The six trends in China's dairy industry after novel coronavirus

发布时间:2020-03-06
Stakeholders in China’s dairy industry are “super busy” during the novel coronavirus epidemic. There are a lot of online brainstorming, training, seminars, and meetings in recent weeks. KOLs, experts, dairy groups, farmers, suppliers, and organizations gather together to analyze the current situations, main challenges, solutions, and future trends in the dairy industry. Here are six trends summarized from the discussions:

Trend 1: Dairy companies will strengthen the e-commerce strategy and "smart logistics"
Trend 2: More investment in the development of functional dairy products and market expansion
Trend 3: Online services for dairy farms become more popular
Trend 4: "Collective Dairy Business" connects stakeholders in the dairy industry to create values together
Trend 5: Supply chains in China should become more “smart”
Trend 6: Fresh Milk vending machines to serve the "last mile" consumers



Trend 1: Dairy companies will strengthen the e-commerce strategy and “smart logistics"
During the outbreak of novel coronavirus, dairy companies maintain close cooperation with e-commerce giants such as JD.com, Tmall, Hema, and Suning Store, etc., to meet consumers' "contactless" distribution needs. Besides, some of them also launched their online ordering system to ensure the daily supply of fresh milk in some cities, and to create and enhance their customer relationship for long-term consideration.

The dairy giants are actively collaborating with e-commerce and new retail platforms to realize low cost and high-efficiency delivery service, which means that the sales channel of the dairy products (must be stored in low temperatures ) is changing fast. Due to "faster, fresher and cheaper", online shopping dairy products may become Chinese consumers’ daily habits.

The dairy giants also invest in "smart logistics", which makes supply chains more efficacious and efficient at each step and guarantees the freshness of the end products, especially during the epidemic. The national logistics distribution system works closely with farms, factories, and distributors to distribute intelligently, from dairy farms to factories, and e-commerce platforms’ warehouses, to supermarkets and community stores. Dairy groups keep working on innovations of the “smart logistic" to meet consumers' expectations on “faster, fresher and cheaper”, and a closer connection between dairy farms and dairy product processors.

Trend 2: More investment in the development of functional dairy products and market expansion
From functional needs to plant-based milk and dairy products for different occasions, China's dairy groups are on constant innovation to differentiate themselves from their competitors and stand out. During the epidemic, there is a louder voice from Chinese consumers that “we want more functional dairy products to improve our immune system!” And China Central Television (CCTV) officially highlighted how vital the milk was to people's immune system during the epidemic.

Many leaders from dairy companies indicate that every dairy product processor understands how essential the strategy on the functional dairy products is to the success; the winner will be who can take quicker actions on research and development, and create the most valuable functional dairy products that consumers accept. Dairy companies reposition themselves to be the provider of health solutions instead of only being a dairy product processor.

Trend 3: Online services for dairy farms become more popular
During the outbreak of novel coronavirus, suppliers benefit a lot who take advantage of digital technologies to serve their farmer clients via online communication. Online services in farming will become more popular, three main reasons:
1) it is important to biosecurity control, e.g., African Swine Fever and novel coronavirus are also an essential warning to everyone involved in farming.
2) it is good to alleviate the difficulty of employment and the shortage of employees during the epidemic since remote communications may resolve some work.
3) it is valuable to suppliers and experts to make customized solutions according to big data and accurate information from farms. Some suppliers have already collaborated with dairy farms to establish a database for further and better service.

Internet+ brings us more valuable changes from every aspect of our work, life, and study. The dairy industry needs to seize the opportunity in the digital era, and instead of judging online or offline, we may integrate them to create a better solution. During the epidemic, many dairy farming suppliers provide online technical training, which is useful for building a relationship with their clients, and a cornerstone for them to touch clients for further communications.

Trend 4: "Collective Dairy Business " connects stakeholders in the dairy industry to create values together
China's Ministry of Agriculture and Rural Affairs announced that to support the development of middle and small-scale farms will be one of the main plans in recent years, and to establish the third-party service system for them is essential. Many parties, such as suppliers, organizations, local government and farms, are working on it. During the epidemic, it is shown that how significant success is when many parties work together to help dairy farms survive or keep profitability. For farms, mainly middle and small-scale farms, connecting extensive resources is more powerful and realistic than owning all resources; let the professional people, companies and organizations to do the professional things. “Collective Dairy Business” in the developed countries, who have a reliable third-party service system for dairy farms, is worth learning from. The third-party service system for Chinese dairy farms will be in accelerated-build after the outbreak of the novel coronavirus.

Trend 5: Supply chains in China should become more “smart”
To stop the spread of Covid-19, many cities and supply chains within are lockout. Manufacturers in more than a dozen industries are struggling to manage the epidemic’s growing impact on their supply chains, and many are facing a supply crisis. Similar challenges are faced in China's poultry, pig, and dairy industries. More concerns that multinationals' supply chains would move out, and the manufacturing industry in China would be in trouble. The epidemic reflects, at some level at least, the dependence of many multinational enterprises on China's supply chain.

“Global supply chain is not built in a day. It took China 30 to 40 years to become one of the most important global supply chains. It isn't easy for an enterprise to move out of China and build a new global supply chain. In the long term, China's manufacturing industry should pay more efforts on improving its production capacity and product quality, efficiently and efficaciously. Now once again, China's manufacturing industry should take innovation and revolution to improve its competitiveness, which means developing high-end manufacturing.” Chunhua Chen, K.C.Wong Chair Professor and Dean of the BiMBA Business School at Peking University.

Currently, multinationals’ most supply chains in China’s animal production (livestock industry) have re-operated well. Their top management indicated that they would improve the “smart" level of the supply chains to deal with tough situations, such as novel coronavirus.

Trend 6: Fresh Milk vending machines to serve the "last mile" consumers
Some dairy marketing strategists raised the idea of investing Fresh Milk vending machines to each community to serve the "last mile" consumers since there are many vending machines along the streets and lanes to provide snacks,drinks, fruits, and freshly squeezed orange juice. Current technologies may help realize the idea. However, critical factors, such as food safety, logistics, machine cleaning (food hygiene), and maintenance, should be considered.

On Mar.1, high-temperature treatment milk (including ESL Milk) and concentrated milk were officially added into China's Catalogue of Food Production License, which was revised by the State Administration for Market Regulation recently. Chinese dairy groups such as Sanyuan, Mengniu, and Junlebao have launched their high-temperature treatment milk products (e.g., ESL Milk), and more products are expected to be in the market. This processing technology, to some degree, may support the practicality of the Fresh Milk vending machines idea.

In Conclusion
Nowadays, the core elements of agricultural logic are “FINANCE, DATA, and INFORMATION”. Finance (the link) and data (the support) realize Information Closed-loop. The whole process of agriculture is renovated with big data in agriculture, rural finance, and agricultural internet of things. It is acknowledged that the dairy industry is highly integrated, and at the same time, it extends from the primary industry (dairy farming), to the secondary industry (dairy product processing), and the third industry (distribution and logistics). In some way, the outbreak of novel coronavirus gives us an examination to test all the sectors of the whole operation in the world. There are still many opportunities to go alongside the challenges. (Cindy Xiong, Co-founder of AgriPost, cindyxiong@agripost.cn)