CEO is typically reporting to the government of Yantai Municipality in Shandong province.

The value of the place name in a Chinese brand name is attested by the story of Yanjing Brewing laid down in an earlier post. Located in Shunyi County, the brand name originally envisioned was Shunyi Beer, but a ministerial official proposed to change it to a name that was related to Beijing. As Beijing Beer already existed, it became Yanjing Beer.

There are also dedicated light industry colleges like the Zhengzhou University of Light Industry. As attested by several posts in this blog, Zhengzhou is located in one of China’s major food producing regions, the home of, e.g., China’s top snack producer Sinian.

This way of organizing creates a kind of matrix structure in which a Chinese company has to account for its activities and results to the local government, but simultaneously to its sector organization. To stick with Changyu, it is accountable to Yantai Municipality and the Light Industry sector. These two merge in the Yantai Municipal Light Industry Bureau, but it can happen that the provincial or national Light Industry organizations contact Changyu for information about its operations.

Personnel

In the current stage of the development of China, this structure does no exercise a huge influence on issues related to production or marketing and sales. Larger state-owned companies are still affected in the field of human resource, in particular in filling the positions of top managers. Leading functions in companies like Changyu are usually appointed by the organization on the Ministry of Personnel, which also has branches in provinces, cities, counties and other administrative levels. The Party organization is also involvement in such appointments. Nowadays, only people with proven expertise and experience in the field will be considered for appointments of top functions in state owned enterprises, but the political aspect remains. This means that the social networks of the top executives of Chinese companies exercise considerable influence on the day to day managed of the enterprises.

Social embeddedness

The combination of the various stakeholders to which a Chinese enterprise is accountable and the social network can be called: the social embeddedness of Chinese companies. Insight in the affiliation of a Chinese enterprise is vital for Western companies who are seeking or have engaged in partnerships with Chinese counterparts. Too often, Western managers believe that their Chinese partner is ‘a company just like we are’ and that the CEO of the Chinese partner has ‘the same responsibilities as I have’. They aren’t and they don’t. Such misunderstandings will certainly play a role in the problems of companies like FrieslandCampina or Fonterra in China recently reported in the media.

Eurasia Consult’s founder Peter Peverelli is an expert in determining the social embeddedness of Chinese companies and the consequences for their Western partners

Food & beverage covers several sectors

The theme of this blog, food, drinks and ingredients, involves a complex situation, as the manufacturing of these three product groups is dispersed over more than one sector. Light Industry is definitely the largest one, but a number of food companies, in particular those using primary agricultural produce as raw materials, are operating under the Ministry of Agriculture. A special type of companies under Agriculture is State Farms. This name is based on the fact that the first of such companies were large state-owned farms established in rougher regions with no existing agriculture or other economic activity. These farms later also established processing plants of their own. A small number is part of the hierarchy of the Ministry of Commerce. The latter is in charge of distributing goods rather than making them, but in the early decades of the PRC, that ministry also established production units. An industry that is very disperses over those sectors is dairy processing. Interestingly, FrieslandCampina and Fonterra mentioned above are both dairy companies.

Light Industry Top 50 2017

As Chinese ministries (try to) keep track of the industrial statics of their respective sectors, the regularly publish compilations like the top 10, 50, 100 manufacturers of a certain product or sector. The China National Light Industry Council recently published the Top 50 Light Industry companies of 2017. I will list the top 10 in this post.

Rank company sector
1 Maotai spirits
2 Wuliangye spirits
3 Yili dairy
4 Mengniu dairy
5 Wahaha beverages
6 Yanghe spirits
7 Xiwang starch sweeteners
8 Bohai soybean oil
9 Hefeng meat
10 Haitian soy sauce

From this list it is obvious that food, drinks and ingredients are the major sector of Light Industry in China. Actually, it covers a broad range of products, like: toothpaste, detergents, brooms, toys, etc. However, the Top 10 and in fact the entire Top 50 consists of food companies. Regular readers of this blog will recognise several of the companies in this list.

Universities

As mentioned above, universities also play an important role in the development of the Chinese food industry. Their role is so vital, that I have dedicated a special post to them.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation. He is a co-author of a major book introducing the cultural drivers behind China’s economic success.

