Capitalising on the fastest growth markets Lessons from the Chinese Dairy market - Dr Gerrit Smit Managing Director Yili Innovation Center Europe The Netherlands
Overview Dairy market development in China Market Trend of IMF in China Challenges of the China market Yili as key player Innovating with us!
Part 1 Dairy market development in China
The China phenomenon Population at start of growth period Years to double GDP per capita Britain (1700-1855) 9 M 155 USA (1820-1873) 10 M 53 India (1989-2006) 822 M 17 China(1983-1995) 1023 M 12 China doubling of GDP was 12x the speed of Britain during the Industrial Revolution at 100x the scale! 400 million people lifted out of poverty! IDF conference July 2016
The China phenomenon China dairy consumption is growing very fast! IDF conference July 2016
Milk demand is increasing while production lacks behind! Profitabiliy of dairy companies in China IDF conference July 2016
Estimated growth in dairy consumption Driven by active factors, like economic development, income growth, population increase and urbanization rising, China dairy industry will continue a growth of about 11% in the coming years. In 2016,The average milk-drinking amount of Chinese is 1/5 of that of Western countries still a way to go...!
The 4 th baby boom and increase of aging population brings about a chance. Billion With the coming of 4th baby boom and implementation of comprehensive two-child policy, breast-feeding rates are in a falling trend. Thus, infant power milk will embrace a further development, reach to 180 billion in 2020. With the rapid increase of aging population, improvement of payment capacity and enhancement of health consciousness, the dairy production for aging people and food with health function will possess a better development opportunity.
Impact of China on global dairy market According to IDF 2016: - About 9% of dairy production is exported the export prices determine the milk price for the farmers (not the 91% local trading!) - Small variations in that 9% have huge impacts on global pricing... - Europe, Oceania, USA,... are the biggest exporting countries - India is biggest producer but has growing population (demand) as well - Russia is still closing the door and catching up its own production - China (and Middle East) are in strong demand now and in the future THUS CHINA WILL SET THE MILK PRICE GLOBALLY!
Part 2 Market Trend of IMF in China
Change to Fertility Policy As to the change to the current fertility policy in China, Chinese government began to implement the general second pregnancy policy all-over China according to which every single child family could have another baby. Under this policy, there are approximately 90 million families in China who are allowed to have another baby.
Change to Fertility Policy 2500 Predicted number of new born babies from 2015-2020 2000 1500 1000 1650 1810 2212 2033 2076 2112 500 0 2015 年 2016 年 2017 年 2018 年 2019 年 2020 年 Numbers 出生人口数量 x10000 ( 万人 )
Change to Fertility Policy Three types of families qualified: Type 1:Parents are both the single child in their families. Currently, there are approximately 29 million families belong to Type 1; Type 2:One parent is the single child in his/her family. Currently, there are approximately 11 million families belong to Type 2; Type 3:Neither of the parents are single child in their families. Currently there are approximately 50 million families belong to Type 3. With the perfection of the fertility policy, China will see a new baby boom coming which is also a great potential market opportunity.
Consumption patterns upgrade at a quicker speed in China In recent years, the growth rate of the disposable income per capita of Chinese urban population and that of the net income per capita of Chinese rural population both exceeded 10%. The upgrading trend of consumption patterns will have a big influence over China s infant formula milk powder market.
Part 3 Challenges of the China market
China legislation is adapted all the time...
Food safety law special food supervision and management Health care food Ingredient and function category management Registration and archive Label and manual Advertisement Manufacture and quality management system Food for medical purposes Infant formula Product registration advertisement Manufacture and quality management system Ingredient and additive management Strictly control multi-packaging and and multi-brand of same recipe. Whole process quality control Archive of infant formula Recipe registration Manufacture and quality management system Special food including Health care foods, Food for Special Medical Purposes and Infant Formulas are supervised and managed strictly
New rules requires baby formula registration All baby formula producers that sell baby formula on the Chinese mainland must have their formulas registered with the China Food and Drug Administration, according to a CFDA regulation that will take effect on Oct 1-2016. An enterprise can register up to nine formulas, according to the regulation released by CFDA today. The regulation applies to both Chinese as well as foreign producers. The underlying issue... many Chinese producers have too many formulas for marketing promotion, which result in potential quality risks and can cause confusion among consumers. There are >100 companies producing baby formula in China and they hold nearly 2,000 formulas. In some cases, an enterprise can possess dozens of formulas at the same time, but many of the formulas are not developed after serious research and development.
Food safety law explanations... 1 Basic requirement 2 Requirements product name Recipe on label should be in accordance with registered recipe, claimed content should be the same with registered as well. Product name must consist of product name and regular name, each product can only have one name, and should be named in standard Chinese. 3 Ingredients Label which animal the milk originate from, if milk from multiple animals, the ratio of each animal should be labelled. Milk from animals other than cow, sheep and goat is not allowed for infant formula. imported raw milk, from foreign dairy farm, ecological farm etc. Implicit info. is forbidden, instead, detailed origin or country should be labelled. Plant oil names should be labelled as decreasing amount. Zero addition, do not contain, etc. in order to claim no addition of forbidden ingredients is not allowed. Based on GB 7718 which is national standard of food safety, emphasize the label of infant formula should not contain: 1) Disease prevention and cure;2)explicit or implied health benefit;3)explicit or implied description about good for brain development and immune strengthening or immune and gut protection; 4) no addition, do not contain zero addition ;5) false, exaggerated, against scientific principles or absolute contents; 6) claims different from registered
Food safety law explanations... 4 Nutrition label Must based on per 100KJ and per 100g, 100mL can be used at the same time. In order of energy, protein, fat, carbohydrate, vitamin, mineral and other components. ARA and DHA do not belong to fat but other components. 5 Nutritonal claims Nutrition claim has to be the same with registered content, emphasis is disease prevention, curation, explicit or implied health benefit, explicit or implied good for brain development, immune strengthening or immune and gut protection Validity of claim is still based on GB 14880 and GB28050, but according to article 95 of draft <food safety implementation> made by state council in Oct 19 2016, any amount claim and health claim of infant formula is forbidden, once the draft version is published officially, any company has to delete all amount and health claims. 6 Other Should include targeted baby s age in months, 1 phase, 2 phase and 3 phase can be used. Humanized milk or similar description is forbidden also for follow-on and 3 phase infant formula besides 1 phase.
