A supermarket in Shanghai has this week for the first time been selling fresh milk from Australia for 78 RMB, or about $13, a litre.
Milk from Jonesy’s Dairy Fresh sold well at the grocery level of upmarket Sogo store despite the extraordinary price.
And a New Zealand company has for the past year been delivering milk, guaranteed fresh within 24 hours from the farm gate to your door in Shanghai.
These two initiatives are winning strategies but they reach only the very wealthy in China.
The bigger opportunity is the country’s middle class, now numbering more than 300 million – a little bit less than the population of the USA.
This is why there are so many suitors for Warrnambool Cheese and Butter, Australia’s oldest dairy, and why the bid price keeps going up. Bega Cheese, Murray Goulburn, Canada’s Saputo and New Zealand’s Fonterra are all trying to get a piece or a bigger slice of the action. Lion Co, the local subsidiary of Japanese brewing giant Kirin, upped its stake to 9.99% recently to ensure a seat at the table in the event of a likely takeover.
Everyone in the world wants to sell to China, especially its new middle class wanting the same things as all middle class: better education for their children; clean and healthy food, and medical services.
The competition is fierce but in dairy Australia has an advantage in that it produces roughly twice as much milk as it consumes and has a reputation for green, clean and healthy food.
New Zealand is the world’s biggest milk products exporter but Australia can use that to its advantage as the Kiwis create markets.
This is how much potential there is in China for dairy: urban Chinese consume per head about one-tenth of the western standard for dairy foods and about one-third of the rest of Asia.
Baby formula and powdered milk is the current game in play. China doesn’t make enough to fill domestic demand and foreign formula is seen as better following an infant formula contamination scandal in 2008.
Mainland Chinese buy up infant formula when overseas and bring back suitcases full for friends or to sell.
On Tao Bao, a site similar to ebay but mostly selling new products, there’s an international area where people round the world set up to sell into China. Baby formula sells.
But not all dairy products have an immediate market.
Cheese first came to China, or to be precise became available to many, when McDonald’s opened its first store in Beijing in 1991.
It was a strange taste to the Chinese palate. They didn’t really go for the cheese but the burgers were new and cool.
Then came mozzarella cheese with Pizza Hut followed by western-style cake shops with cream cheese.
Today in supermarkets there’s lot of kids’ cheese but also cream cheese with added flavours including fruit and nuts.
Liu Bing went to school and university in Australia and now lives in Shanghai.
“People in China find it hard to accept the taste of cheese,” she told Business Insider. “The Chinese palate is used to a different taste than cheese.”
Bing returned to China in 2000 after 13 years in Brisbane but to her the thought of eating cheese is not a pleasant one.
“I still don’t eat cheese myself,” she says. “I force myself to try sometimes in the right social setting.
“And I can’t say that I tell myself, ‘I’ll have a piece of cheese when I’m drinking’. The taste is quite different from Chinese food.
“The Chinese community at large is not used to the cheese flavour yet. It’s early days. But a new generation will be different because many of them are growing up with cheese readily available. Also students from China are going overseas at a much younger age so they more easily adapt to the cheese taste.”
Bing is now Australia’s trade commissioner in Shanghai. Her job is to help Australian companies penetrate the China market.
Australia food reputation in China is based on a variety of food products including beef, lamb and seafood such as abalone, lobster, oysters and snow crabs.
Again, this is expensive and usually appears only for weddings or entertaining important guests. Lobsters from South Australia, Tasmania and Western Australia sell for between $55 and $90 a kilogram, depending on the season.
In packaged goods, Tim Tams are recognised as Australian by the Chinese.
“Tasmanian cherries, Australian oranges and citrus fruit also sell very well at a good price,” Bing says. “Australian mangoes are coming into China in very large quantities. So for seafood and fruit, everyone knows Australia has them.”
Less so for dairy but that is changing.
Driven by higher prices Australian dairy exports will increase by 15 per cent to $2.6 billion this financial year, according to forecaster ABARES.
China has been at the centre of the growth in demand for milk and dairy products in Asia, particularly over the past four years. Chinese imports of milk and dairy products increased threefold to $2.7 billion over the four years to 2011.