In most countries when consumers think of milk, it’s likely they’d picture smiling kids with milk-moustaches. They may visualise families in chorus, skipping through emerald green pastures amongst big-eyed cows with bulging udders. Chinese consumer’s perceptions aren’t so rosy. Every time someone in China has a sip or a suck of the white juice sourced from Inner Mongolian paddocks, there’s a small part of them worried that they’ll be bed-bound by morning, or worse still, their precious child will be. Hence the premium consumers pay for foreign dairy products, and why foreign milk powder producers account for 60% of China’s market.
Dairy is the extreme example of everything that is wrong with China’s supply chains. Nothing has done more to raise awareness about the poor quality and safety of goods produced in China, versus those produced abroad. The melamine catastrophe of 2008 and the scandals that followed have eroded Chinese consumers’ trust – not just for milk products, but for the China-Inc brand as a whole. In a way, poisonous milk has helped any Western business selling in China who is trading on the quality of their products.
The Chinese Government knows that if it can turn local milk around and restore faith in consumers, it will be a game changer. As part of their quest to make that happen, they’ve passed new laws in hope of fixing the problems. The private players such as Nestle are coming to the party, introducing new systems to improve the safety of its locally produced milk. Danone, who recently spent $417 million buying local dairy companies, also backs itself in making local milk supply safer. Something has to happen, simply to help supply the slew of new milk-guzzling middle class consumers coming to the market every day. In addition to new systems and laws to support the local milk suppliers, the Chinese Dairy Association is singing the praises of the nutritional advantages of local milk, and the Government is back to its old games to try and sway consumers’ preferences to local brands by investigating ‘unscrupulous’ behaviour of the Western brands who are creaming it. Think how Apple’s brand has been affected by a similar Government campaign.
There’s obviously still the polluted soil and water to deal with, yet each of the initiatives can only help close the gap for local dairy – probably not immediately, but in the medium term at least. Western dairy brands may not have it so easy going forward, and the focus will need to be on smarter marketing to retain their edge. And if it happens to milk, it could happen to any industry. As always, below you’ll find some articles that will hopefully help you stay ahead of the game. Good luck!
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