As milk vies with yogurt, dairy ferment gives consumers choices

At Hongxing Qianjin Bread and Milk Company in Beijing, a glass bottle is delicately removed from a sterilizer, placed beneath the metallic spout on the bar counter; and with a gentle pull of the lever, fresh milk flows smoothly into the container.

Armed with a slice of toast imprinted with the production date, health-minded customers then proceed to the nostalgia-stirring stylish front desk to pay their bill, experiencing a sense of old State-owned enterprise charm.

Over the past two years, this rapidly emerging establishment has not only captivated a loyal following in Beijing, but also drawn in hordes of visitors from afar who make special trips on high-speed trains solely to partake of this unique experience.

However, the concept of pairing fresh milk with bread is not a novel one. Provinces like Zhejiang, Shandong and Hebei, and autonomous regions like Inner Mongolia, have long embraced this practice, often referring to it as fresh milk bars.

With a focus on sourcing fresh milk from nearby farms, fresh milk bars are able to offer consumers a direct link to the origins of their dairy products, analysts said, stressing that this localized approach allows them to stand out in a crowded marketplace and capture a sizable share of the fresh milk consumption segment within their respective regions.

"We want to use this model where consumers can see the source of the milk and the processing method to assure them that domestic milk is reliable," said Li Dajiang, deputy general manager of Heli Dairy Co, which is located in Shandong province.

The current dairy consumption market in China is plagued by a contradictory dynamic — on the one hand, dairy farms are struggling to sell their high-quality raw milk at fair prices; on the other, consumers remain hesitant to purchase products they do not fully trust, Li said.

Recognizing this gap, Helili decided to leverage its advantageous milk sources and geographic location to directly supply local consumers with premium-quality and safe fresh milk products by harnessing the business model of fresh milk bars.

Consumers have shown a keen interest in the visual experience of watching milk processing at the bars.

Twelve such fresh milk bars are now operational in Shandong's Weifang. The establishments cater to a burgeoning community of over 30,000 consumers, according to the company.

The dairy market in China has been characterized by a linear supply chain, where milk is acquired by dairy companies, processed, distributed through various channels, and eventually sold in supermarkets, said Li Shengli, a professor at China Agricultural University.

This conventional model, however, is marked by multiple distribution steps and extended transit times, which pose challenges to the production and consumption of fresh dairy products, Li said.

By sourcing fresh milk directly from their own dairy farms, fresh milk bars are able to offer consumers a truly local and affordable dairy experience. This proximity-based model not only ensures the freshness of the milk but also streamlines the supply chain, minimizing the number of intermediaries and reducing the time between production and consumption, Li said.

As the popularity of fresh milk bars continues to rise, the inadequacies in their product portfolios, industry chains and the lack of streamlined large-scale production and marketing strategies are proving to be significant obstacles to their growth trajectory, analysts said.

These establishments are now facing a fresh wave of competition, particularly from the expanding network of outlets belonging to major ready-to-eat yogurt brands, said Wang Jiaqi, director of the Institute of Food and Nutrition Development, which is part of the Ministry of Agriculture and Rural Affairs.

These brands, with a strong focus on product promotion and marketing, are swiftly establishing a formidable presence, potentially overshadowing the appeal of fresh milk bars, Wang said.

Moreover, the fresh milk bar model faces inherent challenges in its operations due to the perishable nature of its products. The requirement to process and sell the milk on the same day not only limits the production capacity of these bars but also makes it difficult for them to achieve scalable production, Wang said.