China’s milk production dipped last year for the first time in five years, after years of steady growth, as shifting consumer preferences outpace the industry’s ability to adapt. The key to reversing the trend lies in closing the gap between traditional dairy offerings and the evolving demands of modern consumers, industry insiders said.
China’s liquid milk production slumped 2.8 percent last year from the year before to 27.4 million tons in total, according to data from the China Dairy Industry Association. Prior to this, output had been growing at more than 2 percent a year for the past five years.
Dairy producers above a designated size across the country logged a drop in dairy product production of 1.9 percent in 2024 year on year to 29.6 million tons, according to data from the National Bureau of Statistics. This is the first negative growth in recent years and is in stark contrast to 2022 and 2023, when output expanded by 2 percent and 3.1 percent respectively.
This has had an impact on revenue. The top three dairy companies, namely Yili Group, Mengniu Dairy and Bright Dairy, all logged a dive in earnings of between 8 percent and 10 percent last year from a year earlier. Yili posted revenue of CNY115.8 billion (USD16 billion), Mengniu reported CNY88.7 billion (USD12.3 billion) and Bright Dairy logged CNY24.3 billion.
There are two main reasons behind the slump, Liu Jiangyi, chairman of the China Dairy Industry Association, said at the association’s annual meeting recently held in Nanjing. First, a complex domestic and foreign economic environment has led to a slowdown in consumer spending, and second, the market is reflecting both a drop in demand for regular milk and a dependence on imported premium dairy products.
China’s dairy industry has been dominated for a long time by different types of liquid milk, but consumption is now on the decline. Last year, the average Chinese person consumed 41.5 kilograms of dairy, a 5.6 percent drop from the year before.
Imports of liquid and fermented milk are also tumbling. However, imports of higher-end items such as cream, condensed milk and whey protein are going up. For example, cream imports jumped 9 percent last year from a year ago to 290,000 tons.
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The dairy sector is being completely reshaped, Wang Hua, a marketing manager at Swedish food packaging firm Tetra Pak, said at the meeting. Snacking has become a growing trend and this is driving up demand for ready-to-eat cheese. The fitness boom is also boosting interest in protein supplements and weight management products.
As milk sales slow, more dairy companies are hiking their investment in the health and nutrition market. Bright Dairy as well as Hohhot-based Yili and Mengniu all said at their recent earnings calls that they plan to focus more on functional products and advanced dairy processing going forward.
Future innovation needs to revolve around three main goals, Liu Zhenmin, chief scientist at Shanghai-based Bright Dairy, told Yicai. These are developing probiotics targeted at specific health needs, deepening research into dairy nutrition and creating functional dairy products aimed at healthy aging. In his view, meeting the nutritional needs of China’s silver-haired population can open up a large new market, demonstrating the huge potential of products that support healthy aging.
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