China’s many capitals – regional food chauvinism in China

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The leading port of export of canned food from China is Zhangzhou – China’s Canned Food Capital (Chinese news source, 19/7/2016)

I have yet to find out when the first city in China started calling itself ‘the capital of . . .’, where … is a slot for a certain product (group), one of which that city is a national production centre. However, it now has become so important for the local economy, that it has almost become an official designation, bestowed by an industrial association.

Icons are an important aspect of the construction of social identity in Chinese culture. Chinese like to identify a famous person who they would like to become. More than a few Chinese start-up cyber-entrepreneurs are dreaming of becoming China’s Steve Jobs. Some even go as far as to try to emulate their hero’s behaviour, clothing, and speech.

In an analogous fashion, Chinese cities that are leading in a certain industry have started picking a similar foreign city, calling themselves ‘China’s …’ A city with a major car maker may call itself ‘China’s Detroit’. Unfortunately, there are several cities in China that are the home of a major automobile manufacturer, resulting in almost as many ‘Detroits of China’. So far, this has not led to conflicts between the various local governments. Detroit doesn’t care either. The city has lost most of its car-related industry and virtually turned into a ghost town.

Several posts of this blog are introducing the growing importance Chinese local governments attach to their local culinary specialties. A representative post is that about Jinhua ham. Jinhua ham is so typical for that region, that Jinhua has applied for DOC status for this product, meaning that only ham producers of Jinhua are allowed to market their ham as ‘Jinhua Ham’.

A city with a DOC-status food is likely to have a relatively large number of manufacturers of that product, and/or the top producer in that business. Instead of finding its icon elsewhere, such cities endeavour to become an icon themselves, by calling themselves ‘China’s Capital of <their typical product>’. Unlike in the case of China’s multiple Detroits, this has been a cause for chauvinist strive. As societal harmony is a top priority in China, the government has started to regulate such designation through the various sector associations. The most famous issue was giving Huhhot, the capital of Inner Mongolia the status of ‘China’s Dairy Capital’. It was initiated by Mengniu, a well-known company for the regular readers of this blog. Mengniu want Huhhot to be the first city to apply for that status, lest another city would be the first to do so. Huhhot itself was not too keen at first, but gave in at the end. Once the Dairy Association of China had recognised Huhhot as China’s Dairy Capital, no other city in China was allowed to refer to itself in that way. I am not sure if there actually is a penalty for violating this rule, but so far no other city has tried. To mark its status of China’s dairy capital, a large monument was put up in Huhhot.

MilkCapMonument

In the remaining part of this post, I will list a few of the major Chinese food capitals. This list is by no means exhaustive and I will keep adding cities, whenever I encounter them in my scanning of the Chinese information streams. Some of these have a more or less official status, i.e. they are bestowed by the relevant sector association. However, most still seem to be self-assigned. This is probably why there are several capitals for some products.

This list may turn out quite useful. If you want to know quickly were a certain food is produced in China, this list can guide you directly to a/the major region. You will have to look further (e.g. using this blog’s search engine), but this is a good start.

  • China’s ‘Canned Food Capital’: Zhangzhou (Fujian).
  • China’s ‘Dairy Capital’: Huhhot (Inner Mongolia).
  • China’s ‘Chili Capital’: Zunyi (Guizhou).
  • China’s ‘Capital of High Quality Maize’: Siping (Jilin).
  • China’s ‘Green Tea Capital’: Emei (Sichuan).
  • China’s ‘Seaweed Capital’: Rongcheng (Shandong), Fuzhou (Fujian).
  • China’s ‘Shrimp Capital’: Zhanjiang (Guangdong).
  • China’s ‘Coffee Capital’: Pu’er (Yunnan).
  • China’s ‘Beverage Capital’: Sanshui (Guangdong).
  • China’s ‘Goat Milk Capital’: Fuping (Shaanxi).
  • China’s ‘Apple Capital’: Qixia (close to Yantai, Shandong).
  • China’s ‘Kiwi Capital’: Pujiang (Sichuan).
  • China’s ‘Date Capital’: Cangzhou (Hebei).
  • China’s ‘Flour Capital’: Damin (Hebei).
  • China’s ‘Noodle Capital’: Yiyang (Hunan).
  • China’s ‘Beef & Mutton Capital’: Chifeng (Inner Mongolia).
  • China’s ‘Meat Captial’: Linyi (Shandong).
  • China’s ‘Potato Capital’: Ulanqab (Inner Mongolia).
  • China’s ‘Lemon Capital’: Ziyang, Anqiu (Sichuan).
  • China’s ‘Leisure Food Capital’: Longhai (Fujian).
  • China’s ‘Tilapia Capital’: Maoming (Guangdong).
  • China’s ‘Ginger Capital’: Laiwu (Shandong).
  • China’s ‘Vinegar Capital’: Qingxu (Shanxi).

