Who Has The Golden Key to Unlocking the High-Protein Sector for China’s Dairy Market?

In The Silk Initiative’s work with dairy clients these past few years, there is one question that keeps coming up again and again: how can we unlock the high-protein sector in China’s dairy market? And, why isn’t anyone really doing this in a big way yet?

In North America, Europe and Australia, the creation of the high-protein milk category was a shot in the arm for the industry, remaking the image of milk, the original health drink, as a new option for the health-conscious consumer. So why can’t it be done in China?

Health and fitness is undoubtedly one of the fastest growing sectors in mainland China these days.  Three years ago, BCG ranked China as the world’s most health conscious country and those of us living here see it every day, in the way people eat, what’s on the dinner table, and in the legions of runners on the streets. Just look at the booming businesses of apparel brands like Lululemon, Under Armor and the rapidly growing gym and yoga studio scene in Shanghai. According to Ibis World market research, the gym, health and fitness club industry in China was worth nearly $6 billion in 2016, with annualized growth of almost 12% from 2011-2016. Sales of health food are around RMB 200 million annually, according to the China Health Care Association. This would seem to go hand-in-hand with a booming nutraceutical market, and in particular, dairy products with added protein, focused on the health-conscious consumer. And yet.

china dairy market

[ABOVE: Photo courtesy of Darren from Hunt Gym (WeChat ID: gym_life) – an avid user and reseller of imported protein powders in Shanghai]

One place we have seen growth is in the protein powder market, with the Chinese Xiwang Group spending approximately $730 million in 2016 to buy a controlling stake in Iovate, the Canadian maker of the Muscle Tech line of protein powders, as the extremely health-conscious consumer in China remains wary about domestically produced supplements. This is in line with a trend captured by Euromonitor, showing protein powder sales jumped from RMB 275 million in 2012 to nearly 400 million in 2013. It’s only grown in the intervening years.

But body builders are one market. The average middle class worker is another, and here is where it gets interesting. According to Mintel, nine of out ten Chinese consumers already drink plant-based protein, whether in the form of soybean drinks, juices or grain drinks. It would seem like a short leap from plant-based protein to dairy-based protein, but the gap is more akin to a crevasse. Is China ready for a Muscle Milk type product yet?

china dairy market

[ABOVE: Plant protein vegetable and juice drinks from Shanghai-based Vcleanse]

Our own research has found that barriers to consuming more soluble protein include a simple lack of understanding of the benefits of protein. Most Chinese consumers don’t know how many grams of protein is needed every day to maintain healthy muscle growth and muscle repair.

Calcium is often the first consideration for Chinese consumers of milk, with protein not even showing up on their radar. Chinese health concepts are a second factor; the holistic approach that focuses on entire systems or the entire body doesn’t readily accommodate specific nutraceutical functions. And finally, there is a cultural barrier towards gaining muscle and bulking up in general (unless you are a young urbanite male in the major cities). In the West, it’s considered a desirable trait to show some muscle bulk (for males, and increasingly for females as well), and high-protein dairy is one way to achieve that goal. In China, the average consumer is not trying to bulk up, but rather slim down and/or tone through a combination of exercise and diet. Fat is the enemy. Muscle growth and protein as a facilitator is not yet known as a hero in helping to achieve a better-looking body and healthier physique.

All of this adds up to an opportunity, but one no single company has been able to translate into a product that resonates with the Chinese consumer, as has been done with Quaker Oats using traditional Chinese medicinal ingredients or yogurt companies modifying their offerings to make drinkable yogurts.

At The Silk Initiative, we’ve identified protein ready to drink beverages as one major opportunity ahead of brands out there. Who wants to be the first mover? Talk to us and we can crack the code for you as part of our Product Blueprint services.

Contact us today to see how we can help.