China Securities Co., Ltd.: Fresh milk as the main component, naturally dispersed, with high value-added subcategories becoming more concentrated.

China Securities Co., Ltd. has released a research report stating that Japan's dairy consumption has experienced three waves of growth. Following World War II, consumption grew rapidly, reaching saturation in the 1990s, and the structure is still evolving. After the number of teenagers peaked, overall milk consumption declined, and the elderly gradually became another major consumer group. Japanese dairy companies cannot build a moat through controlling milk sources or distribution channels; thus, continuous product innovation and iteration, research and development reserves, and consumer education have become the core sources of premium value. Yogurt stands out with its functional products and drives an increase in product premium rates, transforming yogurt from a "food" into a "daily health management carrier," with consumption still not peaking. Among solid dairy products, cheese occupies a major portion, with consumption growth resilient across cycles. In terms of structure, fresh milk remains naturally dispersed, while high-value subcategories such as yogurt, cheese, and lactic acid bacteria are becoming more concentrated. The main points from China Securities Co., Ltd. are as follows: Japan's dairy consumption has experienced three waves of growth, continuously increasing with economic development until the 1990s. Japanese dairy products are diverse, with per capita consumption of milk and cheese leading China, and yogurt and lactic acid bacteria beverages on par with Europe and the United States. Japanese dairy dates back to the Asuka period, when it was used as a medicinal ingredient, and became a consumer product during the Meiji Restoration. International aid after World War II revitalized Japan's dairy consumption, and the subsequent rapid economic development optimized dietary structures, leading to a rapid increase in dairy consumption until saturation in the 1990s, although the structure continues to evolve. The aging population is gradually becoming the main consumer force, with prominent functional characteristics. School milk programs account for a significant proportion of Japan's dairy consumption, with drinking habits nurtured in schools. The consumption of dairy and milk shows a U-shaped trend with age; after the number of teenagers peaked, overall milk consumption declined, and the elderly gradually became another major consumer group. Milk primarily consists of low-temperature UHT products, with production and consumption regions matched. Yogurt stands out with its functionality, and its consumption has still not peaked, with Meiji yogurt holding a significant market share due to its functional attributes. Lactic acid bacteria beverages have matured, and leading companies often have medical technology backgrounds. Among solid dairy products, cheese is a major part, with consumption growth resilient across cycles, continuously achieving simultaneous volume and price increases, covering various age groups and multiple consumption scenarios, including dining, side dishes, and cooking. In terms of structure, fresh milk remains naturally dispersed, while high-value subcategories such as yogurt, cheese, and lactic acid bacteria are becoming more concentrated. Focusing on health, with functionality as the spearhead. There remains a significant gap in dairy consumption between urban and rural areas in China, with per capita dairy consumption in rural areas being only about 60% that of urban areas, and ongoing optimization of low-temperature structures. Currently, the leisure attributes of yogurt are still prominent, and probiotics are becoming a key focus in functional layouts, with anticipation for the launch of major functional products. The deep processing business is following the consumption trend from "drinking milk" to "eating milk," which is expected to become a core carrier of dairy consumption in the future. Risk warnings: food safety risks; rapid rise in raw milk prices; and competition easing less than market expectations.