9 Drivers of Chinese Dairy and Export Opportunity for UHT Milk

Rising income and rapid urbanization are two of the reasons outlined in USDEC report. 

Increasing UHT milk import volumes can be attributed to the strong economic growth seen in China over the last 20 years or more, and the spin-off effects of higher incomes, increasing urbanization and a drive to consume more and better food. Some market commentators attribute the recent increases to the fall-out of the 2008 melamine scandal. Undoubtedly, food safety concerns play a part in this, however the timing of the recent increases—four or more years after the crisis—call into question the true impact.

The growth of UHT milk imports is more accurately seen as a subset of the growth in the Chinese dairy industry over the last two decades. This has been driven by nine key macroeconomic and structural drivers.

The drivers are: 

• A sustained period of strong growth of the Chinese economy
• Rising per capita incomes
• Rapid urbanization, particularly to the major cities in eastern China
• The development of large, relatively wealthy second-tier cities
• Increased commercial and economic freedoms
• Westernization of diets and culture
• The introduction of western foodservice operators
• The establishment of modern, national supermarket retailing
• Development of a national transportation infrastructure

The impact of the country’s strong economic growth and the increase in disposable incomes amongst China’s emerging middle class cannot be understated. Globally, dairy consumption growth has mostly been driven by these factors; as consumers get “richer”, they demand better food. Dairy products are widely acknowledged by consumers in virtually every country and culture in the world as the best, most complete food products. This is especially true when it comes to children’s nutrition.

As Chinese consumers have got wealthier, they have consumed ever-increasing volumes of dairy products. Given the relatively low per capita consumption levels, and the very low penetration of “added-value” products like cheese, butter, and ice cream, dairy consumption levels are likely to continue to grow well into the future.

The imported milk market does not operate in a vacuum; it is a subset of the milk market in China. At forecast import levels, imported milk products will account for 1.1% of the total milk market in China.

(This post is excerpted from the USDEC, members-only research report, "The Market for Imported UHT Milk in China." If you are a member, download here.)

The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.