'China' and 'Dairy' seem to be appearing in the same sentence everywhere right now.
There has been lots of noise about in-bound investment from farm to factoryand plenty of talk about the dairy market in China, Aussie milk being flown there and sold for eye-watering prices, demand growing for infant formula etc.
Earlier this week I participated and presented at the "Unlocking Dairy for China" workshop held by and at the Food Innovation Centre (FIC) in Melbourne. The FIC is run by Mondelez with funding from the Victorian Government with a vision of helping grow food exports to Asia.
There were ~20 delegates as well as eight presenters. Two dairy companies sent four representatives each which shows a certain level of interest in the topic.
Susie White facilitated the workshop and still managed to draw this graphic recording at the same time. An amazing skill I'm jealous of as well as a great summary of the day!
My top takeaways, moments, insights and themes were:
- Yes, it's a very large market with its affluent population growing, the middle class is 400m people plus 50m richer still
- It's not one homogenous market – China is more culturally/linguistically, religiously and genetically diverse than Europe!
- The burgeoning middle-class (avg family income $40K) doesn't have high disposable income – they're not the ones buying milk for $9/litre
- Perception of issues with food safety and quality are very high
- 'Natural' products are valued & international products more trusted
- Food is purchased online at a much higher rate in China than in most western countries e.g. 40 per cent of Chinese consumers buy food online versus 10 per cent in the US
- Dairy in China is nearly as big as the US dairy market at the retail level in dollar sales terms and growing much faster
- Fruit flavoured milk drinks are a popular format
- NZ sent $189m of butter to China in 2013, Australia…just $8m – do you think the FTA might make a difference in time?
- Shelf life is the technical crux for everyone thinking of taking their products to China
- Chinese retailers are demanding milk has 50% of its shelf-life remaining at the time of stocking. Tricky for HTST milk – there will be more ESL
- Cold chain is critical and its getting better in China all the time – the last mile especially for e-commerce deliveries is still missing
- Every 2°C rise in storage temp you lose half your shelf life – it's a rule of thumb for milk
- Serialisation – a unique code on every item – will be huge everywhere not just China – 7% of Norco's retail packs sold in China are scanned by the purchaserto ensure authenticity. I thought that was surprisingly high but is strong evidence for the need to build trust in your product
- The whole clean green thing is a bit of a given for any western dairy producer – not a point of significant difference for Australia or NZ
- The Export Markets Insights work from FIAL & Victoria University's SCIU is really very good. They need to market it better – dig in if you want good stats on exports to Asian consumer markets
- It's not a surprise, but the Chinese palate and expectations from dairy are very different. The learning here is if you're a SME looking to take a product to China get to the FIC to get your insights & prototypes done while they're still 'subsidised' by their grant money (i.e this year).
- Getting Australian fresh milk into China is hard work but its being done by at least five Australian brands/producers now with more going soon
- Getting other more complex dairy products into China is much more difficult because of their trade rules on ingredients in imported food
In the end I left thinking that there is a lot of potential, that we are probably closer to the beginning of the growth in this relationship than the peak, but that being successful will require determination, great relationships and the right products. There's very little that says Australia is in a better position than the rest of the world though – and the competition is sure to be be fierce. Hard work ahead.
Mark Fink is the Commercial & Communications Manager at Dairy Innovation Australia.