Earning Our Cheese Export Credentials

The global economic recovery is solidly under way in developing countries. Economic fortunes are “reflected in dairy demand [with] strong buying from developing Asia, the Middle East and North Africa,” notes Rabobank. With the developing world getting back on the dairy consumption growth track, U.S. cheese makers have an opportunity to energize sales in a number of regions where they currently sit on the low end of the market-share scale.

A perfect example: Southeast Asia.

Southeast Asia—specifically Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam—is a budding cheese consumer, fueled by foodservice expansion and the region’s extensive processed cheese manufacturing operations (which purchase imported cheese for further processing). Demand grew strongly over the past decade and today far exceeds domestic capacity.

In 2009, Southeast Asian cheese imports rose 4 percent to 52,000 metric tons. USDEC projects import volume will increase to 62,000 metric tons by 2013.

The United States, however, has been a relatively minor player in the region, grabbing only 8 percent of the cheese import market last year.

A larger role is well within U.S. grasp if U.S. suppliers can take a more strategic view of the growth potential in the region, importers say.

A more strategic view involves everything from targeting the right buyers to providing first-class service to delivering the desired product. Together, they accomplish a feat that has so far eluded U.S. cheese makers: They display to potential buyers that the United States is a committed player in the market.

Other global dairy powerhouses like France’s Bel Group, the Netherlands’ FrieslandCampina and New Zealand’s Fonterra Co-operative Group have all targeted Southeast Asia as a high-growth region. They’ve invested in brand building, established regional offices and formed partnerships with local importers/distributors—some even erected manufacturing plants for processed cheese.

Most U.S. suppliers on the other hand have jumped in and out of the market.

It is not necessary to build a Malaysian cheese factory to demonstrate commitment to Southeast Asia, but U.S. companies do need to invest in areas where many Southeast Asian buyers perceive the U.S. industry is falling short.

USDEC has heard comments from customers in the region that U.S. suppliers are unresponsive to inquiries, lack a consistent presence, offer a low level of customer service and generally only provide short-term and spot pricing. The impression is that U.S. suppliers lack a realistic business and marketing strategy to be serious players.

One of the primary hurdles to securing a greater share of the region’s growing cheese market (as well as shares of other cheese and skim milk powder markets around the world) is U.S. supplier attitude. Buyers want consistently available, consistently priced product. That means viewing the market as a critical component of overall, ongoing business, which means allocating resources and approaching it with a long-term mindset.

For example, in Southeast Asia, cheese must be Halal-certified to meet the needs of the region’s dominant Muslim population. U.S. cheese makers might currently produce Halal-certified cheese, but they fail to earmark it for Halal markets. In practice, that results in very little Halal cheese available for export and indicates a lack of interest in serving the region’s customers. (Halal certification is relatively straightforward process; USDEC can provide information on how to achieve it.)

Southeast Asian buyers also get forward pricing from U.S. competitors, and they need it from the United States. (U.S. cheese suppliers will have an additional tool to facilitate forward pricing later this month when CME Group launches its new cheese futures contract).

In cheese specs, the United States is not far off the mark. Foodservice and industrial buyers state U.S. cheese functionality is acceptable, although they also note greater product variability and a “saltier” taste than counterparts from Oceania and the European Union.

Addressing even minor spec differences would engender good faith and build the United States’ reputation as a continuous supply partner.

If the United States takes action to earn its consistent-supplier credentials, USDEC projects U.S. cheese shipments to the region could reach 22,000 metric tons in the next 10 years, up from an estimated 5,200 metric tons this year, more than doubling our import market share.

Overall U.S. cheese sales to Southeast Asia have grown over the past few years (despite a decline in 2009) and some suppliers have established themselves as reliable sources, but ample room exists for more participants and more volume from those already engaged.

Ultimately, it’s Business 101: Southeast Asian cheese buyers want a supplier who will work with them, not just sell the occasional container load. A solid growth market awaits in Southeast Asia, and U.S. suppliers can take part by adopting a more progressive global worldview.

(This article first appeared in Cheese Market News in June 2010.)

The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.