September 26, 2003



China's Importance For Global Dairy


China is without a doubt, becoming a significant market for world dairy ingredients. The country has already become a major destination for many exporters, following closely on more traditional markets, and offers various potential price positions, a recent report published in the UK said.


Several factors are responsible for this trend. Economic growth which has enlarged greater consumer wealth has led to an upsurge in dairy consumption within China in recent years, owing in no small part to local perceptions of dairy products being highly beneficial to generally health. The subsequent expansion in dairy consumption has been rising at around 15% per annum, exceeding the 12% average growth in the food market.


Also, and in part due to rising incomes, more Western-style products have hit Chinese shelves, boosting both quantity and diversity of local processed food manufacture.


Any globally-oriented dairy ingredients supplier with long term sights on China's dairy ingredients market would know that planing for business development in China is essential. This is well illustrated by the case of Fonterra, which has driven up its local business by 400% over the last decade, most of which is at the quality end of the ingredients trade.


China's sheer market size and segmentation, nevertheless, would intimidate any potential investor. With over 400 dairy plants alone, leading suppliers to the Chinese ingredients market barely have their fingers on the surface of the business' potential. Constant assessment and painstaking reinventions are what's needed for greater insight into the country's burgeoning dairy ingredients market.


The entire array of dairy products include milk powders, whole and skim, whey products, lactose and derivatives, casein, caseinates, milk calcium minerals and natural milk calcium.


China's dairy output has seen nearly 12% annual growth for the last two decades, with the world's top 20 milk enterprises operating in the country. Latest statistics on urban Chinese consumers also show that 45% of Chinese now drink milk daily, and at least 27% consume yoghurt at least twice a week.


Among lower income consumers, and those living mainly in rural areas, dairy products are increasingly gaining a market foothold, with accordingly vast improvements in the quality, taste, hygiene, packaging and marketing of local brands. Indeed in the milk sector the dominant brands tend to be regional dairies such as Shanghai's Guangming (Bright) Dairy and Beijing's San Yuan, while in the yoghurt sector the major players are Bright and San Yuan again along with Hangzhou Wahaha Group, Harbin-based Wandashan and Inner Mongolia Yili.