Barely a month after announcing its withdrawal from China’s baby formula market, Japan’s Meiji Group has surprised the industry by making a big push into the chilled milk and yogurt segments.
The Japanese dairy giant’s strategic shift appears to a wise move. As competition in the infant formula market is getting more intense, and given Beijing’s aim to foster homegrown labels, Meiji may find more room to grow by turning to the high-end fresh milk market.
Due to constraints in raw milk sourcing, the chilled fresh milk market in China is concentrated in the hands of a few domestic firms such as China Mengniu Dairy (02319.HK), Inner Mongolia Yili Industrial Group (600887.CN) and Bright Dairy & Food Co. (600597.CN).
On the strength of its brand reputation and manufacturing know-how, Meiji is well positioned to grab a share of the high-quality chilled milk and yogurt market. That said, the major hurdle to be overcome is still in raw milk supply.
Meiji will launch six chilled fresh milk and yogurt products in the affluent eastern China so as to tap into the growing spending power as well as health awareness there. Although the items will be produced in Suzhou, the ingredients will mainly come from a cattle farm in Hebei province. The long distance between the two places will pose a big challenge for the firm in ensuring product safety as well as cost-effective operations.
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