Dairy Products Account For a Significant Increase In Online Sales

Dairy products are naturally healthy and have the widest consumer base. 2021 saw a recovery in the dairy consumer market overall, with liquid dairy, cheese and adult milk powder all growing at a faster rate. Consumption of liquid dairy products will grow significantly in both the self-purchase and gift channels; adult milk powder will grow faster in the online shopping channel. Dairy consumption became more health-conscious and green.

According to the Cato Consumer Index China Urban Household Sample Group, FMCG sales will grow by 3.1% year-on-year in 2021, with overall sales of liquid dairy products increasing by 4.4% year-on-year and the penetration rate at 99.6%. Adult milk powder sales grew by 6.5% year-on-year, with a penetration rate of 40.5%. Cheese sales grew by 32.7% year-on-year, with a penetration rate of 29.3%.

Data from the National Statistics Office showed a steady increase in milk production, with 36.83 million tonnes of milk produced in 2021, an increase of 2.43 million tonnes, or 7.1% year-on-year. Per capita milk consumption was 14.4 kilograms, an increase of 10.6 per cent.

Steady growth in liquid dairy adult milk powder

Growth in liquid dairy products, which include ambient liquid milk, ambient milk beverages, ambient yoghurt, low temperature milk, low temperature yoghurt and active lactic acid bacteria beverages, was mainly driven by price and increased single purchases, with the increase in the total number of households brought about by urbanisation expanding the size of the consumer population.

Analysis of the contribution of sales growth shows that of the 4.4% growth rate for liquid dairy products, 1.3% was contributed by price increases, 2.9% was contributed by the expansion of the size of the buying population, and 1.4% was contributed by an increase in the volume of single purchases. At the same time, the frequency of liquid dairy purchases by consumers declined as channel choice and consumption habits changed, contributing a negative 1.2% to category growth.

The growth in consumption of ambient liquid dairy products is evident. Data shows that ambient dairy sales grew by 7.7% year-on-year in FY2021, higher than liquid dairy as a whole. In addition to the urbanisation demographic dividend, higher average unit prices and average household purchases were the main drivers of ambient dairy growth. Analysis of the contribution of sales growth shows that ambient dairy growth was driven by price at 1.4%, the size of the buying population at 3%, single purchase volume at 1.4% and purchase frequency at 1.8%.

Low-temperature dairy products saw a decline in both purchase frequency and single purchase volume, and a decline in penetration. The data shows a sales growth rate of -6.1% for low temperature dairy products in FY 2021.

Analysis of the contribution to sales growth showed that price increases and the increase in the number of urban households due to urbanisation made positive contributions of 2.7% and 2.9% respectively, but the decline in penetration, purchase frequency and single purchase volume (-1.9%, -6.2% and -3.5% respectively) meant that low-temperature dairy products as a whole were unable to reverse their decline.

The adult milk powder category, which includes milk powder for the whole family, milk powder for the middle-aged and elderly, milk powder for students, milk powder for women and milk powder for special groups, saw growth driven by more household purchases, in addition to an increase in purchase frequency which also contributed to category growth. Data shows that adult formula sales grew by 6.5% year-on-year in FY2021, higher than liquid dairy sales growth.

Analysis of the contribution of sales growth shows that the frequency of purchase contributed 1.5% to the growth rate of adult milk powder, with an increase in the number of urban households in China and an increase in penetration contributing 2.9% and 2.8% respectively, while a small decline in average price and single purchase volume pulled down the growth rate of the category.

In terms of city level, liquid dairy sales declined slightly in the four key cities of North, Shanghai, Guangzhou and Chengdu, with more potential for faster growth in the lower tier markets. 2021 saw the highest year-on-year sales growth in prefecture-level cities at 6.3%, better growth in county-level cities and counties and provincial capitals at 5.5% and 3.8% respectively, and a decrease in sales in North, Shanghai and Guangzhou at -0.8%.

The growth rate was -0.8%. Ambient dairy products grew at all city levels, while low-temperature dairy products declined across the board. Sales of ambient dairy products grew by 2.4% year-on-year in the north, while sales of ambient dairy products grew more rapidly in other cities, with 9.4%, 7.4% and 7.9% year-on-year in prefecture-level cities, provincial capitals and county-level cities and counties respectively.

Sales of low-temperature dairy products declined in all county-level cities, with year-on-year sales growth rates of -5.2%, -5.6%, -6.4% and -7.3% in northern cities, provincial capitals, prefecture-level cities, county-level cities and counties respectively.

Over 70% of sales of adult milk powder were contributed by lower tier cities, but growth was weak in key cities. In FY2021, sales of adult milk powder grew at 8.3% year-on-year in prefecture-level cities, followed by county-level cities and counties, provincial capitals and North China, with sales growth rates of 8.1%, 4% and -0.7% respectively.