The Daily Fresh milk range, available in Hema's 14 stores in Shanghai and Suzhou in 750ml bottles, was sourced directly from Fonterra's farm hub in Hebei province.
Initial volumes were about three metric tonnes daily, with plans to scale up over time and expand as Hema increased store numbers across China.
It was meeting increasing domestic demand for higher-quality fresh products as part of the ''premiumisation'' of China's consumer categories, Fonterra Greater China president Christina Zhu said in a statement.
''Shoppers ... are becoming increasingly sophisticated in terms of their tastes and preferences, which are being driven by rising household incomes,'' she said.
Figures from McKinsey showed it was expected more than 75% of China's urban consumers would earn 60,000 to 229,000 each year ($NZ13,000 to $49,000) by 2022.
That was up from 4% on 2000, prompting a marked shift in consumer behaviour and purchasing power.
Linked to that trend was the rise of Hema which emerged on the scene in early 2016.
Consumers could either shop in-store using their mobile phones to browse and purchase, or order online for 30-minute delivery within a 3km radius.
It then used the data it gathered to provide a tailored, personalised shopping experience for customers.
The new product highlighted how Fonterra's business in China was leveraging the strength of its local milk pool, spread across three farming hubs, Ms Zhu said.
''No other multinational dairy company in China has a local milk pool to draw from, so we are in an advantageous position.
''This milestone with Hema is a sign of things to come and indicates that our push to shift more of our local milk into higher-yielding consumer and foodservice products is well and truly under way,'' she said.
Anchor UHT milk products and the Anchor Dairy Foods range of butter, cream and cheese items were also sold through Hema, while the retailer was also a foodservice customer.
Rabobank's latest dairy quarterly report said China was tightening environmental protection regulations, with local government zones prohibiting livestock farming in certain regions to prevent soil and water pollution.
If the impact on milk flows was larger than expected, it would lead to higher imports in 2018.
Milk prices continued to inch higher in China but ongoing industry consolidation and unfavourable weather had hampered production growth.
Rabobank senior dairy analyst Michael Harvey said dairy policy interventions in the EU would be a key ''watch factor'' for the industry this year.
Coupled with the risk of a United States exit from the North American Free Trade Agreement and geopolitical tensions, those factors could all create volatility in global dairy markets, he said.
The report said the global market would ''confront a wave of exportable surplus'' in coming months, estimated at 3.2 billion litres higher year-on-year (in liquid milk equivalents) for the six months from October 2017 to March this year.
The recent growth in global milk supply, which peaked in the last quarter of 2017 with the Oceania spring peak and a return to growth in Europe, was taking its toll on global commodity prices, Mr Harvey said.
Supply growth was emerging as the biggest risk for global dairy markets with the entire dairy complex witnessing weakness.
''Even butterfat prices, which had been defying gravity, have fallen in recent months. However, the low stocks of butter and robust demand are expected to support prices well above the five-year average.
''Meanwhile, skim milk prices remain depressed, with the closure of the European intervention scheme removing the floor and allowing prices to soften further,'' he said.
The global cheese market had fared best with the buoyant importing of cheese in countries such as Japan and China providing support.
Comments
It's all very well that us Kiwis produce the most waste per head but we're really going to up our game to stay ahead of China at this rate. So come on Kiwis, get polluting, this is no time to rest on your plastic laurels.