China's Dairy Industry Embraces Functional Protein Focus

China's dairy industry is undergoing a strategic transformation, driven by a growing demand for functional proteins. This shift was highlighted at the 17th Dairy Conference held in Nanchang, Jiangxi province, where industry leaders discussed the increasing importance of high-value ingredients to achieve better profit margins.

Global prices for premium dairy proteins such as whey protein concentrate (WPC) and whey protein isolate (WPI) have seen significant increases. WPC prices rose by 108%, while WPI prices jumped by 139% over the past two years, according to StoneX. This increase is attributed to limited global processing capacity and a rising demand for high-protein diets.

In China, the sports nutrition sector has experienced substantial growth, with a compound annual growth rate (CAGR) of 22.7% from 2015 to 2024. The sector is projected to reach 6.8 billion yuan by 2025, with protein powders accounting for 62% of sales. The market for ready-to-drink liquid protein formats is also expanding, with online sales growing by 478.4% year-on-year to 34.72 million yuan.

Both international and domestic companies are positioning themselves to capture this growing market. Ireland's food board, Bord Bia, reported a 32% year-on-year increase in Irish whey exports to China in 2025, along with a 36% rise in casein export values. Chinese dairy giants like Yili Group and Mengniu Group have introduced high-protein liquid milk products and are exploring the protein water segment.

The strategic focus on specialized protein production is part of a broader structural evolution in China's dairy sector. By expanding local processing capabilities with plans to achieve a combined daily processing capacity of 10,000 to 15,000 metric tons within three to five years, Chinese dairy producers aim to increase control over premium milk components, reduce reliance on imports, and capitalize on high-margin functional health trends.