Article 丨 Chen Xi
Source | Mantis Finance (ID: TanglangFin)
During the epidemic, a piece of news caused a heated discussion among netizens. A resident was isolated at home. Community workers were asked to buy imported milk powder for their children. The staff found several stores but did not buy it. He was perfunctory and called the 12345 mayor hotline to complain.
Whether we are right or wrong in the behavior of the resident, this news reflects the fact that the domestic milk powder is still in an extremely awkward position. Twelve years have passed since the 2008 melamine incident, but consumer trust has not yet been fully established.
Recognizing only imported brands has become the only standard for many mothers to buy milk powder.
Where is the future of domestic milk powder?
1. Sinking three or four lines, the helpless move of domestic milk powder
In fact, since the melamine incident, Chinese mothers are generally more willing to pay higher prices for imported milk powder and pay a higher premium for safety. Imported milk powder companies took advantage of the opportunity to raise prices and occupy the market, and overseas purchasing to sweep the shelves of foreign supermarkets. From 2009 to 2015, the scale of imported milk powder companies expanded by 4.5 times. Crazy overseas purchasing has prompted Hong Kong, New Zealand and other places to issue milk powder purchase restrictions.
Under the crisis of trust in the entire industry, China's milk powder companies can only turn around and turn to third- and fourth-tier cities, targeting consumers who are not sensitive to brand recognition. It can be seen from the table below that the key cities of several domestic milk powder brands are all in the third and fourth tier cities.
Data source: GF Securities
Insensitive to brand recognition, it is naturally very sensitive to price.
Whoever buys it cheaply.
Domestic milk powder began to take a low-cost route, such as Junlebao, which launched an ultra-low price of 130 yuan per can (800g) in 2014.
But the low-cost route is not so easy to take. They are all notorious domestic brands, and whoever buys them is the same, so the key question becomes:
Who can be placed on the containers of supermarkets and maternal and child stores, who will be able to enter the vision of consumers, and ultimately into real sales data.
Therefore, domestic milk powder is extremely dependent on distributors and terminal mother and baby stores.
As can be seen from the data in the figure below, the sales ratio of supermarkets and maternal and child stores has reached about 80% of the overall.
Data source: China Merchants Securities
In order to ensure channel sales, milk powder companies give huge profits to distributors and terminals.
Data source: Caixin
The baby-friendly room of the Shanghai company, which specializes in directly-operated maternal and infant stores, has become an A-share listed company. In 2019, it recorded revenue of 2.46 billion yuan, of which milk powder revenue accounted for half of the country, reaching 1.16 billion yuan.
"Mantis Finance" found that milk powder companies distribute a considerable portion of profits to distributors and terminals. Under fierce price competition, their profits are diluted. At the same time, the burden of milk powder companies has not decreased, as can be seen from the table below, the asset-liability ratio of milk powder companies is relatively high. Therefore, it is not a long-term plan for the milk powder enterprises to sink to the third or fourth line and to fight the price wars closely.
Data source: Caixin
2. Making efforts in the high-end market, it is difficult for domestic milk powder to break through
In order to increase profits, many milk powder companies have turned to high-end and ultra-high-end markets in an attempt to grab market share from imported brands.
However, "Mantis Finance" found that this battle was even more difficult to fight.
The first is higher investment in raising in big cities.
Compared with third- and fourth-tier cities, big cities have lower fertility desires, while big cities have higher incomes for consumers. When there is only one child per family and the family income is sufficient to support, parents are more willing to invest in their children.
According to statistics, the average annual consumption of infants and young children in China continues to rise, and the consumption expenditure of a family on mothers and infants is second only to accommodation expenditures.
Data source: China Merchants Securities
Therefore, many families spare no expense to purchase imported milk powder, and even go abroad to buy it on their own, or find a substitute to buy it. High-end imported milk powder companies have been cultivating in big cities for many years, both in terms of brand recognition and consumer education. A large number of loyal consumers in the high-end market, such as Mei Su Jiaer, Wyeth Qifu, Abbott Jingzhi, Mead Johnson Lan Zhen, etc., have been recognized by a large number of consumers.
This is also the cause and effect of Wuhan residents who cannot buy imported milk powder and choose to complain to community workers.
Secondly, consumer confidence is difficult to rebuild.
According to a survey, among the factors most concerned about when consumers buy milk powder in 2019, brand and safety are the top two factors.
The safety of domestic milk powder has always been the focus of consumer concern.
In the past three years, the pass rate of random inspection of milk powder in China has been above 99%, and many people have called out the "safest milk powder period in history". If you only look at the data, the domestic milk powder is very safe, but behind the data is that the dairy standards have become looser.
In 2010, China revised the dairy standards from more than 160 to 66 items.
In the revised national standard, two indicators have caused great controversy:
The first indicator is the decrease in protein content. The new national standard stipulates that for every 100 grams of raw milk, the minimum protein content is 2.8 grams. The old national standard for this indicator is 2.95 grams, and the international standard is 3.0 grams.
The second indicator is the relaxation of the total number of colonies. The new national standard stipulates that the total number of colonies per milliliter of milk is 2 million, the previous standard of the old national standard is 500,000, the standard of the United States and the European Union is 100,000, and Denmark, which has the most stringent food testing standards in the world, the total number of dairy products The standard is 20,000.
The relaxation of these two key indicators has allowed many unqualified raw cow's milk to become qualified products.
Wang Dingmian, chairman of the Guangzhou Dairy Association, once expressed his opinion on this: This was caused by the collective interest and the "brick house" who lost their conscience when controlling standards in 2009 when formulating the standard. When the new standard was implemented in 2010, I As I said, China's raw milk standards have regressed overnight for 25 years, becoming the country with the lowest global standards.