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation.

Harbin, Heilongjiang – where the West meets the East

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It is about time to highlight another region in this blog. After Pu’er in China’s southernmost province Yunnan, I am taking you to the opposite in this blog, to Harbin, the capital of Heilongjiang, which shares a large border with Russia’s Siberia.

What Harbin has in common with Pu’er is that it is not a purely ethnic Chinese city. The name Harbin already betrays that it is not Chinese. A number of stories about the name’s original meaning; one is that it means ‘place to hang fishing nets to dry’ in Manchu, the language of the people with the same name. The Manchus were once a powerful nation, and the emperors of the last imperial dynasty of China, the Qing Dynasty (1622-1912) were Manchus, not Chinese.

Moscow of the orient

After the Russian Revolution, a large number of Russians fled to Manchuria, with Harbin as their unofficial capital. It gave Harbin its nickname ‘Moscow of the East’. A number of Russian buildings still survive, like the orthodox cathedral. Moreover, some Russian words entered the local dialect. The most famous one is lieba, from the Russian chljeb ‘bread’. It refers to a large round bread baked with beer yeast. This type of bread has become the symbol of Harbin cuisine.

Lieba

Watch this video for more information about the Russian influence on Harbin cuisine.

When the Japanese invaded Manchuria, they more or less let the Russians live there in peace, while the Russians accepted Japanese rule; they had no choice. In fact, for a short period, Russians, Chinese, Japanese, Koreans and several national minorities (in particular Manchus and Mongolians) lived in a peaceful coexistence in Harbin. This ethnic diversity has created an equally diverse local cuisine. Besides the afore mentioned bread, dairy products also became part of the diet of Harbin people, long before Chinese elsewhere started to appreciate the white gold. The potato, the typical staple of Western cuisine, has also grown roots in this city.

The consumption of coffee is also increasing rapidly in Harbin. Insiders report that there were more than 400 coffee shops in the city at the end of 2015, consuming about 60 mt of coffee beans per year. The Russian Coffee brand Lebo noticed this trend and undoubtedly also cashing in on Harbin’s Russian past, opened its first coffee shop in China in that city in 2021.

Harbin Beer (better known as Hapi in China) is one of the top beer brands in China, though currently owned by Anheuser-Busch. The Harbin municipal government and Harbin Cultural Tourism Group are co-hosting the 2016 China-Harbin International Beer Festival, which will run from June 30th to July 17th at the Harbin Frozen World in Songbei district. There will be 11 beer tents, 16 food exhibition areas and four cultural exhibition areas. The total area of the beer festival is 600 thousand square meters

Agricultural region

Heilongjiang is one of the prime agricultural regions of China. The chernozem soil in Harbin, called “black earth” (Heilongjiang literally means: ‘Black Dragon River’) is one of the most nutrient rich in all of China, making it valuable for cultivating food crops. According to the municipal statistics of 2013, Harbin alone was good for more than 2% of the national grain output, 1% of the meat and 4% of dairy products.

BlackEarth

A recent survey comparing the GDP of major Chinese cities with that of nations, revealed that the economy of Harbin can be roughly compared to that of Bulgaria.

Heilongjiang is one of the major grain-producing areas in China, ensuring food security for the country. The grain output of the province reached 67.6 billion kgs in 2014, leading the country’s provinces since 2011 and accounting for one-tenth of the national total.

