The competition for the 10 billion cheese market has intensified

In the context of the peak increase in liquid milk, cheese is becoming one of
the important plates for many dairy companies to seek increase.
Following several capital injections, Mengniu intends to make another offer to acquire 5% of the company's shares
.
Upon completion of the tender offer, Mengniu's shareholding in Myoklando will increase to 35%.

The seemingly promising cheese industry is currently facing many challenges
.
On the one hand, due to the low industry threshold, many brands have been attracted to enter the market driven by interests, and homogenization competition is serious; On the other hand, while the market is growing rapidly, the industry reshuffle is also accelerating, and enterprises with slow innovation and insufficient brand premium ability will be eliminated, and supply chain capabilities and product research and development innovation will become the key to
future dairy enterprise competition.

Giants continue to invest

Compared with developed countries, China's cheese consumption still has great room for
improvement.
Data show that in 2021, China's cheese shipments will reach 250,000 tons, retail sales will reach 13.
1 billion yuan, and the compound growth rate will remain double-digit in the next five years, far higher than the world average
.

According to the "Three-year Action Plan for Cheese Innovation and Development to Help Improve the Competitiveness of the Dairy Industry" formulated by the China Dairy Association, by 2025, the national cheese production will reach 500,000 tons, and the retail market will exceed 30 billion yuan
.
This means that China's cheese industry will usher in rapid development
.

The broad prospects of the industry have attracted many dairy companies to accelerate their entry into the track
.
"The increase in its stake in Myoklando represents Mengniu's long-term optimism about the Chinese cheese market, as well as its confidence and value recognition
for the future development of Myoklando.
" Mengniu explained
the increase in holdings.

In fact, this is not the first time Mengniu Dairy has invested
in Myoklan.
In 2020, Mengniu invested 287 million yuan to acquire a 5% stake in Mioklando, and by July 2021, Mengniu increased its shareholding ratio to 28.
46% in the form of a fixed increase of 3 billion yuan, becoming the controlling shareholder
of Mioklando.
In January this year, Mengniu also increased its stake to 30%
by increasing its stake in the secondary market.
If the tender offer is completed, Mengniu's shareholding in Myoklando will increase to 35%.

"Mengniu's purpose in adopting a partial tender offer is to allow other natural shareholders of Myoklando to exit and further concentrate
their shareholding.
" Dairy analyst Song Liang believes that cheese is a major direction for Mengniu's future development, and Mengniu will form a deeper synergy with Miokolan in terms of brand, channel and product
.

It is understood that Myokolan is a cheese manufacturer with rapid growth in recent years, with explosive growth after the launch of children's cheese sticks in 2018, with a compound growth rate of 46.
1%
in 4 years.

More competition

In fact, in the context of the saturation of the traditional liquid milk market, many dairy companies regard cheese as the main lever
for growth.

Euromonitor data shows that the growth rate of China's dairy industry has fallen back to single digits after 2015, but C-end cheese has always maintained an annual growth rate of more than 20%, which is the fastest growing category
in the current dairy industry.
Due to the late start of the cheese industry in China, it is still in the growth period
.
Data show that the per capita consumption of cheese in China is only 0.
17 kg, less than 1/10 of Japan and South Korea, and the proportion of dairy products in the overall consumption is also low
.
In the face of this blue ocean market, many dairy companies have begun to increase the layout of the cheese track
.
Foreign brands such as Baijifu, Fonterra, and Kraft have a relatively high
market share due to their earlier layout.

Mengniu has set up a cheese division in 2018, with two major cheese brands
, Mengniu and Aishi Chenxi.
After becoming the largest shareholder of Myoklando, Mengniu has committed to injecting its original cheese business into Myoklando
by 2024.

Yili established a cheese division almost at the same time as Mengniu, and in June 2021, it specially established Inner Mongolia Yijiahao Cheese Co.
, Ltd.
, which is mainly engaged in cheese business, and also laid out a cheese stick production line
with an output value of 1 billion yuan in Longyou County, Zhejiang Province.
The company plans to take advantage of the Group's great advantages in ambient channels to bring products to market quickly and achieve rapid development
of the cheese category.

Panda Dairy sees the cheese segment as the company's second growth curve
.
In the first half of this year, the growth rate of the company's B-end cheese business doubled, and the C-end opened the market
through children's cheese.
At the same time, JuneYao, Junlebao and other dairy industries are also making cross-border layouts, and start-ups such as Miaofei, Jistin, Dr.
Cheese, and Lepure are also trying to cut off some markets
.

On the product side, in addition to low-temperature children's cheese sticks, room temperature cheese sticks, adult cheese products, and cheese snacks have appeared
.
A number of research reports mentioned that at present, China's C-end cheese market is still dominated by children's cheese sticks, and other products account for a small
proportion.
But this is not the final form of China's cheese industry, whether it is at the snack end or the family table, there will be more large-scale items in
the future.