The reason why China has set such low standards is that on the one hand, it is hoped that more consumers will see more "qualified" milk powder; on the other hand, it is because of the limitation of milk sources in China. Officials of the Ministry of Health have responded: "At present, the proportion of small-scale free-range dairy cows in China is high. The proportion of farms with more than 100 heads is only 23.1%, and the proportion with 5 heads is 32.4%. The low level results in a relatively high total number of fresh milk colonies. "
How can domestic milk powder under such loose standards establish a "safe" impression for consumers? How to compete with imported milk powder with high standards and strict requirements?
Third, the clear way to go further
Whether it is to continue to take the route of third- and fourth-tier cities or to develop high-end markets, it is not easy for domestic milk powder. To solve the problem of going to the left or to the right, domestic milk powder companies still need to clearly determine the way to go further.
First, focus on safety cards and build hard core quality.
In terms of its own quality control, domestic milk powder companies only reach the pass of the new national standard. In order to truly build hard-core quality, they need to actively exceed the national standard and move closer to the high international standards.
Judging from the current situation, although the nutritional content of the major milk powder brands has a high protein content.
For example, the nutrient composition table of Feihe Xingfeifan series shows that the protein content per 100g is 17g.
The nutrient composition table of the Synbiotics series shows that the protein content is 15g / 100g.
However, the protein content of raw milk, raw milk, cannot be verified.
There are generally two production processes for milk powder: the first is to dry raw milk to make milk powder, and then blend nutrients, and the second is to mix nutrients and raw milk in advance, and then dry to make milk powder.
Either way, the protein content of raw milk is extremely important.
From the official promotion of Synbiotics, we can see that its high protein standard depends on the added LPN-whey protein and α-lactalbumin. In other words, even if the protein powder is added to the milk powder, the quality of the milk powder has not been solved.
Therefore, many companies take foreign pastures and imported milk sources as the main points of publicity, the essence of which is to make consumers more confident about the quality of "raw milk" or "cow milk powder" in the milk powder processing process. Mark the location of the ranch in a prominent position of the brand advertisement.
Secondly , a strong alliance and multi-line development.
Restricted by milk sources and product lines, companies seeking mergers and acquisitions can quickly solve the problem.
In 2019, Mengniu carried out two major actions successively. The first was the acquisition of Bellamy, an Australian organic milk powder brand. Then, Mengniu announced the acquisition of Lion-Dairy & Drinks, Australia's second largest dairy company.
Bellamy's main organic milk powder, Haitao Army bought and bought in Australia, so Bellamy entered the Chinese mother's shopping cart. According to Bellamy's financial report, 70% of its revenue comes from the Chinese market. Mengniu acquired Bellamy in order to obtain a perfect organic milk powder industry chain.
Lion-Dairy & Drinks has similarities with Mengniu ’s main business, mainly engaged in milk beverages, yogurt, low-temperature juices and plant beverages, Mengniu. Mengniu ’s acquisition of Lion-Dairy & Drinks is on the one hand to improve the product chain, and on the other hand to obtain a better Australian milk source market and provide high-quality raw materials for other Mengniu product lines.
Mengniu ’s old rival Yili also chose a strong alliance to acquire New Zealand ’s second largest dairy company, Westland, in 2019. Westland is a cooperative system. The company is owned by more than 400 dairy farmer shareholders. These dairy farmer shareholders own more than 180,000 cows, and this is bound to provide high-quality milk for Yili.
Third, we will work hard to develop new varieties and penetrate the high-end market with the help of consumption upgrades.
As consumers have higher and higher quality requirements for milk powder, organic milk powder, goat milk powder and other varieties have become consumers' new favorites.
Goat milk powder is considered to have smaller fat globules and is rich in unsaturated fatty acids, which is more easily absorbed by the body, and the content of whey protein and casein in goat milk is also considered to be closer to breast milk. Ausnutria goat milk powder Jiabeite has occupied a leading position in the domestic market for a long time. In terms of milk powder sold by Ausnutria in China, it was 2.863 billion in 2017 and 4.4 billion in 2018, a year-on-year increase of 53.8%. Jiabeite goat milk powder sales reached 2.033 billion yuan, a year-on-year increase of approximately 58.9%. It is not difficult to see from the data that the core highlight of Ausnutria's performance growth in recent years comes from goat milk powder.
Although the organic milk powder market in China is still relatively small, it is also rising steadily. According to statistics from the China Merchants Industrial Research Institute, offline organic milk powder sales from 2016 to 2018 were 1.82 billion yuan, 2.67 billion yuan and 3.92 billion yuan, respectively, and the scale in 2019 was about 6 billion yuan. In addition, according to forecasts, the offline sales of milk powder are expected to exceed 10 billion in 2020.
Under the weak growth of the milk powder market, the organic milk powder market has become a strong growth point.
When a product is labeled as "organic", consumers are willing to pay more to buy it, especially the "new middle-class women" with high education, high income and high positions, and they are the main force of buying milk powder in first-tier cities. military.
Nielsen data shows that nearly 60% of consumers accept organic products that are less than 40% more expensive than ordinary commodities; people aged 25-49 are more willing to pay than other age groups.
At present, many milk powder brands have launched organic milk powder product lines, and the prices are not low:
This is one of the reasons why Mengniu is still willing to pay a high premium to buy Bellamy under the background that Bellamy has not yet obtained a license for infant formula.
In a nutshell, whether it is to launch new products or acquire new companies, establish a safe production system, and improve product quality, is the only way for domestic milk powder to win back consumers.
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