ASEAN-6 nations set to overtake China in dairy imports
Southeast Asia’s growing demand for dairy products in the next decade, is likely to see it overtake the world’s single-largest dairy importer, China.
The booming region is paving the way for more opportunities in key dairy-exporting regions such as Australia and New Zealand. Rabobank’s latest report, Dairy export boom beckons in ASEAN-6 – with a push and a pull finds the combined dairy import deficit of the ASEAN-6 nations, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, is one of the largest globally and continues to grow.
Rabobank forecast the region to grow close to 19 billion litres (liquid milk equivalent) by 2030. This year it is estimated at 12.9 billion litres. China currently has an annual milk deficit forecasted to reach 15 billion litres in 2030 (from an estimated 10.2 billion in 2020).
“The absolute market size of these collective nations is significant, and a growing milk deficit over the next decade in Southeast Asian countries will be a major ‘pull’ factor to propel dairy exporters to re-engineer their export growth strategies towards these markets,” said report co-author, Rabobank senior dairy analyst Michael Harvey.
“Given the scale and attractiveness of the ASEAN-6 markets, dairy exporters need to have the right level of exposure. And, while there are challenges, Rabobank is very optimistic about the future opportunities for dairy companies in these economies.”
The Rabobank report also said that the rising tension and less dairy demand from China are affecting how dairy exporters are reassessing their business strategies. There is also a deterioration in relations between China and its key trading partners which is causing uncertainty for exporters, said Harvey.
“As a result of China’s exceptional dairy market growth, many dairy companies now have a high degree of exposure to the Chinese market and are more sensitive to trade tensions,” Harvey explained.
He sees China’s dairy demand to decline over the next decade as the rate of growth in per capita demand slows down.
“However, Australia’s market share in the ASEAN-6 dairy markets has fallen over the past decade as milk production has dropped and other export markets, such as China, have been prioritised,” he said.
According to Rabobank, 35 per cent of Australian dairy exports went to China last year, while 30 per cent went to Southeast Asia.
“Given milk production here is growing again and a key goal outlined in the Australian Dairy Plan is to grow production over the medium term to [supply] export markets, now is a good time for the sector to be having discussions about its long-term role in the global market. The critical question is what markets should we invest in for the long term and how that then shapes the direction of the local supply chain,” said Harvey.
Rabobank is also seeing a “significant headroom for growth in per capita consumption” in Southeast Asia. It is underpinned by socio-economic factors and also local initiatives supporting the growth in consumption and as incomes continue to rise in the region.
The socio-economic factors affecting it are large populations; increasing urbanisation and a growing middle-class with purchasing power; development of integrated supply chains; current low per-capita dairy consumption rates; private and public investment to boost consumer awareness about nutritional benefits of dairy and government initiatives to expand local food processing.
Harvey said Indonesia and Vietnam are the leading markets as the countries’ economies have the strongest mix of positive macro-economic and demographic factors.
Rabobank forecast the region to experience robust growth in demand for yoghurt, fresh milk and ready-to-drink beverages during the next decade. It also sees expansion in premium and specialty products such as organic milk and childhood nutrition.
There will also be more modest growth in condensed milk and retail milk powders and more household consumption of butter and fresh cheese. It forecasts more demand for products from the bakery and quick-service restaurant sectors.
“Jostling for position in this market are a mix of strong local players with large and growing market share, established global dairy companies, other international dairy players seeking to broaden their scope into the region and also major Chinese dairy interests,” added Harvey.