It cannot be ignored that while the competition in the industry is rapidly intensifying, cheese products that lack strong technical barriers have fallen into a serious homogenization dilemma
.
According to Song Liang, the number of cheese brands has been reduced by at least half from more than 50 in its heyday, and many small brands relying on the OEM model are difficult to reach the end
on the road of cheese development in the long market cultivation cycle due to high cost, slow innovation, and insufficient brand premium ability.

At the same time, some new cheese brands rely on capital to promote more intense price promotions and marketing activities to achieve higher performance growth
.
This directly led to the price war that lasted for more than 2 years and only recently gradually stopped
.

Myokolan said in many ways that excessive price wars will affect the entire value chain of the industry and damage the healthy development of
the industry.
Mioklando will not take the initiative to launch a price war, but tactically will actively respond according to the competitive situation, and drive the development of the enterprise through the value output of brands and products to avoid the damage
of price war.

In this regard, Song Liang pointed out that overall, the threshold for cheese market access is getting higher and higher
in the future.
Cheese companies with low supply chain costs and strong downstream market expansion capabilities will have a competitive advantage
.
At the same time, the release of the "National Food Safety Standard for Processed Cheese and Cheese Products", the landing of the new national standard may bring some changes to the fierce homogenization competition in the industry, forcing enterprises to pay more attention to the improvement of quality and other aspects in addition to brand and channel competition, and promote the healthy and orderly development of
the industry.

Seek incremental passwords

Cheese has been cultivated in the first-tier cities for a long time, and after the penetration and popularization of the whole line in recent years, urban consumers have a relatively clear understanding
of cheese and cheese brands.
It can be said that the first stage of cheese consumption cultivation has ended
.
So where is the next stage of increment?

"China's cheese market is mainly divided into two markets, B-end and C-end, and the consumption ratio is about 7:3
.
In the C-end market, the more competitive is the children's low-temperature cheese market
.
Song Liang believes that room temperature cheese products and adult cheese products will be the path for many companies to seek incremental growth in
the future.
In the B-end market, the expansion of Western-style fast food, baking, and new tea drinks drives demand
.

Since the launch of low-temperature cheese sticks in 2018, competition in this segment has gradually intensified, and many companies have launched similar products to share market dividends
.
In September 2021, Mioklando launched room temperature children's cheese sticks in an attempt to expand the consumption scene and consumption radius
.

A number of industry insiders said that "low temperature refinement, room temperature wide" will be the main trend
of the C-end cheese stick market.
Because of the channel resources of liquid milk, the traditional dairy giant has many advantages
in the promotion of room temperature cheese sticks.

"At present, China's C-end cheese market is still dominated
by children's cheese stick products.
In the future, the children's field will develop
in the direction of functionality, health and quality.
In addition, adult cheese products as well as cheese slices and cheese snacks can also contribute
to the company's revenue growth.
Song Liang said
.

For the B-end market, according to Chinese food industry commentator Zhu Danpeng, foreign brands still dominate
.
Whether it is brand tonality, professional operation and team precipitation, foreign brands such as Fonterra have performed more solidly
.
It will take some time
for domestic brands to enter this market.

"The B-end business is competing for cost and quality, and Fonterra, FrieslandCampina and others currently have advantages, but Yili and Mioklando have also made certain achievements in the B-end market, especially for home baking, catering, etc.
, and have made good breakthroughs
in the third- and fourth-tier markets.
" Song Liang said
.

In addition, the milk cap series of various ready-made tea brands is also a proof
of the continuous expansion of cheese in application scenarios.
According to incomplete statistics, new tea drinks including Yishengtang, Heytea, Naixue's tea, Lele tea and other new tea drinks have launched a variety of tea products
with cheese.

"On the whole, the threshold for cheese market access is getting higher and higher, and the key to future industry competition lies in the scale effect and the cost advantage of the product supply chain
.
" Leading enterprises such as Yili and Mengniu have a greater competitive advantage
.
Song Liang said that at this stage, the cheese market tends to be saturated, and how to obtain consumer recognition is the key to
enterprise competition.
Cheese processing enterprises should innovate and develop new processes and technologies for cheese production, and constantly enrich cheese categories
.

With the implementation of the new national standard for cheese at the end of the year, companies will compete on cheese content, and the market may be stratified
.
"At such a node, each enterprise should strengthen the service system and improve customer stickiness, rather than relying on price war alone for market competition
.
" Zhu Danpeng said
.

(Yang Xiaojing, comprehensive arrangement)

China Food News (November 1, 2022, Edition 04)

(Editor: Yang Xiaojing).