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will the huge domestic dairy consumption market face a change as each “grabs” the upstream milk source?
On the 9th of this month, foodaily noted that the green smart breeding demonstration park project of 180000 cows of Yili Group was officially launched in Hohhot. Following the first anniversary of the listing of Youran animal husbandry on the Hong Kong stock exchange, this is another big move of the domestic dairy industry in the field of milk sources, and also makes the dispute over milk sources, which has been silent for several months, once again become a hot spot in the industry.
In August, 2020, Mengniu became the owner of Shengmu, the largest organic milk and dairy company in China, setting off a new round of milk source war in the epidemic era. After more than one year, the main large-scale pastures in China are basically owned by “famous flowers” and each belongs to its own position. Now, independent construction has become the “main theme” of the second half of the milk source dispute.
Why does every move of China milk source affect the nerves of the industry? What specific impact will the increasingly fierce competition for milk sources bring to the downstream traditional giants and local dairy enterprises? How can the domestic milk source, which will be divided up completely after the internal roll, be on the right track to benefit consumers, dairy enterprises and the whole industry?
Golden milk source: a must for strategists in the dairy track
From the perspective of industrial chain, the upstream of dairy industry is the raw material industry of dairy products, which can be traced back to the quality of dairy cows and even pasture, and is closely related to the quality of dairy products. Coupled with the significant impact of raw milk price trend on the industrial chain, high-quality milk sources have become the core “chips” valued by enterprises in the dairy competition.
The best red wine is in Europe, the best coffee is in South America, the best tea is in China, and the best dairy naturally has its “specialty”.
The temperature and humidity in the four seasons, the composition of soil composition, water source and rainfall conditions determine the growth environment of pasture and cows, and also affect the protein content, milk fat content, total milk solids and other fresh milk quality indicators. Therefore, it is very important to choose the geographical location of dairy farms.
As we all know, the best pasture is in the golden milk source zone – the temperate grassland between 40 ° and 50 ° north-south latitudes. The vast grassland surrounded by temperate climate is filled with humid and foggy air. Although it is not conducive to the growth of grain, it provides good conditions for the growth of juicy grass. It is internationally recognized as a high-quality cow breeding belt – such as New Zealand, Australia, the Netherlands, Xinjiang, Inner Mongolia and other places in China.
If the advantaged geographical environment lays the foundation for high-quality milk sources, the support of national policies has injected a shot in the arm for the upstream development of the dairy industry.
In recent years, relevant policies on promoting the revitalization of the dairy industry have taken root in many provinces and regions. Since 2019, Ningxia has promoted the transformation and upgrading of the local dairy industry in accordance with the idea of “strengthening the base, optimizing the structure, improving the quality, cultivating the leader and promoting the integration”; The Inner Mongolia Autonomous Region subsidizes the new dairy farm and the increment of raw and fresh milk processing; Sichuan has actively built a dairy processing base, encouraged the development of dairy farming in the Anning River Basin and the valley of the Western Sichuan Plateau, and supported the development of yak milk production in Tibetan areas.
“Roll up your sleeves” all over the country, which not only greatly promotes the economic growth of local agriculture and animal husbandry, but also lays a solid foundation for the construction of upstream milk sources in the dairy industry.
Several policies and measures for promoting the revitalization of dairy industry in Inner Mongolia Autonomous Region. Source: Dairy headlines
For a long time, the raw materials of China’s dairy products were mostly imported. Based on the operational considerations of stabilizing the supply chain and ensuring product quality, in recent years, the leading dairy enterprises have increased their competition for upstream pasture resources to achieve control over milk sources and build competitive advantages in the industry.
In March this year, Guangming dairy announced that 70% of the 1.919 billion yuan raised by non-public offering in March last year will be used for the construction of milk pasture. In October last year, Guangming dairy acquired 60% of the equity of Qinghai xiaoxiniu biological Dairy Co., Ltd. at a price of about 612million yuan, becoming the controlling shareholder of xiaoxiniu. Bright Dairy said that the completion of the acquisition will help improve the company’s milk source layout, production capacity layout and market layout in the west, improve the self-sufficiency of high-quality milk sources, improve production capacity and further expand the scale.
Annual report of Bright Dairy in 2021. Photo source: Bright Dairy
China’s high-quality pasture resources are scarce. In recent years, Yili, the leader of the dairy industry, began to use self built or joint venture construction methods when it was completely purchased by various giants. As the first start-up project of Yili demonstration park, the construction area of Youran animal husbandry ancient city (No. 1) pasture in Tuo county is about 1500 mu, with a total investment of 530million yuan. The planned scale of cow breeding is 12000, and the daily output of fresh milk can reach 230 tons after the project is completed.
