By Liu Jie (China Daily)
Updated: 2008-01-18 10:59

In 2006, the company launched a milk product for children: Yili QQ Star Milk. Yili is expected to launch more new products, enlarge its production base and broaden its distribution channels to compete with Mengniu.

Mengniu's Deluxe, which retails at around 20 yuan per liter, has established a premium segment in the milk market. In 2007, Yili also launched its high-end Classic Organic Milk at 28 yuan per liter.

Well-off consumers in the larger cities tend to choose products based on quality and nutritional content, the report said. In most areas of China, however, consumers can only afford low-priced UHT products, at around 7 yuan per liter.

High calcium and low fat content are the major features emphasized by manufacturers, especially when targeting women and children.

Manufacturers are expected to increasingly offer added ingredients like vitamins and fiber to attract consumers.

Flavor is another key area for manufacturers. More improvements in milk flavor are expected so that products appeal to the local palate.

The report said fruit-flavored milk drinks are expected to post the strongest growth over the next five years, of 18 percent.

Consumption is expected to increase, as milk drinks flavored with fruit juice are still an underdeveloped segment in China. The mixture of milk and fruit juice is believed to offer health benefits due to the combination of high calcium and vitamin C content.

More international players are expected to enter the local dairy market as it develops. Asahi is planning to set up a plant in Shandong province, the second Japanese company to enter the milk products sector in China after Meiji. These Japanese dairy companies are expected to bring premium products to the Chinese market, the report said.

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