This is an English adaptation of a FoodBud historical article originally published on January 4, 2022.
Jiahe Foods, previously covered as a supplier of milk tea and coffee companions, had a market value of RMB 8.96 billion at the time of the article.
The company’s core businesses include powdered fats, coffee and other solid beverages. Its product portfolio covers powdered fats, selected coffee beans, instant coffee powder, cold-brew coffee liquid, tea-based solid beverages, flavored solid beverages and plant-protein solid beverages.
Its downstream customers include major packaged-food companies such as Uni-President, Xiangpiaopiao, Wahaha and Unilever, as well as foodservice chains including CoCo, 85°C, Auntea Jenny, Gu Ming, Yihotang and Mixue Bingcheng.
Jiahe Foods’ revenue still mainly comes from non-dairy creamer, a powdered food ingredient made primarily from glucose syrup, edible vegetable oil and milk powder through microencapsulation and spray-drying. It improves product structure, aroma and flavor, and increases body, smoothness and fullness in foods and beverages.
That makes it a common ingredient in milk tea and coffee products, as well as instant oatmeal, cakes, biscuits and other snack foods. Nutritionally, the ingredient mainly supplies carbohydrates, oils and proteins.
In Q3 2021, Jiahe Foods reported:
By channel in Q3 2021:
Jiahe Foods uses a sales model led by direct sales, with distribution as a supplement. The company was placing more emphasis on direct customer development and end-market understanding in order to serve customers more closely.
By the end of September 2021, 75% of main-business revenue came from East China, South China, Southwest China and Central China.
For January to September 2021:
Milk tea store growth remained strong overall. The article attributed this to two forces: slower growth in top-tier cities, but rapid growth in lower-tier cities; and the fit between value-oriented chain brands and non-dairy creamer products. Large customers focused on third- and fourth-tier cities were growing quickly.
Southwest China showed the sharpest growth, mainly because Mixue Bingcheng was one of China’s largest brands by store count. Another standout brand that year was Chabaidao. Both were regional chains with strong store expansion, and Jiahe Foods’ sales grew alongside them. East China, with its large population and dense tea-drink market, grew less quickly than Southwest China in percentage terms but still contributed meaningful absolute growth.
Before the pandemic, Jiahe Foods’ consolidated gross margin was around 30%. It had fallen to 14.2%, mainly because raw-material volatility over the previous two years weakened margin levels. The company’s margin-improvement approach included monitoring raw materials closely and expanding into higher-margin businesses such as coffee and plant-based beverages.
The rise of non-dairy creamer in China was tied to milk tea. The article describes four phases:
The article frames this as normal category iteration driven by changing consumption occasions.
Freshly made tea drinks grew quickly because they are fresh, frequently updated, customizable and aligned with younger consumers’ interest in taste, playfulness and health. Jiahe Foods adjusted its R&D organization around these traits: product managers collected and analyzed market needs and consumer hotspots, communicated directly with customers, and worked with R&D and application teams to develop and recommend solutions.
Customers increasingly had individualized needs that standardized products could not fully meet. Many stores had signature drinks, shifting competition toward category-specific hero products. Examples cited include Heytea’s cheese tea, 7 Fentian’s mango pomelo sago and Mixue Bingcheng’s ice cream.
For ingredient suppliers, milk tea remained the durable menu item. More than 90% of beverage shops carried the milk tea category, and non-dairy creamer was one of its main raw materials. Fruit teas may change seasonally, but milk tea menus tend to remain stable, which helped non-dairy creamer remain a large category within a large market.
Jiahe Foods also participated in customer product design and R&D because beverage stability is critical. Foam in beverages is essentially suspended fat globules; a drink may remain stable for a few days, but not for several months without formulation and testing.
At the same time, rapid growth in freshly made tea and fruit tea was pressuring Jiahe Foods’ core business. Among its major customers, the leading names included Mixue Bingcheng, Gu Ming and CoCo, while Heytea and Nayuki were not listed.
As a result, Jiahe Foods was seeking new growth directions and positioned itself not as a non-dairy creamer company, but as a food-ingredients company.
The company’s product development was organized around customer groups. Since all customers use sugar, syrup products were growing quickly, especially small-pack syrup products with lower unit prices but larger volume.
Second, leading tea-drink brands were testing coffee products. Mixue Bingcheng had already opened several hundred coffee stores, mainly under Lucky Cup, while Luckin Coffee offered both coffee and milk tea products. The article expected tea and coffee formats to increasingly overlap.
Third, some customers wanted to upgrade from non-dairy creamer to liquid base products, which Jiahe Foods could also supply.
Overall, Jiahe Foods focused development around customers’ core needs in sugar, milk and coffee, while continuing to work on toppings. Coconut jelly, pudding, pearls, crystal balls and jelly had each become popular at different times, and Jiahe Foods developed jelly and pudding ingredients according to demand.
According to global non-dairy creamer industry data cited from QY Research and Statista, the global market had grown steadily in recent years. Data cited from China Food News stated that China’s non-dairy creamer consumption reached 576,500 tonnes in 2018, up 22.04% from 472,400 tonnes in 2015, and was expected to rise to 768,200 tonnes in 2023, with a compound annual growth rate above 6% from 2019 to 2023.
