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"a bottle of milk a day makes chinese people strong" was once a slogan used to encourage chinese people to drink ambient temperature milk. however, this nutritional product, which was once regarded as a cost-effective product, now seems to be "disdained" by chinese people who pay more and more attention to their health.

low-temperature milk is starting to take center stage. "room-temperature milk has low requirements for milk sources and can be reconstituted with milk powder, commonly known as 'canned milk'." "low-temperature milk tastes better and is healthier."from a nutritional point of view, low-temperature milk seems to be healthier than room-temperature milk.

according to data from bocom international, the compound annual growth rate of low-temperature fresh milk will reach 12% from 2022 to 2027, and white milk is expected to experience a high-end trend and shift from ambient temperature milk to fresh milk.

against this background, new dairy, which has always been engaged in "fresh" business, has also begun to tell a new story through its low-temperature milk business.

as a regional dairy leader, over the past decade, xinruye has been telling "fresh" stories, deploying different product lines through its different sub-brands to enhance its brand image and net profit; at the same time, it has been making big purchases, allowing it to successfully enter the 10 billion club in 2022.

however, although the "fresh strategy" can help improve the brand image and net profit, it will be difficult for new dairy, which has built its empire through a "buy, buy, buy" approach, to quickly penetrate consumers' minds in the short term.coupled with the accelerated internal competition in the low-temperature milk market today, the nationalization of the new dairy industry still has a long way to go.

1

the new story of low-temperature milk

"i fell in love with it the first time i took a sip of low-temperature fresh milk. it has a mellow, thick, smooth and icy taste. now i can no longer find room-temperature milk in my home." xu jie, a post-95 consumer who likes to try new things and is a loyal fan of low-temperature fresh milk, said that after she started trying low-temperature milk in 2020, she formed the habit of drinking low-temperature milk because of its taste and flavor.

"during the epidemic, academician zhong nanshan and professor zhang wenhong both recommended drinking milk to enhance immunity, and low-temperature fresh milk has better nutritional value." xu jie said that the reason he chose to try low-temperature milk was mainly for health considerations.

she recommended to "jiemian news·entrepreneurship frontline" that, based on my experience of drinking milk over the past few years, i still recommend drinking fresh milk. the most recommended is 3-4 days of low-temperature fresh milk or barreled milk with a shelf life of 5-7 days, because this type of milk has the least additives and the most complete nutrition.

xu jie has done his homework. low-temperature milk has high requirements for milk sources. it must use fresh, pollution-free milk from nearby sources. the milk must be squeezed out and produced within 24 hours. it must be refrigerated throughout the process, which is fresher, safer, more natural and more nutritious. "room-temperature milk has low requirements for milk sources and can be reconstituted with milk powder, commonly known as 'canned milk'. and it can be stored for such a long time, i always feel that there is black technology in it."

image/photo network, based on vrf protocol

in fact, since the epidemic, consumers have begun to pay more attention to healthy eating. compared with normal temperature milk, low-temperature milk has obvious advantages in nutritional content and "fresh" feeling, and is gradually loved by consumers.

according to kantar data, the national low-temperature fresh milk penetration rate has increased from 18% in 2018 to 39% in 2023, and the high-end milk penetration rate has increased by 5.9% compared with the previous year. in addition, data shows that low-temperature milk has achieved steady growth across all channels, with sales of low-temperature milk on tmall, jd.com, and douyin platforms increasing by 24%, 6%, and 12% year-on-year in q1 2024, respectively.

under this trend, new dairy, which has been focusing on the "fresh" business in recent years, seems to have ushered in a harvest period.

it is understood that over the past decade, xinruye has been telling "fresh" stories, and has deployed different product lines through its different sub-brands, targeting different consumer pain points.

for example, as early as 2011, new dairy launched products with the concept of "only sold on the same day", and introduced a 24-hour series emphasizing freshness; asahi vipshop focused on the high-end fresh milk market; and the huorun series achieved growth through new product drive.

the “fresh” story told by xindairy began to work.

the financial report shows that in the first half of 2024, the "24 hours" series of fresh milk continued to be deployed in a national matrix, and hunan nanshan launched the "golden 24 hours". the mid-to-high-end series grew by more than 30% year-on-year; the high-end brand asahi vipshop fresh milk grew by about 15% year-on-year, achieving an overall year-on-year growth of about 15% for high-end fresh milk; the huorun series achieved a year-on-year growth of 15% through new product drive.

