Sophie Loras speaks to Dairy Australia about the changing landscape of China’s burgeoning demand for imported dairy products.
When Sarah Xu first began her role as International Marketing Manager with Dairy Australia more than a decade ago (then known as the Australian Dairy Corporation), the prominent products being exported to China were milk powders and whey powder. At that time, concentration of her role was focused on top-tier Chinese cities such as Shanghai and Beijing. In 2001, total Australian dairy exports to Mainland China were worth about A$69 million (about 2 percent of Australia’s total exports by value).
Today, that figure has ballooned to be worth A$274 million in 2011, accounting for 10 percent of Australia’s total dairy exports by value and making China, Australia’s second largest dairy market behind Japan.
Reflecting the increasing sophistication of China’s dairy market, demand for Australian dairy has shifted to include a range of milk powder formulas with higher value added, infant formula, cheese, skim milk powder, whole milk powder and milk.
One of the focuses of Ms Xu’s role has been to co-ordinate an annual scholarship programme – bringing key players in China’s dairy import sector – from dairy manufacturers who use dairy in their products to representatives from trading companies – to Australia for a first hand experience of how Australian dairy products are produced from farm to factory and seminars on quality assurance systems and food safety.
One of the main aims of the training programme, which includes participants from Hong Kong and Taiwan as well as Mainland China, also focuses on how to better use Australian dairy products.
The programme has been running since 1999. Dairy Australia remains in touch with its ‘Alumni’, conducting ongoing seminars in China and publishing a quarterly magazine with latest Australian dairy industry news in Chinese (as well as Korean, English and Japanese).
“We make sure the market is being informed with what’s happening in Australia,” says Ms Xu.
“Key aspects of the programmes are to develop a positive image of Australian dairy, show commitment to the market, making sure the markets know we think they are important and for some markets, we need to keep passing on the message of food safety and quality assurance systems – this is the most important selling point of Australian dairy to China.”
The scholarship programme for China has changed over the years to focus more on cheese, butter and some milk powder.
This year’s group spent their first week in Australia learning how to make cheese and butter and the second week visiting factories and farms with a particular emphasis on the food safety and quality assurance side of Australian dairy.
Dairy Australia has also assisted private groups – anywhere between five and 10 delegations annually. Most recently, Ms Xu facilitated dairy visits for a Zhejiang government delegation looking at food safety systems in general.
*Pictured right: Dairy Australia’s 2012 Chinese scholarship group taste test their cheese. (Dairy Australia)
Despite unprecedented demand from China, Ms Xu says Australia continues to face a number of challenges to the export of its dairy products – including the lack of a free trade agreement with China.
“New Zealand has an existing FTA with China and this puts Australia in a very difficult position competitively,” says Ms Xu.
She says that while Australia can benefit from New Zealand’s shortfall, Australia will continue to be disadvantaged going into the future as more and more products are added to the low cost end of the China-NZ FTA, damaging Australia long-term competitiveness.
“The demand is definitely there and it’s growing,” says Ms Xu. “We definitely have a role to play [in China’s dairy sector] but how well we play it without an FTA is a big stick.”
Australia’s edge remains on higher value added products, such as cheese and milk powder and a rapid increase in growth over the past 18 months in UHT milk.
Ms Xu who travels to China at least three times a year, says the big cities continue to be very legitimate markets, but demand in second tier cities is also growing.
“There have been a lot of changes in the Chinese market in my 12 years with Dairy Australia – the market is getting more sophisticated and now it’s more about quality, image and reputation,” says Ms Xu.
“Chinese Consumers today, are prepared to pay the money for quality.” ■
Total Dairy Exports China & Hong Kong
Total exports to China (incl. HK) 2001 2011
Volume nearly 60,000 tons 103,000 tons
Share between mainland China & HK 42% : 57% 71% : 29%
Value A$146 million A$369 million
Share between mainland China & HK 47% : 53% 74% : 26%
Proportion in total export by value 5% 14%
*Source: Dairy Australia