Domestic milk powder boosts the industry's revitalization with quality and fair prices
The high price of domestic milk powder has long been widely criticized by consumers, yet when domestic dairy companies launch low-priced milk powder they are questioned instead. In fact, domestic dairy companies have now broken with the traditional production and sales methods by using a new model of "global resources + internet thinking," thereby producing milk powder products of quality and fair price. And only when domestic dairy companies repay consumers with products of international quality and high cost performance can domestic dairy companies rise again
The milk powder market in April was quite a spectacle. First, the New Hope Group grandly launched original imported infant formula priced at only 99 yuan; two days later, Yashili announced that in the second half of the year it would also launch a low-priced product at around 100 yuan. By then, together with Junlebao, which had already "stirred up the market" a year earlier with its low price of 130 yuan, the camp of domestic dairy companies offering low-priced milk powder at around 100 yuan is taking shape at an accelerating pace.
Just like Junlebao back then, New Hope's milk powder first drew attention and controversy both inside and outside the industry because of its price. As for the description of 99 yuan as a "low price," Wang Zhi, general manager of New Hope Nutritional Products Co., Ltd., strongly disagrees. "Foreign milk powder is at this price point, and this price has supported the survival and development of foreign milk powder companies for decades or even a hundred years," Wang Zhi said.
In contrast, in the domestic milk powder market, high prices have long been widely criticized by consumers. Analyzing the reasons, the reason why foreign-brand milk powder sells domestically for as much as two or three times the foreign price is mainly that five cost components - landed cost, channel cost, brand building, marketing promotion and labor - stack up one after another. Although domestic milk powder has no cost in import taxes and fees, because raw materials are controlled by others, the price of milk sources is high, and combined with too many channels and the commercial atmosphere and other factors, prices also remain stubbornly high.
"Nearly 30 percent of the cost of milk powder is spent on channels and promotion," said dairy expert Wang Dingmian. For example, when Junlebao milk powder was launched last year, the reason it could first "halve" the so-called mainstream price and set its first milk powder at 130 yuan was that it proposed using a new model of "global resources + internet thinking" to break with the traditional production and sales methods. Junlebao believes that only by repaying consumers with milk powder of international quality and high cost performance can domestic milk powder prices return to reason and can domestic dairy companies rise again. In sales channels, the short, direct and fast advantages of e-commerce should be fully utilized, eliminating the fees and profits of all intermediate sales links, so as to greatly reduce the cost for consumers of buying milk powder.
The market is a touchstone. Junlebao's approach won consumer recognition and an enthusiastic response. As of the end of March, the cumulative sales of this milk powder had exceeded 300 million yuan.
Like Junlebao, the launch of New Hope's milk powder this time also adopted the "global resources + internet thinking" model. At the source, it directly sought a partner in New Zealand to jointly take shares, and the milk powder was entirely completed in New Zealand from dairy cow raising and production to filling; in sales, it cooperated with JD.com, using JD.com's e-commerce platform for vertical sales to further compress marketing costs. Liu Yonghao, chairman of the New Hope Group, said, "Quality must be good, and the price must be cheap. Do both of these well, and there will definitely be a market."
People in the industry believe that whether it is Junlebao's 130 yuan domestic milk powder or New Hope's 99 yuan original imported milk powder, milk powder has now basically completed its price return in e-commerce channels, and in the future the industry will certainly become more transparent in raw materials, costs and quality.
"The trend of Chinese infant milk powder prices generally entering a downward channel has become increasingly obvious," said dairy analyst Song Liang. Under the wave of e-commerce and overseas online shopping through purchasing agents, the Chinese market is accelerating its alignment with the international market, and the milk powder industry has already bid farewell to the era of high growth and high gross margins. Although the new camp of high-quality, fair-priced 100 yuan milk powder from Junlebao and New Hope is still a "microclimate" in the broader market, what deserves attention is that the impact this camp brings to the market and the industry is deep-level and fission-like. It is believed that the effect triggered by this camp will continue to ferment, and in time it will eventually evolve into a major trend.