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Alternative milk brand Oatly plans push into mainland China

2019-07-11 17:06 Thursday

One of the world's leading producers of dairy-free milk, Oatly, is planning to launch an expansion into China, as a stepping stone towards bringing their products to more consumers in Asia.


Oatly, based in Sweden, is known for its oat drinks, yoghurts and ice-creams packaged in friendly, colorfully-designed cartons, which are targeted toward vegans and those looking for a healthy alternative to dairy.

They are hoping that their product will have added appeal in China, where levels of lactose intolerance are much higher than in the West.

Nearly all Chinese consumers have some level of lactose intolerance. In fact, studies have indicated that lactose intolerance affects around 30 percent of Chinese children, and a study of adults showed that 92 percent suffered from some level of lactose malabsorption.

The company has already launched in Hong Kong in 2016, where it is now sold in Starbucks and Pacific Coffee outlets, as well as major supermarkets and independent cafes.

Worldwide, Oatly is available in more than 20 countries, and is looking to replicate this success in China. So far, its biggest impact has been in Europe and North America.

Frothy caffeinated drinks such as cappuccino and latte have already become big sellers in China, so it should not be a mammoth task to establish a mainstream operation offering a dairy alternative to people for whom these products cause a certain degree of discomfort.

As part of the expansion this year, Oatly plans to open new local factory openings, which will help prepare for increased demand when they branch out gradually into neighboring countries as well.

It has already opened an office in China, and is even promoting a new Chinese character to signify “vegan milk” and attract more dairy-minded consumers to its product line. The character is designed specifically to combat the confusion caused by the current character used at point-of-sale, which is translated as “oat nectar”, which makes no mention of dairy.

Despite the widespread lactose intolerance levels in China, there has been a huge push to encourage greater milk consumption in the country by the government.

Since the 80s, dairy has accounted for a growing share of the average person's diet. Over this time, Beijing authorities have been persuading citizens of the link between milk and better health, and at the same time, greater exposure to Western lifestyles has cemented the idea.

For the past 2 decades, schoolchildren have been given a free cup of milk daily. According to the latest Chinese dietary guidelines, laid out by China's Ministry of Health in 2016, Chinese people are being recommended to eat dairy products equal to 300 milliliters or grams per day.

Results are falling short of this figure, though. The average adult currently consumes only 100 grams of that, according to research firm Mintel, suggesting that there is much room to grow.

At the same time, as the government has been showing strong support for the dairy industry and encouraging it to produce more milk, the market for alternatives – led by almond and soy milk offerings – has been rising.

Oatly has been seeking to make this category its own. It hopes that the “vegan milk” character will be the first step to making awareness of its product more universally recognized.

According to Oatly's research, 96 percent of consumers in Hong Kong, where dairy milk consumption is growing, only think of cow's milk when they see the Chinese word for milk. Only 2 percent think of plant-based milk.

"We are bringing the debate of plant-based milk and cow's milk to Hong Kong and encouraging people there to make well-informed milk consumption decisions,” said Toni Petersson, Oatly chief executive.

He added: "Hong Kong people say they want more information and education about plant-based milk. We're here to help and tell people where to find the right products. We are not just doing this for our business, we're doing this for the whole category of plant-based milk.”

China is currently both the world's third largest producer of milk and the number one importer, accounting for about 1/8th of milk imports globally.

This is being fuelled by a new generation of Chinese consumers who have switched on to Western lifestyles, such as hanging out in coffee shops and ordering drinks “to go” on their way to work in the morning.

Being conscious about healthy living, they are nowadays more aware of the nutritional differences between products, and are demanding foods their bodies react well to. It is this market that brands like Oatly are counting on to develop even more in the future.

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