High end dairy product opportunities in China

A pick-up in China’s appetite for dairy imports will create trade growth opportunities for Australia, albeit largely in higher-end products, according to a visiting Chinese dairy expert.

In Australia for a series of industry presentations, Rabobank Shanghai-based senior dairy analyst Sandy Chen (pictured) said after a two-year hiatus from the global dairy market, China’s appetite for dairy commodity imports is starting to revive, at a time when global supply across the export engine is returning to growth.

Longer-term, Chinese dairy demand will continue to expand, he said, creating trade opportunities for Australia, however much of this will be limited to higher-quality and value-add dairy products.

Mr Chen said while Australia was in a good position to take up some of the medium-term trade growth opportunities into China (with China’s import gap set to widen), many challenges would remain and hinder access to the Chinese market.

“China remains a market and industry in transition,” he said, “with the country’s dairy consumption fluctuating significantly over the past 15 years, while local production is also still undergoing considerable structural change.

“In terms of dairy consumption growth, we have seen this plummet from an annual growth rate of close to 19 per cent for the most part of last decade (2000 to 2008), to just a two per cent growth rate since 2012. And looking out to the medium-term, we are expecting dairy consumption growth to remain in low single digits of around two to 2.5 per cent out to 2022.”

Chen said while China’s per capita dairy consumption remained well below that of some of its east Asian neighbours, “such as Japan, Korea and China’s Taiwan”, there were some dairy product categories exhibiting strong growth opportunities.

“For example, annual cheese consumption in Japan is two to four kilograms per person, while it is close to two kilograms per person in Korea and Taiwan,” he said. “However in China, it is currently less than 100 grams per person.”

“While this sees China only import around 100,000 tonnes of cheese each year – largely for its food-service sector such as burger chains – Australia supplies nearly a quarter of all China’s cheese import requirements, having seen good trade growth in recent years.

“Butter consumption is also growing faster than other dairy categories, but it also represents a very small component of overall dairy consumption, so, like cheese, there is considerable opportunity for growth.”

Other sectors exhibiting strong growth opportunities include yoghurt and ‘premium’ white milk (which has a higher protein content of 3.3 to 3.4 per cent) compared with ‘mainstream or standard’ milk (with a protein content of 2.9 to 3 per cent).

Chen said while Australia has been importing fresh pasteurised milk into China, representing five per cent of China’s liquid milk imports, it was facing intense competition from domestically-produced milk.

“I see the export of fresh liquid milk into China being a very niche market,” he said, “given the high air freight costs and increasing local competition. To remain sustainable exporters supplying that market will to invest in a strong brand presence to warrant a premium retail price.”


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