Some experts even contend that this new «dining boom» will rival Australia’s recent mining boom.
A tally of investments makes for impressive reading.
In the past two years, Australian dairy companies have spent or plan to spend more than $1.5 billion building new or upgrading existing dairy factories.
The bulk of the money is aimed at production for the export market — Asia in general, China in particular.
«The opportunity to feed Asia is an enormous one for the Australian agricultural industry and dairy in particular is one of these sectors that has got great potential,» analyst Michael Harvey of Rabobank said.
The global rate of growth for dairy foods is about 2 per cent per year, but in Asia it is much faster.
«The challenge there for [the Asian market],» Mr Harvey said, «is they can’t produce enough milk themselves, so they do need to import products and that’s where Australia, sitting on the doorstep of these markets, has the opportunity.»
FTA may lead to baby formula boom
Australia’s free trade agreement with China is expected to be in place for the dairy industry by year’s end and the deal will make Australian exports far more affordable.
During the next decade China will scrap import tariffs — some as high as 19 per cent — on everything from milk powder to yoghurt, fresh milk and cheese.
Without doubt the brightest star in dairy’s constellation is baby formula.
The industry calls it «paediatric nutrition», a term that covers everything aimed at feeding China’s burgeoning infant population.
The world’s most populous nation has seen a baby boom since the relaxation of the one child policy and demand for milk-related products is skyrocketing.
«At the moment this year, it’s around an $18 billion infant formula market in China,» Judith Swales, Australian managing director of Fonterra, the world’s largest dairy processor, said.
«By 2018, that’ll be around $33 billion.
«So you look and say not only is the growth absolutely huge but it’s the quality of the growth that is also giving people the confidence to invest, and that’s not just the processors but also the farmers,» Ms Swales said.
Trans-Tasman company ups stake in Chinese market
Fonterra is a farmer-owned New Zealand co-operative that owns and operates 10 factories in Australia.
More than 2 million tonnes of dairy products roll off the trans-Tasman multinational’s production lines annually to markets in more than 100 countries, but the company’s recent joint venture with China is the jewel in the crown.
«We’ve invested $NZ740 million to buy an 18.8 per cent stake in Beingmate, the largest infant formula player in the Chinese market with around a 10 per cent share,» Ms Swales said.
«So that gives us part of their business and it gives us access to their sales engine.
«That’ll include access to 80,000 points of sale that they have, 1,000 stores that they own, and 20,000 maternal advisers, advising Chinese mothers how to feed their babies.»
Such joint ventures are becoming more common.
«As well as providing the industry here with access to markets through marketing and distribution capabilities, you’re also getting the expertise coming from the Asian economy back into this region, plus capital to build the new facilities,» Mr Harvey said.
Even more vital is the assurance that Australian dairy products comply with the highest possible food safety standards.
In 2008, in what became known as the Chinese milk scandal, infant formula and milk was adulterated with melamine, a toxic compound that made products appear to have a higher protein content.
At least six babies died and there were reports of 300,000 victims having consumed the tainted formula.
«It sparked a revolution in China for the consumer to become far more discerning,» Steve Spencer, a Melbourne-based dairy analyst, said.
«And therefore the Government is far more discerning about how they source product.
«Scandals from time to time in that market help because they generate strong interest from consumers who can afford to pay higher prices for imported product.»
Australian must boost milk production: analyst
Some Australian fresh milk has been selling in China for more than $9 a litre, but Australia’s major dairy companies believe China’s increasing affluence and Westernisation will see products such as cheese and yoghurt also grow as valuable exports.
But to meet this voracious demand, Mr Harvey says Australia’s dairy industry must rapidly grow its annual milk production, which currently stands at about 9.4 billion litres.
And he warns that dairy companies from around the world are also vying for a stake in China’s dairy market.
«So they’re all making investments to get access to that market and to get product into that market,» Mr Harvey said.
«So China and Asia won’t be the silver bullet unless we actually get growth in milk supply here in Australia.»
Source: ABC