China’s HoReCa Dairy Market: Structural Growth and the Acceleration of Domestic Substitution

China’s dairy industry is undergoing a structural shift, and the HoReCa channel—hotels, restaurants, and cafés—is emerging as the most dynamic engine of growth. While retail liquid milk consumption shows signs of saturation, the demand for processed dairy ingredients such as cheese, butter, and whipping cream is expanding rapidly across foodservice scenarios. This shift is elevating the role of B-side channels from supplementary volume to the core of category expansion. Data shows that China’s B-side dairy market exceeded RMB 40 billion in 2024 and is projected to reach RMB 70.3 billion by 2028, corresponding to a 14.3% CAGR (2025–2028)—a clear indicator that HoReCa is becoming the new growth curve for dairy.

Rapid Scenario Expansion: From Western Cuisine to Tea Drinks

The rise of processed dairy in China’s foodservice system is rooted in its increasingly diverse applications. Cheese, once confined largely to pizza and baked Western dishes, is now being incorporated into Chinese cuisines—cheese-topped rice, dairy-infused hotpot bases, and baked seafood are becoming mainstream. Butter and cream are core components of bakery products and are quickly expanding into dipping sauces, hotpot bases, and pre-prepared dishes. Whipping cream, meanwhile, is the backbone of China’s booming new-style beverage industry, defining the texture of milk foam, cream-lattes, and cold-foam coffees.

Among all categories, tea drinks represent the fastest-growing B-side dairy scenario, with a projected 2028 market size of RMB 48.7 billion and a 16.9% CAGR. Western cuisine and bakery follow with 9.8% and 8.1% CAGRs, reaching RMB 15.6 billion and RMB 6.0 billion respectively by 2028. These figures reflect a consumer shift toward richer textures and more sophisticated flavor systems across beverage and meal categories.

China’s dairy consumption is also starting from a low base. Per-capita cheese consumption is still only 0.2 kg, compared with 2.6 kg in Korea and 1.8 kg in Japan. This structural gap highlights the long runway ahead for processed dairy in foodservice.

Domestic Substitution Accelerates: Policy, Cost, and Technology as Catalysts

The rise of B-side demand coincides with a favorable shift in supply-side dynamics. From a policy perspective, China’s recent anti-subsidy investigation into EU dairy imports notably covers high-value segments such as butter, cream, and cheese. EU suppliers currently account for 10% of butter imports, 30% of cream imports, and 13% of cheese imports in China. This environment is strengthening the competitiveness of domestic products.

Cost structures have also shifted in favor of local producers. Domestic raw-milk prices have fallen below the cost equivalent of imported whole milk powder, giving local processors a significant cost advantage in making high-fat, high-value dairy ingredients. As a result, locally produced cheese, butter, and cream are gaining share not only on price competitiveness but also on supply-chain stability and freshness.

Technological improvements are further accelerating substitution. Whipping-cream manufacturers have made progress in stability, whipping performance, and emulsification systems, enabling expansion from bakery into more demanding tea and coffee applications. Leading suppliers—including dedicated ingredient manufacturers and large dairy companies—are strengthening their capabilities in formulation, fermentation, and fat-structure optimization to better meet the needs of HoReCa clients. Similar advancements are occurring in cheese, where improvements in stretch ability, melt ability, and browning are supporting broader use in Western fast food and innovative Chinese dishes.

From Ingredient Supplier to Foodservice Partner

The competitive landscape is also evolving as dairy companies shift from simply offering raw materials to becoming value-added partners in the foodservice ecosystem. Ingredient specialists have successfully scaled whipping cream into major tea-drink chains, while cheese-focused companies are upgrading production capacity and building end-customer service teams to support menu innovations. Large dairy enterprises are investing in new processing lines for cheese and cream, with additional capacity scheduled to come online in the coming years, further strengthening their presence in restaurant and café channels.

Global models provide clear evidence of the opportunity. For example, international dairy leaders have shown that a combination of product excellence, application-science support, and a tightly integrated supply chain can create a dominant foodservice franchise. One leading multinational recorded NZD 4.06 billion (approx. RMB 17.5 billion) in foodservice revenue, contributing 18.6% to total revenue—a benchmark that underscores the strategic value of the B-side channel.

Domestic companies are moving in the same direction, investing heavily in application R&D centers, HoReCa-specific SKUs, and co-development projects with major chains. These efforts are shifting the industry from transactional supply to long-term partnerships.

Conclusion: HoReCa as the Anchor of China’s Next Dairy Growth Cycle

China’s dairy sector is transitioning from a retail-dominated, liquid-milk structure to a “deep-processing” model centered on cheese, butter, and cream. With its high usage frequency, stronger value contribution, and expanding application scenarios, the HoReCa channel is poised to be the most certain and scalable growth engine for the next 5–10 years. Rapid chain-restaurant expansion, menu innovation, domestic production upgrades, and accelerating substitution trends are jointly shaping a new competitive landscape.

The next phase of competition will rely not only on production capacity and cost efficiency but increasingly on integrated solutions—product performance, application know-how, logistics, and the ability to collaborate with restaurants and beverage chains. As these forces converge, China’s dairy industry stands at the edge of a major upward shift in both value and structure.