New UHT plant construction starts
Construction is underway at Fonterra’s new UHT cream plant at Edendale, Southland following a groundbreaking ceremony recently.
Demand for dairy is already soaring, driven by huge populations and fast-growing regional economies, and buoyed by changing consumer behaviours and tastes.
Asian economies are growing rapidly compared to developed markets such as the US and Europe. There’s a strong correlation between a country’s GDP and dairy consumption, which means that as people become wealthier, they want higher-protein foods and drinks, particularly dairy.
With more money in the region’s collective wallet, Asian markets are now in the ‘take-off zone’ for fast growth in dairy demand.
Urbanisation plays a big role in the growth of dairy as city dwellers consume more dairy products than their rural counterparts.
About 1% of the population in China seeks a better life in the city each year, which means Chinese cities swell by 13 million new inhabitants every 12 months.
With a similar urbanisation rate in India, which is expected to increase its urban population to 40% by 2025, the impact for dairy demand should be massive.
A young workforce in Asean countries and India will also propel market growth in the coming decade, as will an expanding middle class. In India, the top two consumer categories – elite and affluent -- will fuel much of the country’s growing appetite for dairy and by 2025 will account for 40% of dairy consumption versus 27% in 2016.
The term ‘glocalisation’ was coined to describe the adaptation of globally marketed products and services into local markets. For dairy consumers, global ingredients bring exotic tastes to local products, giving people more chance to taste unfamiliar flavours.
Cheese, for example, has benefited from Asian people’s desire to try non-traditional foods. With almost 400K tonnes of cheese imported in the past five years, the cheese category has risen on average 30%/annum over this period.
People also want safe and quality dairy products, and a variety of products to choose from.
The internet age has completely changed the market landscape for brands in Asia. E-commerce and social media hugely extends the consumer reach, supported by the logistics system, and lowers the barrier for newcomers to establish a brand.
O2O -- online to offline – is connecting traditional business with a modern digital platform, emerging as a new retail channel and a new way of doing business.
Hema Fresh has been a pioneer of ‘new retail’ in China. A chain of cashless supermarkets, the stores offer a giant selection of fresh food. Customers use their smartphones to shop and pay for their groceries, which are delivered within the hour for those up to three kilometres away. About 70% of Hema’s sales come from online orders.
Another shining example of new retail is Luckin, the dark horse in the Chinese coffee market. It has charged past its competitors, including Starbucks, by meshing trends in China’s tech industry with the coffee shop model. Nine months after its start-up, today it’s worth US$1 billion.
Asia has enthusiastically embraced the health and wellness trend. People want to be healthy and fit, look good and use exercise as a basis for socialising. Dairy protein is increasingly recognised for its nutritional benefits and the yoghurt market is booming.
While offering significant opportunity for global dairy players, the challenges of operating in Asian markets are likely to present speed bumps along the way. However, with a seemingly insatiable appetite for dairy in the region, market growth should continue at full steam for years.
• Teh-Han Chow, president Fonterra’s NZMP Greater China, South & East Asia gave this speech at the recent NZX Global Dairy Seminar in Singapore.
