China proposes controversial fresh milk ID system

- Last updated on GMT

Related tags: Fresh milk, Milk

The Dairy Association of China (DAC) is set to shake up China's
burgeoning milk industry with the introduction of a fresh milk
identification system.

The scheme is designed to promote fresh milk and enable fresh-milk producers to sell their products at higher prices. The system will be launched in major cities such has Beijing or Shanghai, and then gradually rolled out across the country.

The system should also help to protect the fresh milk market. Dou Ming, a senior DAC expert told China Business Weekly​ that some producers market milk from powder as fresh milk. Powdered milk tends to be 15 to 20 per cent cheaper than fresh milk.

"It is unfair that UHT milk, powdered milk and fresh milk are all sold at the same price. The system will ensure better products have a better price and help maintain the consumers' right to know,"​ he said.

The dairy industry is one of the fastest developing industries in China. Milk consumption is relatively low at present at around 8 litres per person, compared to 30 litres elsewhere in Asia, but consumption is expected to grow rapidly.

Last year, production value reached 50.9 billion yuan (US$6.15 billion), up 35 per cent year-on-year. A number of major processors have emerged as industrial giants in China.

Foreign multinationals such as Fonterra are now looking to get in on the action. The group has forged a joint venture with the San Lu dairy company, a major player in the market.

"One of the drivers here is Government policies to encourage milk consumption and not only because of the health benefits,"​ said Fonterra chief executive Andrew Ferrier.

"Their view is that higher demand for milk will transfer wealth to local dairy farmers. Higher demand is being actively promoted through programmes such as agricultural subsidies, milk in schools and the setting of per capita consumption targets rising from 18kg in 2010, to 41kg in 2030."

For Chinese dairy farmers, this is mixed news. Growing consumption means growing prosperity, but if there is not enough arable land to meet the projected increases, which is likely, then additional milk will have to be imported.

In addition, the DAC is likely to face strong resistance from major milk producers, other industrial associations and some government departments. Producers of UHT (ultra high temperature-processed) milk believe that the fresh milk identification scheme will greatly reduce the price of their products.

The China Dairy Industry Association (CDIA), which represents big dairy producers, is reported to be against the scheme.

According to China Business Weekly,​ the association believes that the fresh milk label is unscientific as fresh milk is usually pasteurised. The body argues that pasteurisation and UHT are just two different ways of processing milk.

Related topics: Markets, Emerging Markets, Fresh Milk

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