Irish dairy board seeking higher sales to China

By Dominique Patton

- Last updated on GMT

Related tags Dairy giant fonterra Milk

The Irish Dairy Board is eyeing China's foodservice market as an
opportunity to add volumes to its growing retail business.

The dairy co-operative already supplies its Kerrygold brand butter, cheddar and mozzarella cheese to around 200 stores around China and doubled its sales in the market during 2007, said Karl Long, business development manager in China. "We're now talking with our new distributor to focus on foodservice. It's a big business here with a huge number of new hotels and Western restaurants opening,"​ he told Currently China's foodservice market is dominated by Australian and New Zealand suppliers. Dairy giant Fonterra opened a foodservice innovation centre in Shanghai in 2006, seeking to tap into China's fast-growing bakery market. Chinese bakeries offer a wider range of cream-based cakes and desserts than their European counterparts. Fonterra has a major advantage in the Chinese market with a presence over more than 20 years. It is also set to benefit from a new trade deal signed recently between China and New Zealand. But Long says chefs in the country's international hotels and restaurants will welcome a European supplier to the scene. The IDB is aiming to provide its foodservice range in advance of the Beijing Olympics when there is expected to be strong demand for Western-style food not only from visitors but also Chinese consumers whose tastes are evolving and demanding more dairy-based foods. "Butter is increasingly used in the new bakery products and cheese is also popular now. Consumers typically buy mozzarella first as they know it is used on pizzas,"​ says Long. Rising milk prices threaten to dampen demand in new dairy markets like China however. "Retailers are reluctant to take on price rises when these products are already considered to be high-end goods,"​ said Long, revealing that he is still in price negotiations with Carrefour. Reporting on its global performance earlier this week, the IDB confirmed that higher prices had taken their toll on demand in other markets, especially the branded milk powder sales to Africa. The Chinese government has however recently allowed two major domestic dairies, Bright Dairy and Food and Sanlu Group, to raise milk product prices following a curb on price rises brought in since January. This may make it easier for foreign dairies to push up prices. IDB chief executive Noel Coakley said the group will remain under pressure to innovate to support ongoing high prices. "Product development will be very important with a specific focus on added value and consumer convenience." ​Sales of Irish dairy products rose by 2 per cent to reach €2.1 billion last year, thanks to strong growth in international markets like the US and Europe. The Kerrygold brand grew by 1.8 per cent, helped by a 0.5 per cent rise in volume share in Germany. Two new products will be launched in Germany in 2008 to retain the brand's leading position. It also performed strongly in the USA, with sales up 7 per cent thanks to public relations campaigns, and has recently entered the Moscow market with its foil packed butter. It is planning to expand into other major Russian cities and launch Kerrygold cheeses in the market in 2008.

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