China’s Milk Boom: Does Australia Have What it Takes?

Apr 15
Share on LinkedInTweet about this on TwitterGoogle+Share on FacebookEmail to someone

Since the 2008 baby milk scandal, when thousands of infant children in China were poisoned by contaminated milk formula, the Chinese demand for Western infant formula has exploded. According to market research firm Euromonitor, demand will continue to grow, with sales set to double again in the next three years.  With a tin of foreign-produced infant formula selling for almost AU$100, and China experiencing a baby boom due to the relaxation of the one-child policy, it’s no wonder investors have named this the “white gold rush”.

China Milk Boom

But it’s not all about infant formula; other dairy products are in high demand in China too. The spending power of China’s growing middle class is heightening demand for higher quality food, backed up by The Australia China Business Council’s 2014 Australia–China Trade Report, which found that Chinese demand for high quality Australian food products has increased dramatically in the last two years and looks set to continue. According to Brent Moore, Austrade’s Trade Commissioner in Shanghai “Chinese consumers rate Australian dairy products very highly for quality and safety.”

“High-quality milk products are in strong demand in China and some quality
fresh milks are selling for $5 to $7 a litre. There is a big shift in tastes as the
middle class rises – they are demanding more processed products, such as
Dr John Vaz, Program Director for Finance, Monash University

Infant Milk Formula

How can Australia tap into this opportunity?

With China’s baby formula market worth an estimated AU$17 billion and the demand for high quality dairy products increasing, it is no surprise that China is becoming a key focus for the Australian dairy industry.

The China-Australia Free Trade Agreement (FTA) signed in November last year (which was almost a decade in the making) has seriously opened the door for Australia to tap into this boom. With dairy experts saying the FTA could be a ‘once-in-a-generation game changer’ for local producers, and particularly significant for Australian dairy farmers according to Peter McGregor, Managing Director – Head of Industrials, Food, Beverage & Agriculture, Commonwealth Bank.

Norco, A2, Jonesy’s Farm and Freedom Foods Group are amongst a few major dairy producers that have begun launching new products in the Chinese market, and mining magnate Gina Rinehart has also jumped on the opportunity by recently investing AU$500 million in the industry.

Who is our competition?

Opportunity is one thing, but with booming markets always comes competition! New Zealand is very well established in China; due to the fact their government signed a similar FTA back in 2008. The agreement saw a ten-fold explosion for Kiwi dairy exports, now valued at more than A$5 billion – led by the world’s biggest dairy exporter Fonterra.

There is no doubt New Zealand has an advantage by having their foot in the door first, but if Chinese dairy demand continues growing at the rate it is going there is more than enough room for Australia to succeed.

So, does Australia have what it takes?

I believe that if Australia maximises the China Free Trade Agreement, really understands the Chinese market and leverages Australia’s high quality product and brand we could have a real shot at growing the Australian dairy industry and competing on an international scale. Beijing-based Austrade Trade Commissioner Susan Corbisiero says: 

“In the face of competition from the US, Europe and New Zealand, winning
in China requires an investment in brand and relationship building

We have the pleasure of hearing two of Australia’s dairy industry leaders at our upcoming Maximising Agribusiness Competitiveness Conference. Ian Halliday, Managing Director of Dairy Australia and Angus Taylor, the brainchild behind dairy giant Fonterra will be sharing their insights and strategies for growth.  

So what do you think? Does Australia have what it takes to capitalise on the China milk boom?

Agribusiness Competitiveness Conference

Submitted by Fiona Campbell

Fiona Campbell

Fiona is a producer who brings an international perspective to the team, with a background and experience in Scotland, Singapore and Shanghai. She is a foodie, a keen netballer and passionate about travel.
Fun fact about Fiona – She survived cycling down ‘the world’s most dangerous road’! (In Bolivia, South America)

Leave a Comment

Your email address will not be published. Required fields are marked *

Other blog posts you may enjoy: