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China’s appetite for imported UHT milk could grow four-fold to more than 1.3 billion lbs. by 2020.
In 2007, after conducting an in-depth study of international gouda trade, the U.S. Dairy Export Council (USDEC) launched its “Gouda Initiative.” The initiative, based on opportunities outlined by the research, focused on developing U.S. capabilities to supply bulk gouda to customers in Mexico, which at the time was buying more than 70 million lbs. of gouda per year—virtually none from the United States.
The initiative came at a time when the U.S. dairy sector was fighting a reputation as a casual participant in global markets—unwilling or unable to provide many of the products in demand overseas. Through cooperative work between checkoff-funded USDEC, Mexican buyers and U.S. manufacturers, the Gouda Initiative cultivated partnerships that helped raise U.S. share of Mexican gouda imports from about 1 percent in 2009 to nearly 30 percent in the first seven months of 2013. Gouda volume rose from less than 1 million lbs. in 2009 to nearly 18 million lbs. from January-July 2013.
It quickly made the United States a competitive supplier not only in Mexico, but also to other major gouda markets worldwide, including Japan. Most importantly, it provided a valuable lesson: When U.S. suppliers expand their export offerings and go after “new” product sectors, it not only provides commercially valuable growth, but enriches the United States’ reputation as a serious, committed global dairy player and lays the groundwork for future expansion.
The challenge is identifying the gaps in the U.S. dairy export portfolio and taking the steps necessary to close those that are viable to address. Since gouda, U.S. suppliers have done a good job of branching out, moving to provide high-spec nonfat dry milk/skim milk powder (NDM/SMP), milk protein concentrate (MPC) and, most recently, whole milk powder (WMP). The latest research from USDEC points to the next opportunity in our national portfolio: ultra high temperature (UHT) milk.
UHT milk is milk heat-treated and packaged to provide a 9-12-month shelf life without refrigeration.
The UHT report focused specifically on China, the world’s largest UHT milk buyer. Chinese demand for imported UHT milk is soaring. Consumption jumped from nearly 18 million lbs. in 2010 to a forecast 331 million lbs. this year. Demand scenarios suggest China’s appetite for imported UHT milk could grow four-fold to more than 1.3 billion lbs. by 2020, spurred by economic growth and the resultant drive to consume more and better food.
China is drinking more UHT milk than it can produce on its own, and imported brands are flying off the shelves. Due in part to past food safety scares, Chinese consumers have shown they are willing to pay two-to-three times the price of local labels.
Urbanization and middle class expansion are creating an ever-larger consumer pool. Urbanization is particularly important because dairy consumption in rural areas is negligible, meaning there is huge room for growth as those rural dwellers move to cities. About 300 million more people—a mass nearly the size of the entire United States—will move to Chinese cities over the next 17 years, encouraged by government programs aimed at shifting China’s economic model to one based more on internal consumption rather than exports.
U.S. suppliers have a reputation for high quality food and have established dairy trade routes with China over the past decade. Chinese buyers have consequently expressed interest in U.S. UHT milk to meet spiraling demand.
The decision U.S. suppliers will have to make is whether they want to play a role in meeting that demand. Like past experiences with gouda, NDM/SMP, MPC and WMP, capitalizing on the opportunity requires flexibility and commitment.
That means making product in package sizes (1-liter) preferred by Chinese consumers, adding nothing, not even vitamins, during processing.
Capacity expansion projects targeting Asian UHT milk demand have been proposed or are underway in Oceania. But even if all that capacity comes online, it will still be insufficient to supply all of China’s needs, particularly in light of Oceania’s desire to supply other regions.
The potential payback is greater than simply the Chinese milk market. USDEC sees opportunity in other Asian markets, including the Philippines, and for additional products such as UHT cream and lactic acid beverages.
Expanding into global in-demand product categories lifts the entire dairy trade endeavor, while making the United States a better, more trusted, more desirable global supplier as global demand continues to grow faster than supply.
(This article first appeared in Cheese Market News in November 2013.)
Image copyright: 123RF Stock Photo
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.
