China growth luring foreign dairy firms

By staff reporter

- Last updated on GMT

Related tags Dairy Milk China

China is luring more and more of the world's dairy firms through a
strong growth in domestic demand, says a new report, indicating
European companies have some ground to catch up.

China has the fastest growing milk production in the world and is set to become to world's eight largest milk producer by 2008, according to a report by 3A Business Consulting.

The report says demand has been driven by "remarkable growth in milk and dairy food demand" that increasing numbers of foreign firms are looking to take advantage of.

"Opportunities abound in the China dairy industry,"​ said Tage Affertsholt, the report's co-author.

"Firstly we see domestic industry players taking the initiative and driving development in their own industry. Secondly, some very strong global players have revisited their 'China strategy', and are undertaking various approaches to secure a strong competitive position."

Yet, the report's figures on those importing most dairy goods to China suggests European dairy firms need to do more to catch up.

New Zealand, via dairy co-operative Fonterra, was the biggest supplier of dairy products to China in 2004. Fonterra also recently spent $91m on a 43 per cent stake in one of China's biggest dairies, Shijiazhuang San Lu Group.

Almost $250m (€209) of dairy was imported to China from New Zealand in 2004, more than double the value of imports in 2002.

Australia and the US were the next biggest suppliers, sending in around $50m of goods each in 2004.

The biggest European suppliers by country were Finland, Ireland and the Netherlands, which accounted for less than half again each.

European dairies have, perhaps, competed better in China in terms of foreign investment in the domestic dairy industry.

French dairy giant Danone recently opened its first Asia-based research and development centre near Shanghai, at a cost of €2.5m.

And Scandinavian dairy group Arla Foods recently began a joint-venture with China's leading dairy firm, Mengniu, to supply milk powder to Chinese consumers. It said China had the world's largest market for these products

China imported twice as much milk powder (almost 150m tonnes) in 2004 compared to 2001, although the growth rate slowed after 2003.

Overall the country imported around 375m tonnes of dairy in 2004, compared to a little more than 200m tonnes in 2001. It also exported around 100m tonnes, largely made up of commodities.

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