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China 2016: CATEGORIES IN BRIEF | Food and Dairy

BRANDS EXPAND PREMIUM OFFERINGS, MEDIA PRESENCE

China’s competitive, test-focused education system continued to drive demand for education services. Language training, test preparatory courses, and after-school tutoring attracted students, as adults sought to improve their prospects in the domestic and global economies, and parents prepared their children to succeed.

Facing ongoing consumer apprehension about food safety, category leaders continued to improve technology, found more reliable sources for milk, entered partnerships with international food producers, and introduced product innovations.

After increasing 14 percent a year ago, the category increased 3 percent in the BrandZTM Top 100 Most Valuable Chinese Brands 2016. One brand dropped out leaving six, in this rank order: Yili, Mengniu, Shuanghui, Bright Dairy, Sanquan, and Fortune.

The announcement of the end of the one child policy drove share price appreciation, especially for market leading brands, based on a future with larger families and increased demand. Lower dairy consumption in China, relative to the West, drove growth expectations, especially for premium products.

Consumers preference increased for premium products, such as fresh milk, milk fortified with extra nutrients, cheeses, and flavored yoghurts. New premium beverages, particularly ready-to-drink teas with packaging and marketing aimed at young people, also were popular. Meanwhile, UHT milk, ultra heated to extend shelf life, remained a large, if slow-growing segment. 
 

Yili worked to increase awareness among young audiences with sponsorships of reality TV shows. Mengniu introduced packaging changes and celebrity endorsements. The brand expanded distribution in cities where competition is weaker, and featured new products, including those with local market appeal. And it worked to improve food safety with its partners, France’s Danone and Arla Foods of Denmark.

Bright Dairy prepared to purchase a raw milk supplier as part of the e ort to ensure food safety by controlling the entire supply chain. In another move to enhance its food technology, and add premium products, Bright Dairy prepared to purchase Tnuva, Israel’s largest food producer, from corporate parent, Bright Foods.

In an innovation taking convenience food another step, Sanquan introduced complete frozen meals, dispensed from a vending machine equipped with a microwave oven. The expansion of the catering category, with middle class consumers eating out more, helped drive sales of the cooking oil brand Fortune. Meat producer Shuanghui felt the e ects of weaker consumption because of the economic slowdown.