(Yicai) June 11 -- New Hope Dairy announced its entry into the beverage market yesterday as the Chinese dairy company joins a growing number of milk producers looking beyond raw milk supply to tap new revenue streams in the country’s fast-growing drinks sector amid declining sales of milk.

“Dairy companies must break free from the cut-throat competition in the existing dairy market and seek new business opportunities through innovation and growth,” Xi Gang, chairman of Chengdu-based New Hope, told Yicai at a recent event.

New Hope plans to enter the drinks market with what it does best, namely chilled products. However, the exact product line up has not been decided yet, Xi said.

New Hope did not reveal its full beverage market strategy at the 2025 Investment Conference yesterday, but images presented at the event suggest that its first products will be modern milk-based drinks with popular flavors and which focus on weight management.

New Hope, whose main products are fresh milk and yoghurt, logged net profit of CNY540 million (USD74 million) last year on revenue of CNY10.6 billion (USD1.4 billion), indicating a slim profit margin.

Dairy producers are battling against a sluggish market. In the first quarter, dairy sales slumped 6.9 percent year on year, while that of liquid milk plunged 7.1 percent, according to NielsenIQ data.

By contrast, China’s new-style tea beverage market jumped 6.4 percent in 2024 from the year before to CNY350 billion (USD48 billion), according to statistics from iiMedia Research.

As a result, several dairy firms have launched new teas and trendy beverages since the start of the year. Weigang Dairy, for example, has released two chilled ‘light milk tea’ products, Huangshi Dairy and Wandashan have both announced plans to open milk tea stores while Junlebao has acquired yoghurt beverage brand “Mo Yoghurt” and is linking arms with popular tea chain Mixue Bingcheng to develop new drinks.

Milk-based drinks typically offer higher profit margins than plain milk, and this is attracting dairy producers amid a prolonged slump in the dairy market, independent dairy industry analyst Song Liang told Yicai.

Also, by leveraging their existing advantages, such as regional brand influence, distribution networks and cold-chain logistics, dairy companies can branch out into beverages relatively easily and without incurring a lot of extra costs, Song said.

Younger consumers care more about an emotional connection with products than previous generations did, Xi said. By entering the beverage market, New Hope hopes to better cater to emerging niche trends amid increasingly fragmented consumer demand.

Editors: Tang Shihua, Kim Taylor