Yili has actively arranged the construction of milk sources, which also makes the upstream game between the two giants of the dairy industry increasingly fierce. In january2020, Mengniu purchased 49% of the equity of Shengmu high tech dairy for 8million yuan. So far, Mengniu has all the shares of Shengmu hi tech and all the downstream dairy production and processing resources of China Shengmu. China Shengmu has been deeply cultivating cattle in the upstream, which means that Mengniu indirectly owns the high-quality organic milk source in the upstream of Shengmu.
With more and more new consumer brands entering the liquid milk circuit, the demand for raw milk in the domestic market continues to expand and the price continues to rise. In order to ensure a stable raw milk supply chain, these dairy upstarts also began to “throw money and grab” upstream raw milk, resulting in some upstream animal husbandry companies that have not been integrated by traditional dairy giants being sought after.
In August 2021, park Cheng dairy, the parent company of Jane Eyre yoghurt, signed a strategic investment contract with austasia Investment Holdings Pte Ltd., the parent company of Australia Asia ranch, and officially became the strategic shareholder of Australia Asia. The two sides will share resource advantages in the continuous supply of high-quality raw milk and technical support in the construction of 10000 ranches of Park Cheng dairy. Pucheng dairy said that it had already had a good foundation for cooperation with AoYa ranch, and this shareholding will help to realize the strategic position of high-quality milk supply.
Photo source: Pucheng dairy
Previously, Jane Eyre yogurt has announced that it plans to invest RMB 800million of round B financing in the construction of modern pasture, focusing on the construction of production and supply chain. In addition, 90% of the financing for the construction of factories and pastures will be 400million in 2020. So far, the development path of Jane Eyre yogurt to build a super supply chain and seize high-quality milk sources is becoming more and more obvious.
Within less than a week after Pucheng dairy became a shareholder of AoYa ranch, Beihai ranch, an independent yogurt brand under Yuanqi forest, announced that it had become a strategic shareholder of AoYa ranch, which was the second new consumer brand to become a shareholder of this ranch after Pucheng dairy in a short term. For Beihai pasture, a stable milk supply is essential if it is to maintain a high growth trend. AoYa ranch is a leading independent raw milk production base in China, with 100000 dairy farms.
Commercial thinking on the battle for milk source:
Stabilize supply, increase revenue, improve technology and seize opportunities
Since 2021, new consumption has entered the second half. The era of grabbing traffic dividends and building a network of popular products is gone. “Stabilizing the supply chain, building an ecological chain and preparing for a long-term war” has become a new survival rule for food enterprises.
In the dairy industry, the battle of pasteurized milk since the second half of 2020 is not only the just need for enterprises to build their own moat, but also the true reflection of the consumption trend of pursuing “freshness and differentiation” at the industrial end.
The major dairy enterprises have increased the market layout of low-temperature fresh milk, put forward higher demand for milk sources, and integrated resources to improve quality to meet the diversified needs of consumers for products, which has become the strategic focus of dairy enterprises. In order to obtain enough high-quality milk sources, the most direct “rough” means are to buy shares, acquire and build their own pastures. In particular, in recent years, many dairy enterprises have begun to invest in the construction of ten thousand pastures. By introducing intelligent hardware facilities and scientific management processes, they have comprehensively improved the competitiveness of pastures, and finally aimed at the comprehensive “combat power” of enterprises in the market.
Different from the capital driven investment in pastures, the dairy enterprises that build large-scale pastures such as Wantou are more intended to stabilize the upstream supply and resolve the raw material supply risks that may be brought about by the global epidemic. Since the epidemic spread in 2020, some countries have experienced incidents such as milk farmers pouring milk and dairy production reduction, and the uncertainty of the source of imported milk is increasing. In this context, it is very important for domestic dairy enterprises to reduce their dependence on external milk sources and build a whole industry chain.
Industry insiders said that although the price of raw milk has decreased due to the epidemic, the price of milk will still have an upward trend in the future. Due to insufficient land for pasture in China; Feed, labor, etc. lead to high breeding costs, resulting in higher raw milk costs than imported milk sources. However, it is not difficult for downstream enterprises to share the upstream breeding costs.
The construction of self owned milk source base by dairy enterprises requires a large amount of funds, which is mostly seen in large dairy enterprises. Therefore, from the perspective of supply security, in order to avoid passivity, more small and medium-sized dairy enterprises will choose to complete the layout through cooperation or M & A with upstream milk source enterprises in the future.
