Business analyst Mintel says more Chinese consumers prefer imported dairy products (43 per cent) to domestic ones (34 per cent). Even among those who trust local milk sources, 32 per cent prefer imported dairy products.
The findings are in the latest Mintel report Dairy Consumption Trends – China, which shows that China still lags a long way behind other countries In per capita consumption of dairy products.
Mintel forecasts the China dairy market to grow at a 6.6 per cent a year in value, to reach $76 billion in 2022.
China is Fonterra’s biggest market, consuming a quarter of the milk it produces, and generating $3.4b in revenue last year. Almost $300 million of its profit in 2017 came from all its China business.
Fonterra sales executive in Shanghai Yang Shuai said the perception of the superiority of imported brands was helping drive its increased sales.
“Do people trust the local product? It’s not necessarily that they don’t trust it but they are faced with more choices and there is a higher quality of products.”
“For the younger generation on social media such as Wechat, they are shifting from domestic brands to imported such as Anchor. They are getting to know the Anchor brand and that’s supported by our business growth,” Yang said.
China allowed imported brands to enter the UHT milk market in 2014, and since that time Anchor has become number one, even though it offers fewer lines of products than local producers.
Mintel research analyst Summer Chen said Chinese attitudes towards local milk sources were divided – 44 per cent believed they were reliable, while 36 per cent believed they were not reliable.
“When looking at the battle between domestic and imported dairy products, it seems that while urban Chinese consumers are regaining confidence in domestic milk sources and products, they still prefer imported options. To appeal more to consumers, domestic brands need to strengthen their offering in other areas, like positioning with a premium brand image, showcasing additional health benefits, and spotlighting innovative flavours in order to compete with imported brands,” Chen said.
Yang said the key point Fonterra made with Anchor was that “cows on the farms eat grass”.
“They know farm conditions in New Zealand are different to local.”
Anchor UHT milk on sale in a Shanghai supermarket.
In a Carrefour supermarket, Yang demonstrated a display promoting UHT skim milk. A promoter explains that, with summer approaching, the lighter drink is the appropriate one for the season.
Fonterra pays for the promotional spot but at a discount because the supermarket benefits from the increased sales. The normal price for a 10-pack of 250gm is $16, but in the promotion period it has been reduced to $11.
Fonterra’s business development general manager for China Arthur Kung said the growth in the UHT market had been rapid.
“The Anchor brand was launched only in 2014. It takes decades to build a brand in a market. Anchor is only four years old and we’re already number one for online and offline imported milk.”
Fonterra has also launched a novel fresh milk product in Alibaba’s Hema stores, using milk from its China farms. It achieved certification from the international Safe Quality Food Institute (SQF).
“The farms are the only SQF-certified ones in China. It’s tremendously difficult to receive it. Other local farms have started the process and backed out as soon as they learned how hard it is to achieve the standard.”
New Zealand farms have not applied for the SQF stamp of approval because they do not have to, there was “inherent trust” already there he argued.
Chen pointed out there was a lot of room for growth in China, which had a similar dietary pattern to Japan but fell a long way behind in consumption.
Per capita annual milk consumption in China is 14.3 litres, compared with 36.8 litres in Japan and 51.7 litres in the United States; per person consumption of yoghurt in China is 3.43 kg, 4.92 kg in the US and 9.66 kg in Japan. The Chinese consume a mere 0.02 kg of cheese per person, while the Japanese eat 1.46 kg per person and Americans 6.89 kg per person.
Top categories for sales growth in China since 2014 have been yoghurt and cheese.
Consumers were prepared to pay more for products they regarded as healthier and more nutritious, such as milk and yoghurt. Butter was less associated with health benefits.
Source: stuff.co.nz
