The dairy industry in China has seen significant growth and transformation over the past few decades, emerging as one of the largest and most competitive sectors in the country’s food and beverage industry. As China’s economy continues to grow and the middle class expands, the demand for dairy products has surged, making it a key player in the global dairy market.

This report offers a detailed analysis of China’s dairy industry, examining its market size, growth drivers, key segments, major players, and future trends.

Overview of the Dairy Industry in China

China is the largest producer and consumer of dairy products in Asia, and one of the largest in the world. The market encompasses a wide range of dairy products, including milk, yogurt, cheese, ice cream, and powdered milk. The increasing demand for dairy products has been fueled by several factors, including urbanization, rising disposable incomes, and changing consumer preferences. China’s dairy industry is rapidly modernizing, with both domestic and international players competing to capture market share.

Market Size and Growth

In 2023, the total value of the dairy market in China was estimated at approximately USD 80 billion, making it one of the largest dairy markets globally. The Chinese dairy industry is expected to continue growing at a compound annual growth rate (CAGR) of 6% from 2023 to 2030, driven by increasing demand across all major dairy product categories.

• China’s liquid milk market, which includes fresh milk and UHT milk, was valued at approximately USD 35 billion in 2023.
• The yogurt and fermented dairy products market was valued at over USD 10 billion, with a strong demand for flavored and probiotic products.
• The powdered milk market in China, particularly for infant formula, is one of the largest in the world, with a market value of around USD 15 billion in 2023.

This growth is expected to continue as China’s middle class expands, with more consumers adopting dairy products as part of their daily diets.

Key Drivers of Growth in the Dairy Industry

Several factors are driving the expansion of the dairy industry in China, including shifting consumer preferences, urbanization, rising incomes, and government initiatives to modernize the dairy supply chain.

Changing Consumer Preferences

Consumer preferences in China have shifted significantly in recent years, with increasing demand for dairy products driven by growing health awareness, convenience, and improved nutrition. Historically, dairy consumption was relatively low in China, but attitudes toward dairy are changing, especially among the younger and urban populations.

• Approximately 50% of Chinese consumers reported increasing their dairy consumption in 2023, particularly in urban areas where lifestyles are changing.
• Health-conscious consumers are increasingly opting for products like yogurt, cheese, and low-fat milk, which are perceived as healthier alternatives to sugary beverages and snacks.

These changing preferences are pushing dairy companies to adapt their product offerings, focusing on nutrition, convenience, and taste, while also introducing innovative dairy products like lactose-free, organic, and plant-based options.

Urbanization and Rising Incomes

Urbanization and rising disposable incomes are key drivers of the growth of the dairy industry in China. As more people move into cities, they adopt modern lifestyles that include a greater variety of food options, including dairy. The growing middle class in China has more purchasing power and is more willing to spend on premium and imported dairy products.

• By 2023, more than 60% of China’s population lived in urban areas, a trend that is expected to continue, further driving demand for packaged and processed dairy products.
• Rising incomes have made it easier for urban dwellers to afford higher-quality dairy products, including premium milk, organic dairy, and international brands.

With urbanization accelerating, the demand for processed dairy products such as cheese, yogurt, and ice cream is set to increase in China’s major cities, fueling the continued expansion of the dairy market.

Government Support and Policies

The Chinese government has played an essential role in the growth and modernization of the dairy industry. Recognizing the importance of dairy products in the diet and the economy, the government has introduced policies to support the development of the dairy sector.

• The Chinese government has invested in dairy farming infrastructure, providing financial support and subsidies to domestic dairy farmers to improve productivity and animal health.
• Initiatives to promote dairy consumption among Chinese consumers, particularly in rural areas, have been implemented, including public education campaigns and subsidies for milk products.

These efforts, coupled with the country’s strong economic performance, have created an environment conducive to the continued expansion of the dairy market in China.

Key Segments of the Dairy Market in China

The dairy market in China can be segmented into several key categories, including liquid milk, yogurt, cheese, powdered milk, ice cream, and other dairy products. Each of these segments has unique growth drivers and market dynamics, contributing to the overall growth of the industry.

Liquid Milk

Liquid milk is one of the largest segments in China’s dairy industry, including both fresh milk and long-life milk (UHT). The demand for liquid milk has grown rapidly in recent years, driven by the increased consumption of milk as part of a healthy diet and the rise in the number of dairy drinkers in urban areas.

