Dairy companies are paying increasing attention to this segment, mainly because consumers have recognised the health potential of these products, which offer greater profits than chilled LAB beverages.

Marketing of ambient LAB beverages relies on the "fresh product pitch" 

The Lactic Acid Bacteria Beverage in the Light Industry Standard (QB1554-1992) includes both active and inactive (sterilised) products. In other words, even without active LAB, a product can be called a LAB beverage according to the national standard.

“The production of fresh LAB beverage is very complicated, incurring high costs. In general, there are >=1 million active LAB/ml. On the contrary, ambient LAB beverages, after fermentation and sterilisation, have no active LAB.

This is a simple process, able to extend the shelf life,” said dairy commentator Wang Dingmian, “Differences in process and quality guarantee period also indicate differences in functions: LAB beverages are of very low nutritive value. They exists only due to the concept of ‘intestinal and stomach healthcare’; however, without active LAB, they are only sweet water.”

“Thanks to the pioneers of fresh LAB beverages, such as Yakult and Weiquan, an understanding that ‘LAB is beneficial to health’ has been built,” commented Li Zhiqi, praised as one of the "Top 10 Figures Impacting China's Marketing"; "Ambient LAB beverages are also marketed for ‘digestion promotion and intestinal healthcare’, with packaging similar to their fresh counterparts.

It is hard for consumers to discover the differences, especially the old and children in remote areas - who are targets for ambient LAB beverages."

Profit drives new ambient LAB beverage launches

Nielsen data shows that over the period 2006-2014, the LAB beverage segment witnessed a CAGR of 37.1% in sales – a significant success as these products enjoy average gross profit margins of around 30%. These factors have attracted new entrants to the segment,which is now worth an estimated USD1.6 billion.

Market leader is Yakult at about 37%, followed by Mengniu at 22%, Weiquan, Junlebao and Yili all at around 10%. (Note: Yakult sells only a fresh variant in China, whereas the other main brands sell in fresh and ambient/long-life versions).

“The sales prices (for fresh and ambient versions) are the same, but the costs for ambient LAB beverages are lower,” said Zhu Danpeng, a researcher from the China Food Commercial Research Institute, “The production and transportation conditions make the cost of the ambient versions 25% lower than for fresh ones, making them much more profitable. This is why more and more small- and medium-sized enterprises are launching ambient LAB beverage.”

It is true that, despite different processes, the fresh and ambient products are priced similarly. For instance, Youyi C (fresh, Mengniu) sells at USD0.99/340 g (RMB6.5), whilst Xiaoyang (ambient, Fujian Haocaitou Food Co., Ltd.) is at USD1.1/100g * 4 (RMB7).

New entrants into ambient LAB beverages have included:

Yili, with Changyi 100%

Tingyi (Cayman Islands) Holding Corp. partnering Weiquan Corp. to launch the Weiquan product

Mengniu with Go Chang

In total, there are 80+ brands in the market. 

                                                         Bright Dairy's "Qingxin Huoli" Ambient LAB Beverage

                                                                      Source: Bright Dairy & Food Co., Ltd.

                                                             Yili's Changyi 100% Ambient LAB Beverage

                                                                                               Source: Baidu.com

This article comes from Dairy Products China News 1603, CCM

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