Low-temperature milk, which is mainly "fresh", is triggering a new round of market competition.

As we all know, the current domestic milk market has formed an industry situation with a duopoly between "Yili" and "Mengniu". As of 2020, Yili's room-temperature milk market share is as high as 38.6%, and Mengniu's market share has reached 28%. The two occupy nearly 67% of the milk market. However, the performance of these two industry giants in the low-temperature milk market is unsatisfactory.

In the new round of competition in the low-temperature milk market, what is eye-catching is not the two leading companies Yili and Mengniu, nor Guangming, the veteran low-temperature milk company. Instead, it is actually a company that has only been in the market for more than ten years. new dairy industry. Why? Before revealing the answer, we need to clarify a few questions:

1. Why is the low-temperature milk market?

2. What does the new dairy industry rely on?

3. It competes with industry leaders, what are the chances of successfully breaking through?

1

Why is the low-temperature milk market?

In fact, there are several key points for the new dairy industry to choose to enter the dairy market from low-temperature milk:

The first point: The current market consumption concept is changing. In the past, among the dairy drinks that consumers chose for nutritional supplements, room-temperature milk was mostly used because room-temperature milk is not only nutritious, but also has a long shelf life and is easy to store. However, as consumers' requirements for nutrition increase, low-temperature milk, mainly fresh milk, is constantly competing with room-temperature milk for the market.

In general room-temperature milk, because it needs to use ultra-high temperature sterilization method of 135-152, it will not only kill harmful bacteria in the original milk, but also kill beneficial bacteria, including vitamins and other elements. This directly results in the loss of nutrients in room temperature milk. On the contrary, although fresh milk has higher storage requirements and is shorter than room temperature milk, it is pasteurized, which can well retain the nutritional value of milk. At the same time, because the time from production to sale is short, the taste of milk will also be retained to the maximum extent possible.

In the current new era of consumption upgrading, young people are more receptive to new things, but their pursuit of new things is also higher, and the emergence of fresh milk not only brings higher nutrition to consumers value, and can also enhance consumers’ experience of eating milk, which is obviously more in line with the consumption model of the new era.

Second point: The domestic fresh milk market is huge. According to data, the market shares of pasteurized milk in Canada, the United Kingdom, the United States, and Japan are 99%, 99.5%, 99.7%, and 99.3% respectively, while the market share in China does not exceed 25%.

Dairy industry expert Wang Dingmian once said: The fresh milk market has been on an upward trend in recent years, with relatively large room for development, but its proportion in the entire liquid milk market is still relatively low. The current market sales volume is about 3 million tons, and the market capacity can double in five to six years, reaching a scale of 5-6 million tons, and is expected to reach 20 million tons in the future, so there is still a lot of room for growth in the future.

It is obvious that after the room temperature milk market is saturated, the focus of the market has begun to shift from room temperature milk to low temperature milk, and the overall growth rate of the market size of room temperature milk has slowed down. According to Euromonitor data, in the five years from 2015 to 2019, sales of room temperature milk increased from 80 billion yuan to 94.2 billion yuan, with a compound annual growth rate of only 3.3%. The market sales share of room temperature milk also fell from 78.35% to 73.29%. Under the influence of the epidemic last year, the market size of room temperature milk has once again shrunk.

The decline in the normal-temperature milk market is not disappearing, but is being gradually eroded by the low-temperature milk market. According to data, the low-temperature milk market has grown from 23.4 billion yuan to 36.1 billion yuan from 2015 to 2019, with a growth rate of 54.27% and a compound annual growth rate of 9%.

The CAGR of the room-temperature milk market is only 3.3%, while the CAGR of low-temperature milk has reached 9%. It is obvious that changes in market growth have directly fed back consumer demand and consumption trends, and also revealed future industries. trend and the direction that dairy companies need to focus on in the future.

The third point: The low-temperature fresh milk market is still a blue ocean market. All major dairy companies are in the initial stage of entering the low-temperature fresh milk market. However, due to the rigid technical conditions required for the production and preservation of low-temperature fresh milk, no dairy company can expand unscrupulously. Low-temperature milk is different from normal-temperature milk. Because low-temperature milk has a short shelf life, factories cannot densely cover various areas and can only be built based on milk sources. However, this has also become a moat for regional dairy companies, even industry leaders like Yili and Mengniu. It cannot occupy the market with its own large size.

In the current low-temperature milk market, although major dairy companies are making frequent moves, there is no real oligarch. According to statistics, as of 2020, Yili’s low-temperature milk business has a market share of 14.8% , Mengniu’s market share is only 11.2%, while Bright Dairy’s market share of low-temperature milk is 15%, temporarily ranking first.

As a new brand, New Dairy's market share in low-temperature milk has reached 6%, directly catching up with Mengniu.