Market Size and Demand

In 2023, the liquid milk market in China was valued at around USD 35 billion, with fresh milk accounting for a significant share of this value. Despite the rapid growth in consumption, China’s per capita milk consumption is still low compared to Western countries, suggesting substantial potential for further growth.

• In 2023, the average per capita milk consumption in China was approximately 14 liters per year, far below the global average of 100 liters per year.
• The consumption of UHT milk has been rising due to its convenience, longer shelf life, and wider availability in rural areas.

Domestic dairy companies like Mengniu, Yili, and Bright Dairy are the dominant players in this segment, while international brands such as Danone and Nestlé are also increasing their presence through premium milk products.

Yogurt and Fermented Dairy Products

Yogurt and fermented dairy products are among the fastest-growing segments in China’s dairy market. This growth is fueled by increasing health awareness and the popularity of probiotic products, which are believed to aid digestion and boost immunity.

Market Growth

In 2023, the yogurt market in China was valued at USD 10 billion, with a significant increase in demand for both traditional yogurt and flavored varieties. Chinese consumers are also increasingly turning to plant-based alternatives such as soy and almond yogurt, adding to the market’s diversity.

• The growing trend of “functional foods” has contributed to the rise of probiotic and low-sugar yogurts, with many consumers seeking healthier options.
• Flavored yogurt, particularly in formats like drinkable yogurt, has also seen a surge in popularity, especially among younger consumers.

The yogurt segment is expected to continue expanding, with both domestic brands like Mengniu and Yili, and international companies such as Danone, investing heavily in the market.

Cheese

Cheese consumption in China has traditionally been low, but in recent years, there has been a noticeable shift in dietary preferences as more Chinese consumers, especially in urban areas, embrace cheese products. The growing popularity of Western diets and international cuisine has driven the demand for cheese in China, particularly among younger generations.

Market Insights

In 2023, the cheese market in China was valued at approximately USD 4.5 billion, and it continues to experience robust growth, particularly in cities like Beijing, Shanghai, and Guangzhou. Processed cheese and cheese spreads are the most popular products, but the demand for natural cheese varieties such as mozzarella and cheddar is growing.

• Cheese is increasingly being used as an ingredient in cooking and as a snack, contributing to its rising popularity in both households and foodservice establishments.
• International brands like Lactalis, Fonterra, and Arla Foods have capitalized on this growth by introducing cheese products tailored to Chinese tastes and preferences.

The demand for cheese in China is expected to continue expanding, with younger consumers and the growing middle class leading the way.

Powdered Milk and Infant Formula

The powdered milk and infant formula market is one of the most significant segments of China’s dairy industry. Due to concerns about food safety and a desire for higher-quality products, many Chinese parents prefer foreign brands of infant formula. This has led to a booming market for imported powdered milk, particularly in the premium segment.

Market Demand and Trends

The powdered milk market in China was valued at approximately USD 15 billion in 2023, with infant formula accounting for the largest portion. The demand for infant formula, driven by concerns about food safety and the growing number of working mothers, has made China the largest importer of infant formula globally.

• In 2023, the market for imported infant formula in China reached USD 8 billion, with brands from countries such as New Zealand, the United States, and the European Union leading the market.
• The increasing preference for organic and premium infant formula products has driven higher prices in the sector, further expanding the market.

Domestic companies like Yili and Mengniu are also tapping into the infant formula market by improving product quality and launching premium offerings to compete with international brands.

Ice Cream

The ice cream market in China has been experiencing steady growth, driven by increasing disposable incomes, changing lifestyles, and a growing preference for indulgent treats. Both domestic and international ice cream brands are capitalizing on the growing popularity of premium, innovative, and seasonal flavors.

Market Trends

In 2023, the ice cream market in China was valued at approximately USD 8 billion. The market is primarily driven by the demand for premium products, including gourmet ice cream, gelato, and non-dairy ice cream alternatives.

• The growing trend for health-conscious options has led to an increase in demand for low-sugar, dairy-free, and plant-based ice cream varieties.
• International brands like Haagen-Dazs, Nestlé, and Unilever (through its Magnum and Walls brands) continue to dominate the market, but local players such as Mengniu and Yili are expanding their presence.

The Chinese ice cream market is expected to continue growing, driven by innovation, the increasing middle-class consumer base, and the expanding demand for premium products.

