Report author, Rabobank senior dairy analyst Michael Harvey says the automatic premium that international brands had historically received was unlikely to be repeated.
“It wasn’t long ago that being an imported brand automatically provided a retail price premium but that is no longer the case,” Mr Harvey said.
“This has particular consequences for Australia and New Zealand given the previously alluring retail price premiums, combined with trade opportunities and relatively low capital outlays, which fuelled a period of significant investment in liquid milk processing capacity across Oceania.
“This increased capacity has been specifically geared towards Asia’s liquid milk markets, the short-term consequence of which has been a contribution to diminishing export margins.”
The flood of investment in the regions has resulted in capacity almost doubling across Australia and New Zealand, with additional investment potentially in the pipeline.
This region’s dairy exporters are also competing with their European counterparts, many of which have large-scale and highly efficient processing plants complemented by a growing milk supply.
While economies of scale will be important to remain competitive in the Asian liquid milk export market Mr Harvey says developing a premium platform will be essential for those companies wanting to increase their margins.
“For dairy exporters this is not just about product and packaging innovation, but also category expansion, R&D and behind-the-border support to better cater to changing consumer demands,” he said.
“Strategic investment will be required to confront this highly-competitive new reality but for those willing to build a strong value proposition and promote their point of difference, there are still plenty of opportunities to be had.”
Source: LloydsAustralia
Link: https://www.lloydslistaustralia.com.au/lla/market-sectors/containers-and-container-shipping/FREE-Asian-milk-market-offers-little-fat-for-exporters—Rabobank-541179.html