Pu Shaohua, chairman of Guangming dairy, once said that the “buy buy” of dairy industry is actually the need to establish a brand moat. Because after the dairy enterprises become bigger and bigger, the importance of the whole industry chain has become increasingly prominent. Enterprises need to take cattle raising as a guarantee to build a solid “brand barrier”.
Impacted by the cost performance of overseas milk powder and the improvement of domestic regulatory standards, upstream pastures that need a lot of resources will inevitably become scarce resources. If the farm expands the number of dairy cows to 10000, the management difficulty will increase significantly. “Marriage” with downstream dairy companies can share the financial burden, help balance the production and marketing of milk sources, and finally realize the “1+1>2” synergy.
For downstream dairy companies, the acquisition of upstream farms can further stabilize milk sources and improve product gross profit. Mengniu has continued to invest in milk sources at home and abroad for many years, and has accumulated rich experience in feed procurement, marketing, joint factories and other areas. After taking shares in modern animal husbandry in 2013, Mengniu has used its experience in overseas ranches to guide the modernization of modern animal husbandry and promote the ranches to significantly improve their performance.
The operation of large-scale pastures requires high technology, high capital investment and professionals. Direct acquisition of pastures will not bring benefits to downstream dairy enterprises in the short term. Foodaily believes that the power will come from high margin products – high-end low-temperature fresh milk or cheese products. For example, new hope dairy said in its prospectus in 2017 that the gross profit margin of low-temperature fresh milk was 48.74%; In contrast, the normal temperature pure milk was only 23.59%.
In the battle for milk sources, large dairy enterprises with “deep foundation” have benefited a lot, while a large number of local small and medium-sized dairy enterprises that have no control over high-quality milk sources, how to build their moat? When the dairy giants are killing the four sides, can they break their own piece of sky?
If it is difficult to be big, then be strong.
(1) Improve the refinement of dairy farming
The demand for raw milk throughout the country will increase significantly, but the crux of the imbalance between the north and the south of milk sources still exists, which restricts the development of many local dairy enterprises. According to statistics, the output of fresh milk in the six southern provinces accounts for only 4.6% of the national daily output. Therefore, how to strengthen the construction of milk source base and break the imbalance between the north and the south is the key point to break through the development bottleneck and market encirclement.
As a representative of a regional and urban leading dairy enterprise, Guangdong Yantang dairy has three farms with raw milk supply accounting for about 30%, which is higher than the average level of local dairy enterprises and has obvious milk source advantages. In recent years, Yantang dairy has actively used innovative technology to strengthen the hard power of milk source construction, such as the “fine dairy farming method based on RFID technology” independently developed and obtained the national patent invention certification. It is understood that every cow in the farm will be equipped with an RFID electronic tag, which can reflect the daily health status and milk production in real time. Through RFID technology, Yantang dairy can realize the quality control of the “whole life cycle” of products.
(2) Improve product differentiation and competitiveness with its own core technologies
Industry survey shows that normal temperature milk, which currently accounts for more than half of China’s white milk market, cannot effectively retain milk nutrients, and is often jokingly called “canned milk”; Compared with normal temperature milk, pasteurized low-temperature fresh milk contains more active protein and higher nutritional value, but its shelf life is very short, generally only 7-10 days.
The listing of junle Baoyue fresh milk has broken the limitation of short shelf life of traditional pasteurized milk. Exclusive use of inf009s by yuexianhuo ™ Technology, through 0.09 second ultra instantaneous accurate heating of milk and intelligent temperature control, not only extends the shelf life to 19 days, but also minimizes the heat damage of milk nutrition – more than normal temperature white milk α- Whey protein, lactoferrin and other bioactive proteins.
This technology not only fills the market gap of high activity protein milk, but also provides the possibility for cross regional sales of fresh milk products, which is expected to rewrite the current pattern of China’s white milk market. According to experts of China Food Science and Technology Association, inf009s ™ The technology breaks the limitations of traditional pasteurized milk, provides a new path and new technology for the innovation of fresh milk category, and plays a positive role in the development and promotion of a new generation of fresh milk in China. The overall technology of the project has reached the international advanced level.
Not only the innovation of sterilization technology, but also the cultivation of probiotic strains, one of the core raw materials of the dairy industry, local dairy enterprises are sparing no effort in research.
The Shenzhou 14 spacecraft, which was launched into the sky not long ago, carried 28 probiotic strains screened by Yunnan Huangshi leser dairy for space breeding research.