from the overall performance point of view, in the first half of 2024, new dairy achieved operating income of 5.364 billion yuan, a year-on-year increase of 1.25%; net profit attributable to the parent company was 296 million yuan, a year-on-year increase of 25.26%. the company's performance growth is mainly due to new dairy's focus on low-temperature dairy products, with "freshness" as the core theme, and focusing on low-temperature fresh milk and low-temperature specialty yogurt as core key categories.

new dairy, which has been building its moat around the word "fresh", has encountered the fast-growing low-temperature milk market and is telling a new story.

2

the road to nationalization is long

“there is a brand called yongyou, which is a local milk in ningbo. i personally think it tastes really good, but i haven’t seen it again since i moved to beijing.” wang lei, who was born in ningbo, told jiemian news·entrepreneurship frontline.

in fact, low-temperature milk has a short shelf life and high storage conditions, and requires high cold chain transportation. this makes it limited by the milk source and cold chain cost conditions, and its sales radius is limited. generally, pasteurized milk with a shelf life of 5-7 days can only be quickly delivered within a range of about 300 kilometers from the milk source, and the cost is relatively reasonable. if it is far away from the milk source, the cost will increase significantly.

even in recent years, many dairy companies have begun to launch "ultra-pasteurized milk" with a sterilization process between pasteurized milk (commonly known as fresh milk) and ultra-high temperature sterilized milk (commonly known as ambient temperature milk). the product has lost some active substances, the shelf life has been extended to 14-20 days, and the sales radius is only 500 kilometers.

as for xinruye’s core product, the “24-hour” series, its sales radius is only 100-150 kilometers because the entire process from production to shelf removal is ensured to be completed within 24 hours.

this also means that low-temperature milk is limited by its sales radius, which leads to the industry being mainly dominated by local regional dairy companies.

but new dairy clearly has national ambitions.over the past decade, new dairy has been continuously expanding its territory, acquiring and integrating various local dairy companies across the country, aiming at the national market.

since 2002, new dairy has launched two rounds of "acquisition waves". in the first round, it acquired chengdu huaxi, hangzhou shuangfeng, hebei tianxiang and other regional dairy companies to attack the east china and north china markets; in the second round, it acquired hunan nanshan to enter the central china market, and then acquired suzhou shuangxi, sichuan sanmu and other companies to continue to cover and penetrate.

after the company was listed on the a-share market in 2019, it continued to acquire part of the equity of australian dairy, continuing to increase its national layout.

at this point, new dairy, headquartered in chengdu, sichuan, has expanded beyond the southwestern market and begun to accelerate its layout in east china, central china, north china and other regions.

"but the regional dairy companies acquired by new dairy all already have a certain degree of brand awareness in the local area, and they all operate independently without affecting each other." liu xiaoqian, a media person who follows dairy companies, feels that this approach has advantages, making it less difficult for new dairy to acquire and integrate businesses.

in the first half of this year, new dairy's revenue in southwest china, east china, north china and northwest china was 1.875 billion yuan, 1.503 billion yuan, 536 million yuan and 679 million yuan respectively.

in the first half of this year, north china has become a new growth point for new dairywhile the southwest and northwest regions experienced negative growth, the revenue in north china increased by 20.21% year-on-year, and the revenue share increased from 8.42% in the same period last year to 9.99% today.

“however, the short-shelf-life, low-temperature fresh milk products produced by the regional dairy companies acquired by new dairy still have a limited radiation radius, and it is even difficult to form a superimposed advantage, and it is difficult for new dairy to form a brand effect.” liu xiaoqian told "interface news·entrepreneurship frontline" that the brand power of dairy companies is very important, but the three words "new dairy" obviously have not entered the minds of consumers in these regions.

in fact, when "jiemian news·entrepreneurship frontline" communicated with consumers in hebei, beijing and northeast china about their impressions of new dairy, most of them responded that they "had never noticed it" and "were not familiar with it."

during its visit to two large supermarket chains in hebei, "jiemian news·entrepreneurship frontline" also found that there were no products related to xinruye in the channel.

photo: no new dairy products are found on the shelves

"i haven't heard of this brand. here, sanyuan brand low-temperature milk is well-known and has a large consumer group. other products such as mengniu, yili and junlebao are also selling well." said wang fang, a salesperson in the fresh milk section of a chain supermarket.

although new dairy has accelerated its layout into the north china and northwest markets, it still has a long way to go to build brand influence through acquired local dairy companies and accelerate penetration into mainstream channels in the national market.