The market share of 6% may seem small, but it is almost the same from the time of establishment. Mengniu Dairy was established in 1999 and lasted for more than 21 years, while New Dairy was officially established in 2006 and lasted for more than 21 years. Over 14 years, according to the comparison of time and market share, the difference between the two is not big, and this is without considering the brand awareness and corporate background. From this perspective, New Dairy may not be unable to Become a dark horse.

2

Another approach:

What does the new dairy industry rely on?

Speaking of New Dairy, most people may not be very familiar with it, but they must have heard of New Hope, and New Dairy is backed by New Hope Group. New Dairy was officially listed on the Shenzhen Stock Exchange on January 25, 2019. Compared with established dairy companies such as Yili and Mengniu, its industrial foundation may be relatively weak, but its capital strength is definitely not weak, which is something other dairy companies do not possess. At the same time, , the revenue of New Dairy itself is not bad.

According to the financial report, in the first half of 2021, New Dairy achieved operating income of 316 million yuan, a year-on-year increase of 68.85%, and net profit attributable to the parent company was 146 million yuan, a year-on-year increase of 90.58%. Among them, the revenue from New Dairy's liquid milk business reached 3.975 billion yuan, a year-on-year increase of 68%, accounting for 92.11% of the total revenue. The liquid milk business, mainly low-temperature fresh milk, drove the company's overall revenue to achieve high growth.

New Dairy’s rapid development and revenue generation are due to the expansion method inherited from New Hope, which provides itself with a mature development path through mergers and acquisitions.

We all know that New Hope was once just a small agricultural company in Sichuan, but it quickly grew into one of the top feed giants in the country with its merger and acquisition expansion strategy, and its market value once exceeded 100 billion. It only took 14 years to transform New Hope. According to statistics, of the more than 50 feed companies under New Hope, 37 were acquired through mergers and acquisitions. Today’s New Dairy Industry is also repeating the path of New Hope. Path taken: Mergers and acquisitions.

Since acquiring 60% of the shares of Sichuan Yangping Dairy Industry in 2001 for 42 million yuan, it has discovered new hopes for the development space and profit returns of the dairy industry, and has officially launched its layout in the dairy industry. In 2002, New Hope successively acquired many local dairy companies such as Anhui Baidi, Sichuan Huaxi, Hangzhou Shuangfeng, Hebei Tianxiang, Qingdao Qinpai, Yunnan Diequan, Changchun Miaomiao Soybean Milk Group, etc. In 2003, New Hope acquired Kunming Xuelan Dairy has laid a solid foundation for milk sources in order to officially enter the dairy market.

After New Dairy was formally established, its expansion through mergers and acquisitions was not left behind. In the following 14 years, New Dairy successively acquired Hunan Nanshan, Shuangxi, Xichang Sanmu, Shandong Asahi Luyuan, There are many regional dairy companies such as Chongqing Tianyou. As of last year, the company planned to acquire 100% equity of Huanmei Dairy for 1.711 billion yuan.

The successive acquisitions not only expanded the industrial scale of New Dairy, but also directly solved the two major problems that the company must face when seizing the low-temperature fresh milk market:

On the one hand, the company The recognition of the product in the regional market is the brand.

When a new brand is promoted in a new market, it must go through the process of changes in the recognition of the product by consumers in the region, which directly determines the future market of the product, and in the new dairy acquired Local dairy companies are well-known brands in their regions.

Among them, Huaxi and Yangping are both famous brand products in Sichuan Province and have won famous trademarks in Sichuan Province. Xuelan Milk is the largest liquid milk production enterprise in Yunnan Province, and Baidi is the largest fresh milk production enterprise in Anhui Province. Dairy companies such as yogurt, milk powder and other dairy products, Qin brand is Qingdao's local liquid milk star, while Shuangfeng, Vipshop, Tianxiang, Diequan, Sanmu, etc. are also well-known brands in their respective regions, which has undoubtedly become a new The dairy industry has laid a solid product foundation.

In terms of product quality, New Dairy adopts the industry-leading pasteurization temperature of 72 degrees Celsius, which effectively retains the active nutrients in fresh milk, and adopts independently developed 3D embedding technology and internationally advanced centrifugal sterilization. technology, the protein content of fresh milk products has reached 3.6 grams per 100 grams of milk. You must know that even the current low-temperature milk leader Guangming Dairy has a protein content of 3.6 grams per 100 grams of fresh milk products. As a leading dairy company, Yili And Mengniu, the protein content of its products is only between 3.4-3.5 grams per 100 grams.

It is not difficult to see that in terms of fresh milk, the new dairy industry’s local brand advantages and product nutritional content advantages can directly and effectively reduce the promotion process of new dairy products when entering the market, relying on the influence of the original brand Strength and the excellent quality of products can directly generate income.

On the other hand, it is the advantage of the milk source: avoiding industry leaders and forming a supplement in the market.

