Trade mission focuses on China as potential market
As a player in the world market, China can be mercurial – demand for dairy products one year, for example, can translate into good prices for farmers and marketers here in Wisconsin. In another year, when China doesn’t want our products, the market drop can be dramatic.
But there are some in the agricultural community who see China and its vast population as a marketplace that cannot be ignored – especially when it comes to dairy. With 1.4 billion Chinese people, the country is seen as a vast untapped market for dairy products and a place worth exploring, they believe.
Trade specialists from the Wisconsin Department of Agriculture, Trade and Consumer Protection trekked to China earlier this year to meet with university officials, dairy farmers and food marketers as well as visiting the International Dairy Expo and Summit. They were joined by representative of several Wisconsin ag businesses who also see market opportunities there.
Everywhere the Wisconsin trade delegation went, says Jennifer Lu, the Chinese people all knew about Wisconsin ginseng. “Most didn’t know anything about dairy, America’s Dairyland or Alice in Dairyland, but they knew ginseng,” she said, noting that in China most people view ginseng as a vitamin.
They drink it as a tea to boost their immune systems; and Wisconsin’s ginseng is known for being the best in the world. One of the group’s stops was at a 600-year-old store where people go for traditional medicine like herbs and ginseng.
Lu, an International Economic Development Consultant with DATCP joined Sandy Chalmers, the agency’s Assistant Deputy Secretary, along with a group of Wisconsin ag business representatives on the trip that included visits to two distinctly different provinces -- Zhejiang, which is about the size of Indiana, and Heilongjiang, which is in the north.
Heilongjiang has been Wisconsin’s sister state for more than 30 years and is the home of most of China’s dairy industry. Chalmers notes that there are more Chinese who eat dairy products in northern China because of the influence of food customs from Russia and Korea.
“There are opportunities,” Chalmers said. “There is an entire new generation that is interested in the West and the trend toward urbanization is changing food consumptions patterns. The government’s relaxation of the one-child policy will also have an impact.”
The delegation visited with university official in Zhejiang province; its agricultural curriculum is focused on tea, citrus, silk, swine, poultry and consumer trends but not much on dairy. That region is transitioning from farmers who milk one or two cows in tie stalls.
Two of the Academies of Agricultural Studies featured a high level of agronomic research, Chalmers said. At the Fuli Food Science Institute at Zhejiang University (one of China’s top Universities, which incidentally has a University of Wisconsin graduate as its president) they learned of the challenges facing the food industry in China.
“This traces back to the melamine crisis and the continuing confidence crisis among consumers,” she said.
That scandal – a food safety nightmare in China – came in 2008 when rogue food manufacturers put the industrial chemical melamine into milk products to give the appearance of higher protein levels at a cheaper price than real dairy protein. An estimated 300,000 people in China were sickened by the tainted milk products including tens of thousands of infants. Many died.
An investigation eventually discovered 22 companies were involved in the tainting of dairy products. The debacle raised concerns about food safety and political corruption in China and caused many nations to cut off their food imports from China.
(The dairy product scare followed a similar event a year earlier that saw melamine-tainted pet food ingredients flowing out of China into U.S. markets.)
Chalmers said the there is lingering mistrust of the domestic food industry as a result of the melamine scandal and its aftermath. Many see that as an opportunity for importers of high-quality dairy products from other nations into China.
One of the Chinese businessmen they met with was in the infant formula business and Lu said officials everywhere they went were interested in U.S. food safety processes, especially in production of products like milk powder, UHT milk and infant formula.
“It was interesting to hear their questions,” says Chalmers. “They are trying to figure this out.”
The Wisconsin group also visited a 1,200-cow freestall dairy facility that was very modern and would look right at home in America’s Dairyland. The farm had a Surge milking parlor and a mister system that the owners bought at World Dairy Expo just last year.
But with all its modern trappings, the Fulun Dairy Farm may not be in business by next year, the women said, because their business model has the operation buying hay from California, Washington and even Spain. They cannot grow corn in their region. They said they are losing $300,000 a year because of the shipping costs for their feed.
Lu said it isn’t the overseas shipping that’s killing them because the container shipping over the ocean isn’t prohibitively expensive. “It is the cost of transportation within China that is very high,” she adds.
At an International Food Market they visited, the dairy case was dominated by products from Australia, New Zealand as well as Germany, Switzerland and France. Products that have gotten very popular included yogurt and yogurt drinks.
One of the up and coming trends in China is a “dairy bar” – a place where young people gather and drink dairy. “It’s very trendy. It’s like a coffee shop where young kids gather and socialize. One franchise company has over 1,000 dairy bars,” said Lu.
Though Chinese consumption of dairy is generally pretty low, it is growing thanks to the interest from younger Chinese who are willing to pay more for quality dairy products and trendy food. If they think it is something that is part of Western culture, they are interested, she adds.
As a result of its “trendiness” in urban areas, dairy consumption per capita there is up to nearly double what it is in rural areas.
It is a national goal to increase dairy consumption and the nutritional plane of the Chinese citizens. Chalmers notes the nation is on its 13th five-year plan and an investment of $210 million has been made in the livestock sector – with a focus on dairy. “The wheels are already in motion,” she said.
The women noted that there is no entity like the Wisconsin Milk Marketing Board so the government takes the role of trying to encourage dairy consumption. Officials they talked to were very interested in learning about how it’s done in this country.