The drinking yogurt market is exploding in China due to significant and sustained investment and a new demand for healthier “on-the-go” beverages, according to a new report by global market researcher Canadean. Drinking yogurt will become the third-most consumed dairy drink in China by 2016, with consumption exceeding flavored milk and grain, nut, rice and seed milk alternative drinks.

Significant and sustained investments are taking place in the Chinese yogurt market, said Michael Loubser, beverage analyst at Canadean.

“With insufficient supply of raw milk and rising raw milk prices in 2013, Chinese dairy producers devoted resources to maintaining steady milk supplies by investing more in milk sources and cattle ranches,” he said. “These investments are now bearing fruit, with the drinking yogurt category expected to experience steady growth well into 2019.” 

Since 2013, major dairy production companies have been building alliances and working together with dairy farmers to boost growth in the Chinese dairy industry. In May last year, for example, Mengniu and Danone signed a framework agreement to establish a joint venture for the production and supply of chilled yogurt products. At the same time, Mengniu increased its stake in China Modern Dairy to 28%. Yili Group also formed an alliance with the Italian dairy firm, Sterilgarda Alimenti, and signed a memorandum of understanding with Dairy Farmers of America regarding strategic purchasing and farming service cooperation.

Significant investment, however, is not the only reason why the Chinese drinking yogurt market is growing rapidly, the report noted. With increasing disposable income and exposure to the highly marketed benefits of drinking yogurt, more Chinese consumers demand healthier, nutritious dairy drinks, and the drinking yogurt segment is doing particularly well. Consumption habits have shifted, and a significant portion of the market is now “on the go.”

Canadean's report, 2014 Dairy Market Insights Report: China, is available for purchase.