Laisier dairy, which has superior biological resources with plateau characteristics, has been committed to the breeding of national patented strains. The strains such as Lactobacillus rhamnosus g025-a-09 and Lactobacillus paracasei h-l13 carried on Shenzhou 14 this time are the national patented strains selected by laisier dairy from Dali characteristic food – dairy fan products.
Photo source: laisier dairy
It is reported that local dairy enterprises such as JUNLEBAO and Chenguang have developed probiotic strains with intellectual property rights. These “little dots” who gather big science will become one of the sharp weapons for local dairy enterprises to fight the dairy market.
(3) Public welfare live broadcast, local milk with fire treasure
Relying on the traffic advantage, “live broadcasting + e-commerce” has played a great role in opening up the sales of agricultural and sideline products and helping fight poverty. Live broadcasting has also become a convenient channel and effective way for the public to understand and participate in public welfare. Some dairy enterprises in remote areas are also trying to push themselves in front of 1.4 billion Chinese in the form of live broadcasting.
In the special public benefit live broadcast on major platforms, local milk, through the strong ability of the head anchor to carry goods and the catalysis of favorable factors of domestic emotion, quickly made a circle with excellent quality. For example, Xinjiang milk has numerous related posts on Zhihu, xiaohongshu and other platforms. In 2021, on tmall’s “double 11”, Xinjiang maixier won the top 5 in the sales list of milk drinks brands.
Similar to Xinjiang milk, a number of local normal temperature milk relying on high-quality milk sources are also becoming popular. Among them, rare categories such as buffalo milk and yak milk are the most prominent. The water milk brand of Guangxi baifei dairy started to develop around 2020, and the proportion of its sales revenue in the company’s total revenue surged from 63.5% in 2018 to 94.64% in the first half of 2020; Yunnan laisier Dairy Co., Ltd. launched a new product, Murphy buffalo milk, at the end of 2019. It landed in the head broadcast room for the first time in May 2020, and 210000 items were sold out within 3 minutes.
Source: zumu’s little red book
Output and quality go hand in hand:
The son of breaking the game, who is a good source of milk
The milk source is internally rolled, which essentially reflects the relative shortage of domestic fresh milk supply. Under the premise that the geographical and climatic conditions cannot be changed in a short time, the first idea to solve the problem is to improve the per unit yield of dairy cows. The introduction of high-yield dairy cattle has been going on for decades in China. By the end of 2021, there were 5.8 million Holstein cows on hand with effective production capacity, accounting for 93.5% of the total 6.2 million on hand in the scale pasture.
As we all know, Holstein cows are only suitable for large-scale pastures due to their high cost, and they also have requirements for climatic conditions. So, for other pastures that cannot introduce high-yield cows, how to tap the milk production potential?
Due to the hot climate in South China, the heat stress response of dairy cows is extremely serious. High humidity and high temperature seriously restrict the overall yield level and production efficiency of the pasture. Therefore, heatstroke prevention and cooling in southern pastures is the top priority. In this regard, the Saudi pasture in the desert is a good example.
The Saudi almarai dairy company has built 6 Super Large pastures in the desert, with a total of more than 190000 cows, including more than 100000 adult cows. In the desert area where water is scarce, almarai is proud of the world with an annual output of 1.47 million tons of raw milk.
Almarai company is located in AI badiah super pasture in the desert, with 22500 adult cows and 6 milking halls. Source: beedata
Almarai managers and U.S. dairy experts say that it is not easy to successfully produce dairy products in one of the hottest regions in the world. Under natural temperature, in addition to the plummeting production of milk, it is also very easy to deteriorate and breed bacteria, which means that the technology needs to be pushed to the limit.
Among all the technologies in the desert dairy farm, spray is the key. Leslie Butler, a dairy marketing expert at the University of California, Davis, said: simply washing the cows will create a humid environment and become a hotbed of pathogenic bacteria. In order to control heat and moisture, the high-tech desert dairy plant will deploy a widely used cooler system to spray air cyclones of mixed water droplets and continuously wet the cow skin to cool and dry. The computer in the cooler will monitor the temperature and humidity of the cowshed in real time to maximize convective cooling and ensure a suitable pasture environment.
Image source: avidity Science
In addition to optimizing the “microclimate” of pastures, intensive and refined management of pastures is also a way to “tap the potential”.
In July, 2020, the construction of JUNLEBAO’s fully intelligent future family demonstration farm was started in Shijiazhuang, which is the first family demonstration farm in China to adopt intelligent full robot breeding. The project subverts the traditional Pasture Construction Mode and creates a world-class Smart Family demonstration pasture with full robot feeding and milking and full intelligent management.