As we all know, the core of low-temperature milk products, which are mainly fresh milk, is “freshness”. This determines that the low-temperature milk market must be close to the source of milk. At the same time, dairy companies must have complete pasture resources, production plants, Distribution channels and refrigerated supply chain transportation can ensure the quality of the company's products. After New Dairy acquired 46 holding subsidiaries, it already has 15 major dairy brands, 16 dairy processing plants, and 13 self-owned pasture.

New Dairy Milk Source Distribution Map

From a geographical distribution point of view, New Dairy’s self-owned pastures are mainly concentrated in the central and western regions and East China, mostly small and medium-sized pastures. Overall, The distribution of milk source belts extends from the central and western regions to the north. Ningxia is located in the golden zone of dairy farming and is an excellent milk source producing area with abundant milk source supply.

Distribution map of Mengniu milk source areas

Distribution map of Yili milk source areas

Mengniu Dairy’s milk sources are mainly distributed in the northeastern region, and Yili’s own The milk source areas are mainly distributed in the central and northern regions, which are the three golden milk source belts, the North China milk source belt, the East China milk source belt and the Central and South China milk source belt. The distribution of the two leading milk source areas has a high degree of overlap. More concentrated.

Compared with the concentration of milk sources in Yili and Meng, New Dairy is more inclined to the central and western regions and East China. Therefore, the production and sales of its products will also revolve around the cities in the central and western regions and East China. This also means that the future product trend of New Dairy will inevitably be concentrated in third- and fourth-tier cities. While developing third- and fourth-tier cities, it will complement the regional markets occupied by Mengniu and Yili, forming differentiated competition in the region.

Population density distribution map in 2020

It is worth noting that the distribution of milk sources of the new dairy industry highly overlaps with the densely populated areas in China, that is to say, the milk source areas are the center , New Dairy can cover a large area or even comprehensively the entire East China and the central and western regions, thereby making full use of the demographic dividend to open up the low-temperature milk market. Especially in the central and western regions that are rarely covered by Yili and Mengniu, the market growth space of New Dairy is extremely large. big.

Of course, the size of the coverage area is inseparable from the company's transportation technology. According to New Dairy's disclosure, the company's low-temperature product logistics has achieved full cold chain distribution, achieving full cold chain coverage for every kilometer from the factory to the terminal store. The whole process only takes 6 hours, fully considering providing consumers with fast and advantageous products. Service experience.

From a strategic point of view, New Dairy, as a new force in regional dairy companies, fully leverages the advantages of regional dairy companies in the field of low-temperature milk through the "fresh strategy". First, it enters the market with low-temperature milk, forming differentiated competition with the normal-temperature milk duopoly market of the two giants Yili and Mengniu in terms of product trends. Second, the market focuses on the northwest and central areas, filling the gap between the two leading dairy companies in terms of geography. The market is blank, forming regional differentiated competition. From these two differentiated competition strategies, it can be said that New Dairy has truly effectively maximized the benefits of market competition.

3

Can the new dairy industry break the duopoly?

In the future, as consumption continues to upgrade, consumers’ requirements for health and nutrition will continue to increase. Low-temperature milk and its products will surely replace room-temperature milk and become the mainstream of the dairy market. The quality advantages of low-temperature milk It will also be recognized by more and more consumers. As one of the three major dairy companies in the field of low-temperature milk, New Dairy undoubtedly has an advantage in breaking through in the field of low-temperature milk.

First of all, unlike other low-temperature dairy companies, New Hope Dairy is backed by New Hope Group, which has sufficient accumulation in terms of capital and development experience. Moreover, as New Hope Group is the leader in the feed industry, New Dairy can fully realize the procurement of raw materials through the group's self-sufficiency, which is very important to its animal husbandry companies and helps the company achieve a closed loop of the industrial chain.

Secondly, New Dairy, as the only non-cyclical industry among the four major industries of New Hope Group, is also increasingly important to the group. From the perspective of financial data, New Hope Dairy is a stable profit creator in the industrial segment of New Hope Group. In the first half of the year, the parent company’s net profit attributable to its parent company was -3.415 billion yuan, and it achieved a net profit revenue attributable to its parent company of RMB 146.1 million. Prior to this, New Dairy has been generating profits for New Hope for seven consecutive years. Under such circumstances, New Hope will continue to pay more attention to New Dairy in the future, and the investment in funds, resources and technology will also increase. greatly increased.

Moreover, New Dairy has taken the lead in laying out the regional low-temperature milk market by relying on the strategy of coordinated development of multiple corporate brands and product brands. In the merger and acquisition strategy, the dairy companies chosen by New Dairy will inevitably They are all well-known local brands. With an independent milk source, New Dairy's branding and growth in the low-temperature milk market in each region will be maximized.

It is not difficult to conclude from this: the new dairy industry will definitely be able to achieve new breakthroughs in the field of low-temperature milk in the future, and this may also be a major opportunity to break through the duopoly structure of the industry.