3

strong enemies around

the new dairy industry’s problems are not limited to this.

according to data from bocom international, the compound annual growth rate of low-temperature fresh milk will reach 12% from 2022 to 2027. it is expected that white milk will experience a high-end trend and shift from ambient temperature milk to fresh milk. nongkai fund investment also predicts that the scale of the low-temperature dairy industry is expected to reach 160 billion yuan in 2025.

at present, there is no single product with a sales volume of 10 billion yuan, which means that the market has unlimited room for imagination. therefore, the number of dairy companies entering this market continues to increase, and new challengers emerge in an endless stream, which also makes the competition in the low-temperature fresh milk market increasingly fierce.

after 2018, mengniu and yili successively entered the field of low-temperature pasteurized milk. mengniu established an independent fresh milk division in 2018. by 2019, mengniu's fresh milk products had covered 24 provinces and 50 key cities. at the same time, it also established the daily fresh sub-brand to enter the high-end low-temperature milk market. yili launched three new low-temperature fresh milk products at the end of 2019, adding to its low-temperature milk market.

"before, there were only a few types of low-temperature milk, such as bright dairy, sanyuan, wandashan, etc. now, the fresh milk display cabinets are getting bigger and bigger, and there are more and more brands. jane eyre, mengniu, yili, junlebao have new products emerging in an endless stream." wang fang told "interface news·entrepreneurship frontline".

not only are dairy companies rushing into the production of chilled milk, jiemian news · entrepreneurship frontline also found that traditional supermarket channels have also launched their own fresh milk brands, joining the fierce market competition.

figure/ channel launches its own fresh milk products

with fierce external competition and a surplus of raw milk, competition among dairy companies is further escalating.

according to data from the national bureau of statistics, my country's raw milk production in 2023 was 41.97 million tons, an increase of 6.7% over the previous year. dairy product consumption has recovered at a low level, and raw milk production is still in temporary surplus. dairy processing companies are facing pressure from raw milk surplus and destocking, and the purchase price of raw milk is expected to remain low.

according to the latest data released by the ministry of agriculture and rural affairs, in the third week of august, the average price of raw milk in 10 major producing provinces such as inner mongolia and hebei was 3.21 yuan per kilogram, the same as the previous week and a year-on-year decrease of 14.6%.

against this background, the "promotional war" in the dairy industry also ensued.

"brands are all engaged in promotional wars. whether online or offline, you can see liquid milk, yogurt, milk powder and other categories on sale at reduced prices, and the more you buy, the more you save." wang fang introduced that there are promotions of "over 29-10" and "over 35-15" almost every day. because dealers are reducing prices for promotions, the terminal purchase price is cheaper than before, and most series are on sale at reduced prices.

figure/ low-temperature milk starts a "promotion war"

"the market was relatively chaotic throughout the first half of the year, including the third quarter. on the one hand, several leading dairy companies faced pressure to destock. on the other hand, due to the downward trend in raw milk prices, some small and medium-sized enterprises used low-cost, low-priced products to grab the market. we also saw that small and medium-sized dairy companies eroded some of the market share of leading companies." mengniu chief financial officer zhang ping explained at the performance meeting.

yili also mentioned that the average sales price of dairy products declined slightly in the first half of the year.

under the fierce price war, xinruye can only adopt the strategy of exchanging promotion for volume. in the first half of 2024, xinruye increased its promotion expenses by 18.69% to 474 million yuan, and its proportion in sales expenses increased from 48.12% in the same period last year to 54.8%.

even so, the revenue of xinruye's "base" is also declining.in the first half of 2024, new dairy’s turnover in the southwest region was 1.875 billion yuan, a year-on-year decrease of 6.87%; while its turnover in the northwest region fell by 12.68% year-on-year to 679 million yuan.

with many fortifications around it, xinruye may still have a tough battle to fight.