China’s multidecade dairy boom sours as population ages, sales slump

China’s dairy industry, once a sure bet for investors amid rising incomes and living standards, is nearing the end of a “multidecade boom” as a slowing economy, ageing population and declining birth rates take their toll, according to S&P Global Ratings.

Sales of the country’s top dairy firms fell between 9 and 13 per cent in the first half of 2024, according to the report published by the rating agency on Monday. Among them, China Mengniu Dairy reported a 12.6 per cent revenue slump to 44.7 billion yuan (US$6.2 billion) in the six months to June, while rival Inner Mongolia Yili Industrial Group’s sales fell 9.5 per cent to 59.9 billion yuan amid waning consumer appetite.

“A steep drop in revenue in the China dairy sector suggests that a multidecade boom is finally ending,” and this moderating growth could prompt companies to expand into new product categories or tap overseas markets, analysts including Flora Chang said in the report.

The report added that the downturn was likely to be temporary and that China’s dairy market will continue to grow, albeit at a slower pace.

“A shrinking population and moderating economic gains will translate to a likely 2 to 3 per cent compound annual growth rate [CAGR] in volume sales over the next two decades – half the rate of the prior two decades,” S&P said.