Part 4 Yili as key player
Yili - the NUMBER 1 DAIRY company in China -
RABOBANK GLOBAL DAIRY RANKING 2016
愿景 Vision 成为全球最值得信赖的健康食品提供者 Be and Be recognized as the most trustworthy healthy food provider around the world
核心价值观 Core Values 卓越 Excellence 担当 Responsibility 创新 Innovation 共赢 Win-win
1 100,000,000 More than 100 million Yili products are delivered to consumers everyday.
1,100,000,000 More than 1.1 billion consumers in China bought our products in 2015 Source:Kantar Index
Most valuable brands GLOBALLY Brand power! Note that Unilever s total brand portfolio comes nr 2 after Nestlé Brand Finance 2017 report
Most valuable DAIRY brands Brand power! Brand Finance 2017 report
Advanced Channel Construction 5,000,000 88.1% 伊利的品牌渗透率达 88.1% The brand penetration of Yili has reached 88.1% 覆盖全国 500 万个销售网点 Yili has covered 5,000,000 sales points in China. 数据来源 : 凯度 2015 品牌足迹报告 Data source: 2015 Brand Footprint
14 -Billion RMB- Brands Yili Pure Milk/ Yili Yogurt Ambrosial Greek Yogurt Yili Low-lactose Milk (Shuhua Milk ) Yili Chocliz Ice Cream Yili Satine Milk Weikezi Milk U-Sour Milk Beverage Yili QQ Star Children s Milk Yili QQ Star Yogurt Gu Li Duo Grain Milk Meiyituan Lactobacillus beverage Yili Ice Factory PRO-KIDO Infant Formula Milk Powder Yili Gold Young Children Formula Milk Powder Chang-Tsing Yogurt
Pro Kido Infant Milk Formulas 每六个中国宝宝就有一个喝伊利奶粉 Every one of the 6 Chinese babies drinks Yili power milk 全球首个中国母乳研究数据库, 研发适合中国宝宝的营养配方 Yili has the first Breast Milk Research Database in China, researching and developing notorious formula, which is suitable for Chinese babies
Children yogurt 中国第一儿童品牌 QQ-STAR is the NO.1 Children Brand in China 触及约 1 亿儿童 ( 中国内地 0-14 岁儿童约为 2.2 亿人 ) Reach 100 million children (220 million children in China)
FIRST low lactose milk in China 变形金刚 3 TRANSFORMERS III 变形金刚 4 TRANSFORMERS IV
First organic milk brand in China 国内第一款有机奶 First Organic Milk Brand in China 率先获取我国有机奶认证权威机构国家环保总局有机 食品认证中心 (OFDC) 认证 Satine Milk certificated as first organic brand. 荣获 SIAL China 创新产品称号 Awarded as SIAL Innovation Brand.
Delicacy functional yogurts 畅轻, 来自伊利增长最快的品类 酸奶, 荣膺 IDF 最佳功能乳制品创新金奖 Chang-Tsing, comes from Yili's fastest-growing product category - Yogurt. Chang-Tsing won the "IDF Innovation Awards - Best New Functional Dairy Product".
Greek Yogurts ambient stable 安慕希常温酸奶 Ambrosial Greek Yogurt 引入希腊雅典农业大学研制菌种蛋白质含量比普通酸奶多 35% Ambrosia's protein content is 35% more than ordinary yogurt.
No 1 in Ice Cream in China 中国冰品市场第一品牌 No.1 Ice-Cream Brand in China 每天, 有 242.5 万支巧乐兹售出 More than 2.4 million Chocliz sticks are sold every day.
Part 5 Innovating with us!
愿景 Vision 成为全球最值得信赖的健康食品提供者 Be and Be recognized as the most trustworthy healthy food provider around the world 核心价值观 Core Values 卓越 Excellence 担当 Responsibility 创新 Innovation 共赢 Win-win
Our Future (together...) Keep focusing on our consumers! Yili provides safe, healthy and delicious products. Boost product innovations in order to satisfy growing and changing consumer demands (in China) and do this with a variety of products. Fully embrace the internet, and speeding up its transfor mation. Yili will explore and inno vate both the online to offline channel, and promote resource integration
Foster Global Business and Resources Network For INNOVATION, Yili reaches out to the world! 欧洲 Europe 亚洲 Asia 北美洲 North America 大洋洲 Oceania
Yili Innovation Center Europe based in NL, centrally on Wageningen UR Campus (Food Valley)
Our (eating) cultures differ... And that is also reflected in consumer preferences...
Our (eating) cultures differ...... And there are great opportunities ahead! Capitalizing on the great benefits of dairy and dairy based products, which are truly embraced by Chinese consumers. not sure she is fully on board yet...
Thank you