A report into the Asian liquid milk market by Rabobank senior dairy analyst Michael Harvey said fierce competition from New Zealand and European Union exporters, plus local dairy producers, was likely to mean a squeezing of export margins.
“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.
He said the premiums prompted Australian dairy processors to gear up to take advantage of the premiums but their success also meant diminishing export margins.
The Rabobank report showed Singaporeans and Chinese were the biggest milk drinkers of the seven nations reviewed, with per capita consumption of about 62 litres and 38 litres, respectively.
Taiwan and Thailand were the next biggest markets with 10 litres per capita consumption, followed by Malaysia and Vietnam on about eight and 7.5 litres, respectively.
By comparison, Australian per capita consumption of liquid milk is about 105 litres, with only a handful of countries in Europe drinking more milk.
The Rabobank report showed EU exporters had about 60 per cent of the Chinese milk market with UHT milk, with NZ second on about 20 per cent and Australia about 15 per cent.
Mr Harvey said Europe was now freight competitive to Asian markets and milk processors probably had to pay more for their milk at the farmgate compared to Australia and NZ, but its processing plants were highly efficient and large scale, giving exporters advantages in Asian markets.
“Australia will still be able to compete,” he said.
“A large part of the trade is going to be high volume, low margin business.
“The days of just being an imported brand and getting a high premium will continue to erode.
“There will be a lot of opportunity to value add in niche markets if exporters can provide a strong value proposition.”
Mr Harvey said this included research and development, category expansion and behind-the-border support to changing consumer demands.
Source: WeeklyTimes
Link: http://www.weeklytimesnow.com.au/agribusiness/dairy/dairy-exports-fierce-competition-for-asian-liquid-milk-market/news-story/da322a0588158d4ea70f3f9aecc3c457