New Channels Drive China’s Dairy Consumption Recovery Amid Overall Softness

In recent years, against the backdrop of overall sluggish dairy consumption, increased pressure on traditional retail channels and slower-than-expected market recovery, dairy consumption through new channels such as baking, new milk tea, coffee and Western food has grown significantly. Its proportion in total dairy consumption has been rising, driving a slight uptick in overall dairy consumption. In 2025, China’s total dairy consumption reached 57.7 million tons, a year-on-year increase of 1.1%, with per capita dairy consumption recovering to 41 kilograms.

New channels have gradually become a key driver of dairy consumption recovery. Industry estimates show that in 2024, the scale of dairy consumption through new channels accounted for about one-tenth of the total dairy product market, with a compound annual growth rate of 3% to 4% expected in the next five years. By the end of 2025, there were over 400,000 baking stores, 650,000 new milk tea and coffee shops, and 200,000 Western restaurants nationwide, mainly using liquid milk, whipped cream, cheese and butter as dairy raw materials.

Baking Category Development Report 2025 points out that the annual output value of China’s baking market has remained above 100 billion yuan in recent years. From January to April 2025, dairy-processed products accounted for 57.2% of the total. The new milk tea sector is also expanding rapidly: major tea brands opened about 18,000 new stores in the first half of 2025, a year-on-year increase of 15.3%, and milk-containing drinks, accounting for 15.1%, have become a new favorite among consumers.

The growth of new channels has boosted the demand for customized dairy products, with explosive growth in orders for large-packaged liquid milk and deep-processed products from domestic dairy processors. In the first three quarters of 2025, sales of dry dairy products of major enterprises increased by 10% to 30% year-on-year. Deep-processed products such as whipped cream and cheese have become new revenue growth points for dairy companies. Industry estimates show that the total market size of China’s cheese and butter industry reached about 35 billion yuan in 2024, with the B-end market accounting for about 74%, or over 26 billion yuan.

While driving consumption growth, new channels still face challenges. The nutritional and healthy attributes of products in new channels are not clear, and some operators use cheap raw materials such as non-dairy creamer, whose usage rate exceeds 50%, affecting long-term development. In addition, there is strong homogenization of raw materials, leading to "involutionary competition" among suppliers, and high dependence on imports for raw materials.

Industry forecasts indicate that in 2025, the import dependence of dairy raw materials such as cream and cheese for new channels will exceed 60%, and that of whipped cream will be over 50%. Domestic dairy companies are actively addressing these issues by optimizing production layout, enhancing R&D capabilities and promoting localized substitution of raw materials. Relevant initiatives are also being taken to guide market players to use natural dairy raw materials and improve the standard system, laying a solid foundation for the sustainable development of dairy consumption through new channels.