Organic yogurts are proving popular for health-conscious office workers and young parents.
Discerning shoppers seem willing to pay that little bit more for the right products as supermarkets start stocking an array of upmarket brands.
Classy Kiss, a yogurt rolled out from Green's Bioengineering (Shenzhen) Co Ltd, posted significant sales growth in third and fourth-tier markets.
It recently launched an organic brand, which sells at around 14 yuan (.1), one of the most expensive products from its dairy range. Earlier, it also launched a yogurt designed to help improve the digestive system after a meal.
The company hopes it will be able to cash in on the growing demand for healthy products.
Data showed that China is the second-largest dairy market in the world after the United States, according to Euromonitor International.
By 2022, the country's middle-class is projected to exceed 550 million, so dairy producers are focusing on upgrading their yogurt products.
In the past few decades, China's milk industry has grown rapidly with the emergence of major domestic producers, such as Inner Mongolia-based Mengniu and Yili and Shanghai-based Bright Dairy Group.
But a saturated market is forcing major brands to move upmarket with their dairy products, including high-end yogurts and milk, Southwest Securities stated in a report on the industry.
Zhu Danpeng, a researcher at the China Brand Research Institute specializing in the food and beverage business, predicted that by next year, the top-of-the-range yogurt market would be dominated by three national brands and two regional labels.
"Now it is hard to know which two of the regional brands will end up standing out from the rest," Zhu said. "Maybe it will be Classy Kiss or Yantang Milk. The smaller brands are still doing well in the segmented marketplace, and they still have chance to break through."