In recent years, the province has pushed forward agricultural modernization, promoted the green food industry and established marketing platforms for Internet Plus agriculture.

A sophisticated Internet Plus marketing platform has been established for rice products in the province. Heilongjiang rice is of high quality but used to sell poorly.

The following table shows the development of the total turnover of the Harbin food industry during the past few years.

Year Turnover(RMB bln)
2008 40
2010 50
2011 70
2012 90
2013 95

The processing of agricultural produce was still the most prominent activity in the Harbin food industry in 2013, as is shown in the following breakdown.

Activity ratio (%)
Processing of primary produce 68.0
Food production 15.3
Beverage production 8.6
Tobacco products 8.1

(tobacco is part of the food industry in Chinese statistics)

Top companies

Wondersun Dairy Industry Co., Ltd.

Wondersun is part of Heilongjiang’s biggest Agricultural State Owned Enterprise called Beidahuang Group. The company is ranked as fifth among China’s dairy enterprises and holds 7 subsidiary companies and 41 factories. Wondersun’s liquid milk ranks among the top ten in the country and was assessed as one of China’s most valuable brands in 2003. The company has formed a strong sales network that covers the whole country. Wang Jinghai, president of Wondersun, believes Heilongjiang is ideal for raising cows and producing dairy. The company is expected to sell products worth RMB 50 mln in 2015 through e-commerce channels and has set a sales goal of RMB 300 mln next year.

Heilongjiang Dairy Group Co., Ltd.

Heilongjiang Dairy Group was established in 2004, and the companies registered capital is 213 million RMB. It is one of the key national enterprises in the agricultural industry in China. The main shareholder is the Haerbin HIT group with 10 other small shareholders. The company has four brands, and the brand Longdan and Jinxing have a high reputation in the entire country.

Beidahuang Group

Beidahuang has 16 agriculture branch companies and Haolianghe Fertilizer Company. It is also the parent of Beidahuang Grains Co., Ltd., and Harbin Longken Malt Co., Ltd.. The company owns 624,000 hectares of land. The main crops are rice, soybeans, corns, wheat and brewing barley, supplemented with crops cash crops like red beans, kidney beans, pumpkin seeds, lucerne, medicinal herbs and flax. Haolianghe Fertilizer Co., Ltd. has an annual production of 200,000 mt of carbamide and other fertilizer products. Beidahuang Grains Co., Ltd. has an annual production of 1.4 million tons of refined rice and 100,000 mt of other byproducts. The yearly malt output of Harbin Longken Malt Co., Ltd. is 200,000 mt.

Harbin as gateway to China

Harbin has been on the radar of foreign investors from the beginning of China’s economic reforms.

Nestlé was one of the first Western multinationals to invest in China, with a joint venture for the production of infant formulae in Acheng, a suburb of Harbin in the 1980’s. This subsidiary of Nestlé has withstood all turbulent developments of China since then.

Nestle

Another multinational, McCain, started a potato processing venture in Harbin in 2005. The venture included a 7.5 ton/hour plant and two associated potato storage facilities. McCain Foods has been preparing for its expansion in China for a long time before it finally chose Harbin. The company stated that Heilongjiang Province produces the largest output of potatoes yearly. With its unique geological position adjacent to Russia, Harbin may prove an ideal investment location for companies who want to tap the Far East market, he said. The company decided to double its capacity in 2012.

Other foreign investors in Harbin include a yeast plant of Burns Philp. That makes sense, as bread has been part of the local cuisine for a long time. Even thought lieba is a kind of sourdough, yeast bread was easily adopted as a quicker alternative for the traditional Russian style bread. I myself have organized a number of baking seminars, when I was promoting yeast and bread improvers of Gist-brocades (now part of DSM) in China.

China has reacted quickly to cash in on the opportunities created by the trade war between Russia and the EU/US. This will be an extra large boost to the importance of Harbin as China’s northernmost foreign trade hub for food and agricultural products. Harbin’s ‘Russian’ background will certainly facilitate this development. The China Harbin International Economic and Trade Fair was renamed into Sino-Russian Expo in 2014.

