China's Dairy Deep-Processing Rate Below 10%; Mengniu's 'Nai Lifang' Project Fully Operational

A high-yield dairy cow can produce 40-50 kilograms of milk per day while consuming more than 100 kilograms of feed, including forage, soybean meal and corn, with daily feed costs exceeding RMB 100. At a ranch in the Ulan Buh Desert in Inner Mongolia, cows voluntarily approach fully automatic intelligent milking robots to be milked. Ranch managers describe high-yielding cows as "athletes" on the farm, whose higher feed input is directly linked to output levels.

China's dairy industry is relatively mature in liquid milk production, but deep-processing remains a weak link. Public data show that in 2024, deep-processed products such as cheese and butter accounted for less than 7.3% of total output, with the overall deep-processing rate below 10%. During the 2026 World Dairy Congress, a senior official from the National Technology Innovation Center for the Dairy Industry said the industry's development focus is on enhancing deep-processing capabilities so that milk leaving the farm is transformed into higher value-added products rather than simply increasing liquid milk output.

On supermarket shelves, a small piece of cheese often costs dozens of yuan, in stark contrast to liquid milk prices. Industry insiders note that over the past two decades, China's dairy industry has turned milk from a scarce nutritional item into a mass consumer product, but domestic maturity in cheese, whey protein, casein and starter cultures still lags behind that of liquid milk. The Western dairy deep-processing system evolved from the cheese industry: whey left after milk curdles into cheese is further processed into whey protein, supplied to infant formula, sports nutrition and food companies. Thus, a bucket of milk is split into multiple ingredients feeding different product lines.

Domestic enterprises have begun to establish deep-processing projects, with some dairy companies building production lines for raw materials such as demineralized whey and casein in recent years. As for cheese products, some suggest exploring combinations of cheese with rice, tofu or Chinese dishes, and using new processing technologies to reduce costs, developing products suitable for daily purchase by Chinese consumers.

Dairy ingredients such as lactoferrin, D90 demineralized whey powder and casein have long relied on imports. These ingredients go into infant formula, sports nutrition and functional foods, with costs ultimately reflected in retail prices. To boost self-sufficiency, a research team has developed a milk-component separation and processing technology system that preserves the structure and activity of milk components through precision separation and gentle processing. The production line completed trial production in December 2025 and entered full-scale operation in March 2026.

Domestically produced dairy ingredients still face multiple challenges when entering the market. In addition, milk supply varies with seasons, and production lines must operate continuously for long periods, with customers focusing on batch-to-batch consistency. Lactoferrin has high added value but limited market capacity, while cheese and whey-related products have larger markets but face competition from consumer habits, pricing and established overseas suppliers.