Major Players in China’s Dairy Industry

The dairy industry in China is highly competitive, with both domestic and international players vying for market share. Leading companies in the sector include both traditional dairy manufacturers and newer entrants focusing on innovation and premium products.

Mengniu Dairy

Mengniu Dairy is one of China’s largest dairy companies, with a wide portfolio that includes milk, yogurt, ice cream, and infant formula. Mengniu has been a dominant player in the Chinese dairy market and has established a strong presence in both domestic and international markets.

• In 2023, Mengniu’s revenue reached approximately USD 10 billion, with a significant portion coming from its yogurt and liquid milk products.
• Mengniu has focused on expanding its product offerings with premium and organic products, as well as increasing its international presence through acquisitions.

The company continues to dominate the Chinese dairy market, particularly in the areas of liquid milk and yogurt.

Yili Group

Yili Group is another leading player in China’s dairy industry, known for its high-quality milk, yogurt, ice cream, and infant formula. Yili is one of the most recognized dairy brands in China and has successfully expanded its reach into international markets.

• Yili’s revenue in 2023 was approximately USD 13 billion, with a significant contribution from its liquid milk and yogurt segments.
• The company has invested in high-quality production facilities and research and development to ensure product safety and innovation.

Yili’s success in both the domestic and international markets has solidified its position as one of the top dairy companies in China.

Nestlé China

Nestlé is a global leader in the food and beverage industry and has a strong presence in China’s dairy market. The company’s portfolio in China includes infant formula, powdered milk, and dairy-based nutrition products.

• Nestlé’s dairy revenue in China reached approximately USD 3 billion in 2023, with infant formula being one of the largest segments.
• The company’s strong distribution network and focus on premium, high-quality products have helped it gain significant market share in the powdered milk sector.

Nestlé continues to be a major player in the dairy industry in China, with a focus on innovation and product quality.

Fonterra

Fonterra, a global dairy cooperative based in New Zealand, is one of the largest suppliers of dairy ingredients and products in China. Fonterra’s dairy products, including milk powder, cheese, and butter, are widely consumed across the country.

• In 2023, Fonterra’s revenue from China reached USD 2.5 billion, with a large portion of sales coming from its infant formula and dairy ingredients business.
• Fonterra has focused on providing high-quality dairy products and has established long-term partnerships with local businesses to strengthen its market position.

Fonterra remains one of the key players in China’s dairy market, with a strong focus on providing premium and healthy dairy options.

Challenges in the Dairy Industry

While the dairy industry in China continues to grow, there are several challenges facing the sector. These include food safety concerns, the high cost of dairy production, and the competitive landscape.

Food Safety and Quality Assurance

Food safety remains a major concern in China’s dairy industry, particularly following high-profile incidents such as the 2008 melamine scandal. Ensuring product safety and maintaining consumer confidence is a key challenge for dairy companies operating in the country.

• The Chinese government has introduced stricter regulations to ensure the safety of dairy products, including better traceability, quality control, and safety standards.
• Companies are increasingly investing in quality assurance processes, including third-party certifications and improved supply chain monitoring, to ensure product safety.

Addressing food safety concerns is critical to the continued growth of China’s dairy industry and maintaining consumer trust.

Rising Costs of Dairy Production

The cost of dairy production in China has been rising due to factors such as feed costs, labor, and energy. Additionally, dairy farming infrastructure and technology improvements are costly, adding financial pressures to producers, particularly in the face of fierce competition.

• Many Chinese dairy farmers rely on government subsidies to stay competitive, but this can limit their ability to invest in innovation and technology.
• The rising costs of feed and labor have resulted in higher prices for dairy products, which could limit growth if consumers are unwilling to pay premium prices.

The challenge of rising production costs is one that many players in the industry are working to mitigate through improved efficiency, technological innovations, and economies of scale.

Future Outlook for the Dairy Industry

The future of China’s dairy industry looks promising, with continued growth in demand for both domestic and international dairy products. As consumer preferences evolve, companies will need to focus on innovation, health-conscious products, and sustainability to remain competitive.

• The demand for premium dairy products, including organic and functional foods, is expected to rise, particularly among younger and health-conscious consumers.
• Technological advancements in dairy farming, production efficiency, and distribution channels will continue to shape the future of the industry.

The dairy industry in China is set to continue its upward trajectory, with growing opportunities in both traditional dairy products and emerging segments like plant-based dairy alternatives and functional dairy products.