Because Jiahe Foods had a relatively large export business, nearby markets shaped its view of coffee. The article highlights South Korea, where consumers had reached roughly one cup per person per day more than a decade earlier, with smaller cups and many leisure occasions for coffee.
The article argues that China is not directly comparable with Europe or the United States, where coffee has been consumed across generations. South Korea, by contrast, began drinking coffee at scale after the Seoul Olympics, making it a more relevant reference point. Jiahe Foods saw large potential if Chinese consumers could also drink coffee daily. When the company entered coffee, only a few domestic manufacturers were producing locally.
Coffee was viewed as an incremental market on top of an existing imported-product market, which is why Jiahe Foods considered the category direction correct years earlier.
The article describes coffee as a century-old industry: strategically correct, but tactically requiring gradual progress in each subcategory.
The arrival of foreign coffee companies was viewed as positive for building a Yangtze River Delta coffee industry cluster. Coffee is an agricultural product and involves omnichannel procurement, inventory and raw-material trading. Starbucks’ Yangtze River Delta footprint, from its global-first Reserve Roastery to its roasting plant in Kunshan, was expected to benefit coffee-bean suppliers in the region.
Jiahe Foods is located in the Yangtze River Delta, near Shanghai, described as China’s largest coffee-consumption market and the area with Starbucks’ densest global layout. The article notes that one or two brands cannot create an industry on their own; an industry emerges when quantitative growth turns into qualitative change, as happened with milk tea.
Jiahe Foods had strategically deployed coffee raw materials and, using its technical base in non-dairy creamer, developed formulas and processes including low-caffeine instant coffee, industrialized cold-brew coffee, negative-pressure continuous cold-brew coffee, and aroma preservation and enhancement for instant coffee powder.
Its coffee raw-material products included instant coffee powder, three-in-one coffee drinks, cold-brew coffee liquid, roasted coffee beans, ground coffee powder and coffee concentrate. Coffee had become a new growth point for the company.
Looking forward at the time, Jiahe Foods saw coffee and milk tea as operationally similar, but coffee as having more room for imagination.
The biggest difference is equipment. Coffee shops require expensive equipment as core assets. Luckin Coffee, for example, used financial leasing to place equipment. Milk tea shops do not need similarly expensive equipment, which was one reason they grew quickly. A storefront of around 10 square meters was described as ideal for milk tea. Milk tea still has operational barriers, including staff training, which can protect franchisees. If a format has no barriers, franchisee interests are harder to protect. The article also notes that franchisee products can be relatively narrow and that balancing online and offline development is difficult.
For coffee shops, one machine is not enough; at least two are needed because equipment is the core asset. Coffee is also less standardized than milk tea. For customers that want coffee but cannot bear high equipment costs, Jiahe Foods developed coffee concentrate, comparable to concentrated juice in milk tea shops. The article expected coffee stores to increasingly use this concentrate model, for both hot and cold drinks, with cold coffee concentrate having a taste advantage.
Jiahe Foods had laid out products across the coffee industry, including roasted coffee, refined coffee and instant coffee. From January to September 2021, instant coffee sales were about RMB 57 million, roasted coffee sales were RMB 4.21 million, and refined coffee sales were about RMB 8 million.
Customer type affects development cycles. Foodservice customers move quickly, with some requiring weekly new products. Industrial customers have longer development cycles, typically 1-2 years and sometimes 3-5 years, because formulas and stability must be verified. For companies such as Unilever, some product development cycles can already be 2-3 years.
Jiahe Foods planned to put more capability and finished-product effort into foodservice-oriented products, with ongoing optimization and innovation.
Alongside coffee, Jiahe Foods was developing oat milk and other plant-based products. Oat milk is a finished product, while oat slurry is a raw material. The article notes that leadership periods in powder-fat technology are limited; Jiahe Foods began exploring oat milk from scratch in 2018, spent two years stabilizing it, and by the end of the previous year had developed the ability to produce a fixed formula.
At the time, Jiahe Foods’ product was oat slurry as a raw material. Customers used the oat slurry and then filled it into oat milk. The consumer market was still at an early stage, and the main business was shipping to contract manufacturers for online-popular brands. The formulas were self-developed, with many projects done as ODM.
Coffee, innovative toppings and plant-based products still had small bases, but were growing quickly. According to mid-2021 data cited in the article, coffee grew 87.4% year on year, plant-protein beverages grew 257% year on year, and new products were growing at a relatively strong pace. The article expressed optimism about later-stage growth in new products and tracks.
Jiahe Foods was especially positive on whole-grain beverages, using plant-based oat milk as the starting point for a broader plant-based product portfolio. The article says these products appeal to environmental consumers, lactose-intolerant consumers and younger consumers willing to try new things. It also notes that the share of plant milk replacing dairy milk overseas had been rising year by year, making it a new category with broad development potential.
Note: market value, forward-looking targets, 2023 consumption forecasts and future business plans are historical statements from the January 4, 2022 source article.