ANALYSIS - What could be in store for Chinese dairy demand in the New Year. Michael Rutkowski of Daxue Consulting explores factors at play.
Market stability in developed countries has increased the cost of acquiring new customers, writes Mr Rutkowski. Developed country producers have been seeking new markets with high demand.
The question remains which expansion direction should the dairy exporters go? There is a country with a huge number of customers increasing their milk consumption year by year.
With over 18 millions babies born each year, around 200 millions of children at the age 0-12 China become a significant point on the milk exporter map. The trends are constant.
Import Statistics and Predictions
Although the average milk consumption in China is much below the world average, it is rising quickly. Last years the import of baby formula milk powder has been rising over 10 per cent each year. According to the forecast the insufficiency of dairy products will be rising constantly to reach 24 per cent in 2030, much more than the 13.6 per cent in 2012. It is hard to ensure the accuracy of predictions for 2030, but more sources predict that the domestic demand and real GDP will maintain the high level the next few years.
Cultural and Quality Issues
There are many advantageous cultural trends in China. One of the most often advertised products in TV is milk. With many food scandals each month and high pollution, Chinese people believe that quality of food made in China is lower than imported one. If a man wants to marry a woman, he must ensure her family that their children will be raised in good conditions, high quality nutrition. Many Chinese also believe that babies prefer imported milk powder. Supplying family with milk powder has even played a role in some of the soap operas.
Choosing the Right Way
Chinese market apparently has prospective growth and obviously can bring a high return on investment however there are things which have to be understood. The number of competitors will be growing, the entry barriers will change. Many investments failed not because of wrong investment decision but because of the wrong approach. Entering this market should be based on a solid research, finding local business partners with access to distribution channels and depending on many other factors the right strategy should become just a formality.
TheCattleSite News Desk