The World Dairy Expo & Summit will be organised again in Harbin, april 21 – 24, 2016. The 2015 edition attracted 15,728 visitors from all over the world.

HarbinExpo

Organic and green food

Heilongjiang is China’s primary region for organic agriculture and Harbin is again a centre for this industry.

The municipal government has build a large modern food storage and distribution system for organic produce. The system includes a food logistics centre with an annual handling capacity of more than 1 mln mt, three distribution centres with a combined annual handling capacity of 1.5 mln mt and 11 grain depots each with a storage capacity of 200 000 mt.

HlGreenFood

McDonald’s sources the rice it uses on the mainland from Harbin. The city grows some of China’s top-quality rice. It has more than 600,000 hectares of paddy field producing 3.25 mln mt of rice a year as well as some 200,000 hectares of soybeans, none of it genetically engineered. It is not necessarily organic rice, but at least is produced according to China’s ‘green’ specifications.

Harbin also has annual corn output of more than 10 mln mt. The hybrid breed contains three times more protein than common breeds.

In addition to farming, the city government also invests in livestock breeding and processing. It has nearly 500,000 cows, 3 mln beef cattle and 11 mln pigs, and produces 880,000 mt of meat, 365,000 mt of eggs and 1.5 mln mt of milk a year.

The first flagship store for green food from Heilongjiang opened in Hong Kong in February 2014 offering more than 200 products. Of the 64 suppliers, 27 were based in Harbin.

Agreeable culture

Harbin is an interesting alternative to for international investors in the Chinese food and beverage industry. On top of the advantages introduced above, the people of China’s Northeast are known as easygoing and honest. The good people of Harbin are outstanding hosts, entertaining their guests with supersize dishes of fish and meat, to be washed down with lots of baijiu, traditional Chinese spirits.

HbDish

It may take a little longer to negotiate a deal. They take their time to get to know you and do not feel the urge to put on a business-like act when dealing with foreigners, as you often see in other parts of China. However, once the believe they have figured you out and the impression is positive, you are in.

Mulan – a food production centre in ‘greater Harbin’

The county of Mulan, in Harbin’s northeast, is an important site on the Silk Road Economic Belt. Its connection with Harbin has been strengthened by the completion of the Mulan-Songhuajiang Bridge.

Mulan has a population of 280,000 and covers an area of 3600 square meters. It administers six towns and eighty-six villages. There are thirty reservoirs along the Songhua River in the county and the forest coverage rate is nearly 50%. Mulan has been awarded various titles, such as “National Ecological Agricultural County”, “National Green Rice Production Base” and “National Rural Tourism Demonstration County”.

Mulan is also known for its, rice, coffee and beer. Located in the black soil area of northeast China, it enjoys distinct seasons, adequate sunlight and moderate rainfall, which contributes to the excellent quality of its crops. Hundreds of kinds of precious herbs grow in the 670,000 hectare forest and the abundant grassland feeds flocks and herds. With the improvement of agricultural infrastructure, Mulan has seen remarkable progress, especially in rice and red meat processing.

With the support of related policies and modern agriculture reform in Heilongjiang, the county has seized all opportunities to construct a grain production base, developing grain processing efficiency and funding a green food industry. It built an 8-square-meter agricultural production park to bring together various agriculture projects for cooperation.

In August, 2014, the Chinese Academy of Agricultural Sciences (CAAS) Grain Processing Technology Institute (Harbin) settled in the industrial park, the first national organization instituted by CAAS in Heilongjiang. It focuses on grain processing, product innovation and inspection services. This move inaugurates a new cooperation method between national research groups and local food industries.

In future, Mulan plans to expand the market to Russia, North Korea and Japan with the help of the Heilongjiang Silk Road Belt and, in three to five years, become the leading food research centre of Northeast Asia. That development would improve Heilongjiang’s influence in the area. The government intends to pay more attention to ecological protection and sustainable development under emerging circumstances to create a better Mulan.

Peter Peverelli is active in and with China since 1975 and regularly travels to the remotest corners of that vast nation.