The project is based on the premise of healthy feeding of cows and safe and high-yield milk. Adhering to the design concept of combination of planting and breeding, intelligent milking, intelligent feeding and intelligent management, the project adopts the world’s leading pasture production equipment and information management platform, full robot milking, full robot feeding, full machine human feeding of lactating calves, and full intelligent digital management. The milk yield of cows can be increased by 10% – 15%, and the incidence of mastitis incidence rate can be reduced by 15%, The average parity of cows increased by 1.5-2; Compared with traditional pastures, the number of employees decreased from 35 to 10, and the annual comprehensive income of a single cow increased by 20%.
A few days ago, the document “implementing the county wide promotion project for improving the production capacity of dairy industry” issued by the Ministry of Finance pointed out that: strive to use 3-4 years to further improve the supply level of forage and the level of breeding facilities and equipment in major dairy counties (including the construction of modern smart cattle farms), and the average annual unit yield of dairy cows will reach more than 9 tons. Compared with the current national average of 8.3 tons, the increase is more than 8%.
Increasing the per unit area yield of dairy cows and increasing the supply of pasture is not enough to completely resolve the milk source involution. Improving the quality of milk sources and making differentiated products is another solution worthy of attention. In order to avoid homogeneous competition and make themselves different, dairy enterprises began to seize the small milk sources such as juanshan milk and A2 milk to create “scarce” product settings and capture the minds of consumers.
Recently, the adoption of a cow launched a refrigerated juanshan milk, which caused a warm response in the market. Compared with the product concept of complex process and layer by layer concentration in the past, it is more desirable to adopt a cow and hope that this product is “different from the cow”. The brand uses 1% of the global stock of juanshan cattle as the milk source, and the ESL process gives consideration to freshness and taste; After 13 internal evaluations, thousands of external evaluations, 39 draft packaging design schemes, and 3 months of cold chain logistics tests, the company has polished the ultimate products with the ultimate requirements.
Juan Shan cow has always been known as a “national treasure” cow. The milk produced is naturally high in milk protein and milk fat, with unique mellow taste and rich milk fragrance. As early as 2020, more than 3000 pure bred juanshan cattle were introduced from overseas to adopt a cow, and an exclusive constant temperature pasture was established for them. Through careful feeding, the milk protein of juanshan raw milk can reach 3.6%, the milk fat rate can reach 4.8%, and it contains 125mg/100ml primary high calcium.
In addition to “juanshan milk”, A2 milk, which emphasizes “easier absorption of nutrients”, is also gaining popularity, attracting Yili, Mengniu, Guangming, new hope and other major dairy enterprises.
Mastering the screening technology of A2 cows and having a stable milk supply is the key to wrestling A2 market. New hope dairy cooperates with Australian Federal scientific research institutions to send personnel to Australia to learn professional testing technology, vigorously introduce A2 purebred cows and feed them with exclusive refined feed.
In September last year, foodaily released China’s dairy industry: what to take to meet the second golden decade The article points out that among the many gaps between China’s dairy industry and the global summit, milk source and pasture management bear the brunt. Cow yield level and feed conversion rate are the two most intuitive indicators. Behind these indicators, the final competition is the automation and refinement of pasture management supported by science and technology.
The dispute over milk sources that has lasted for many years, on the one hand, reflects the urgent desire of dairy enterprises to optimize enterprise construction from the source and consolidate the moat; On the other hand, it is also the embodiment of the continuously upgraded liquid milk consumption market’s demand for high-quality fresh milk. As the Chinese dairy enterprises represented by Yili continue to move towards the world dairy peak, the integration of domestic milk sources will continue to improve, and eventually become an important weight for leading dairy enterprises to attack the global dairy champion. Large scale pastures are favored in the milk source war, which will further stimulate the integration and upgrading of small and medium-sized pastures, thus driving the overall rejuvenation of China’s dairy supply chain.
In the long run, the strategic positioning of the upstream milk source by the new and old players of the dairy track will not change. However, it can be predicted that after the milk source of high-quality listed dairy enterprises has been carved up, a large number of small and medium-sized dairy enterprises are likely to face the outcome of being included in the merger and reorganization if they are unable to establish a solid technical advantage, or make clever use of their local characteristics to strengthen market promotion, and the subsequent acquisition drama will become the biggest highlight of the dairy industry in the future.
If you have any views on the dispute over domestic milk sources, please leave a message in the comment area or participate in the discussion in the community.
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