Driven in large by nutritionals and baby formula, Asian dairy demand “has exploded”, Barry Brennan, Glanbia’s business development director, told DairyReporter.com.
The company is spending €180m ($245m) building two milk seven-and-a-half-tonne milk dryers in Belview in Co. Waterford, Ireland, which will be equipped to produce infant formula, among other products.
“I think that’s the wise thing to do,” said Brennan. “Infant nutrition is a very fast growing sector.”
He estimated “that growth will be upwards of 850m litres” from the Belview plant between 2015 and 2020:
“The infant formula arena will be a key market for us, be it as finished infant formula, base powder or speciality products to feed into the infant formula sector.”
“It’s an unavoidable market. The growth is so phenomenal that we don’t have to go seek partners, people come seek us to partner.”
Infant nutrition growth is ‘unrelenting’
While infant nutritionals are a mature market in Europe and North America, Asia’s uptake is only beginning.
“What’s contributing to it?” asked Brennan. “The one-child policy in China? A heightened awareness of nutritional status? Urbanisation of populations? Whatever is driving it, the consumption of milk at infant right through to follow-on and growing up milks has just exploded.
“And it’s not a fad. It is unrelenting, and you can see that with the amount of infant formula companies popping up new dryers and facilities. Asia is driving the consumption.”
Brennan singled out China as a major future buyer.
“You can’t ignore it; it’s just huge and their consumption of dairy is starting from such a low base.
“The Chinese don’t eat [much] cheese but, through McDonald’s and Pizza Hut, cheese is becoming increasingly significant and it’s the same with infant formula.”
“They have a long way to go to match European consumption,” he said, but “China doesn’t have to go to that level. Even a smidgen of growth in per capita consumption in China is going to be massive just because of the population.”
‘The least important word is milk’
Unlike Africa and the Middle East, where dairy is eaten for its calories, Asia seeks milk products for nutritional benefits, said Glanbia’s director:
“In one sense the least important word is milk or dairy. It’s more important to have Vitamin A, D, and calcium, “good for your health”, “healthy heart” [claims].
“I haven’t found people consuming dairy for hunger purposes in China [or the rest of Asia].”
End of NZ supremacy?
Future Asian markets would never be self-sufficient, said Brennan. “China has a big land mass but it doesn’t actually have a very amenable terrain or climate for producing milk.”
Although Asia produces milk, “70% of milk in the India is in the unstructured market,” Brennan said, with Vietnam, Bangladesh and Pakistan facing similar distribution problems.
So far, because EU production has been curtailed by Common Agricultural Policy, Oceania has predominantly fed South East Asia and China. However Brennan believed New Zealand’s pattern of double-digit annual growth could not continue, leaving European countries to profit from quota abolition in 2015.
“So there are uncannily parts of the world that are amenable to producing milk, and there are parts of the world where milk consumption is growing significantly.
“That’s why we’re so confident of our ambitions. We might have to go to areas that heretofore we haven’t been in.”
‘Too late’?
Glanbia’s difficulty is keeping buyers interested until 2015, Brennan said:
“The challenge would be that it will be too late. We don’t think it will be too late, because global consumption is growing over 2-2.5% per annum, and that’s going to continue.
“We think that some countries are coming from very low bases, that generally wealth is being generated in the world and incomes are growing.
“As incomes grow in the lesser markets, the incremental five dollars is most likely to be spent on food, especially infant food.”