Dairy Industry Innovation in Supply Leads New Consumer Demand
Following the new trend of domestic consumption upgrading, advancing supply-side structural reform in the dairy industry
Innovating Dairy Supply to Lead Consumer Demand
Advancing supply-side structural reform is an inevitable requirement for sustained and sound economic development under the new normal, and is the only way for the Chinese economy to move toward the "double mid-to-high" goals, bearing on the overall situation and the long term. The central government has proposed promoting the upgrading of the consumption structure, giving play to the leading role of new consumption, and accelerating the cultivation of new supply and new momentum, releasing a strong signal for strengthening supply-side structural reform in the consumption sector. Faced with the new trend of consumption upgrading, how to advance and deepen supply-side structural reform is a question that the dairy products industry needs to seriously consider.
Identifying the New Threads of Consumption Structure Upgrading
The upgrading of consumer demand is mainly reflected in four aspects: consumption quality, consumption form, consumption method and consumption behavior
In 2015, consumption became the primary driving force of China's economic growth. Total retail sales of consumer goods for the year exceeded 30 trillion yuan, up 10.7% year on year after deducting price factors, and the contribution rate of consumption to economic growth exceeded 60%.
Beyond the growth in consumption scale, we should pay more attention to the deeper changes in the consumption sector, namely that as China's per capita income continues to rise, the trend of consumption structure upgrading has become increasingly evident, mainly reflected in four aspects: consumption quality, consumption form, consumption method and consumption behavior:
Consumption quality is changing from "having enough to eat" to "eating well". Data shows that in 2015, the per capita grain consumption of Chinese urban residents decreased by 7.2% compared with 2013, while per capita consumption of meat, poultry and eggs increased by 1.7%, 16.2% and 11.2% respectively compared with 2013; the per capita grain consumption of rural residents decreased by 5.5% compared with 2013, while per capita consumption of meat, poultry and eggs increased by 1.5%, 7.5% and 9.2% respectively compared with 2013. It can be said that in terms of eating, Chinese people are no longer satisfied with simply having enough to eat as before; they also want to eat nutritiously and eat healthily.
Consumption form is changing from "buying products" to "buying services". After the problem of food and clothing was solved, people increasingly value quality of life. In 2015, the four expenditures on housing, transportation and communications, education, culture and entertainment, and health care accounted for more than half of all consumption expenditure of Chinese residents. In particular, in recent years, service consumption such as communications, movies and tourism has continued to boom and has gradually become a new growth point of consumption.
Consumption method is changing from "buying offline" to "buying online". In recent years, breakthroughs in internet technology have driven the rapid development of China's e-commerce, which is overturning traditional consumption models. At the end of last year, China's internet penetration rate exceeded 50%, with nearly 700 million netizens. In 2015, China's online retail sales exceeded 3.8 trillion yuan, up 33.3% year on year, noticeably higher than the growth rate of total retail sales of consumer goods.
Consumption behavior is changing from "standardized" to "personalized". In the past, when consumption capacity was low and the supply of consumer goods was insufficient, goods were basically uniform and consumers had few choices. As people's living standards improve and the supply of consumer goods increases, consumers of different genders, incomes and cultural backgrounds will engage in personalized consumption according to their own needs.
For dairy enterprises, only by following the general trend of consumption upgrading, further innovating supply, tapping consumption potential and promoting consumption upgrading can they achieve sustained and healthy development under the new normal.
Taking Multiple Measures to Increase Effective Supply in the Dairy Industry
China's dairy products industry should take technological innovation and institutional innovation as its levers, and take brand consumption, quality consumption, service consumption and experiential consumption as its main directions, to meet the booming new consumer demand
At present, China is already a major country in global milk production, processing and consumption, but the per capita milk consumption level remains relatively low, about 1/2 of the Asian average and 1/3 of the world average, with huge potential for consumption growth. Therefore, China's dairy products industry should promote supply-side structural reform in the dairy industry from the four aspects of brand, quality, service and experience.
Tell the brand story well and build a good reputation. During the 2012 London Olympics, Yili launched the themed campaign "Ordinary Chinese, Extraordinary Stories", which inspired and encouraged many Chinese people to devote themselves to active and positive sports, and Yili's brand also took deep root in the hearts of millions of consumers. In the most valuable Chinese brands list released by WPP Group earlier this year, Yili retained first place in the food category with a brand value of 5.1 billion US dollars.
Continuously improve quality and aim for the global best. For the food industry, product quality is the life of an enterprise. Yili has done a great deal of work in product quality management. Taking standards as an example, on the basis of national statutory standards, Yili established internal control lines stricter than the national standards, and on the basis of internal control it established warning lines stricter than the internal control lines, enhancing its ability to control safety risks. Many of the world's top dairy suppliers consider Yili's standards to be unprecedented in their strictness; some of Yili's dairy raw materials even need to be specially processed and customized by suppliers to meet the requirements.
Keep a close eye on consumer demand and provide convenient services. In traditional channels, Yili provides professional services to retail customers and distributors by building a "shopper-centric" multi-functional service team; in emerging channels, it actively develops new resources such as e-commerce, convenience stores, catering and pharmacies, and strengthens strategic cooperation with Tmall, JD.com, Suning and others. Earlier this year, Yili teamed up with JD.com to launch a smart hardware device. Consumers only need to press it lightly, and the system will automatically place an order for the specified product according to the consumer's settings and deliver it to their home, truly realizing "one-touch service".
Leverage cutting-edge technology to enhance the user experience. In the process of consumption upgrading, the trend of consumer demand shifting from "products" to "experience" is becoming increasingly obvious. Therefore, Yili has expanded its factory visit program, which it has maintained for many years, from domestic to overseas; by cooperating with search engines and using panoramic technology and AR technology, people can visit every link of Yili's global industrial chain online and can also engage in voice communication with intelligent robots. Up to now, nearly 50 million visits have been made to Yili's global industrial chain through online and offline channels.
New consumer demand is where the driving force for economic development lies. China's dairy products industry should take technological innovation and institutional innovation as its levers, and take brand consumption, quality consumption, service consumption and experiential consumption as its main directions, effectively increase new supply and effective supply, create, guide and meet the booming new consumer demand, and promote the formation of new momentum for economic development.
(The author is Vice Chairman of the All-China Federation of Industry and Commerce and Chairman and President of Yili Group)