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China Dairy Summit: China needs to walk before it can run

By Kacey Culliney , 06-Sep-2011
Last updated on 06-Sep-2011 at 17:00 GMT

China still has a long way to go in developing its dairy industry to international standards, according to the China Dairy Summit.

The invitation-only summit was hosted by animal health and nutrition company Vi-Cor and included dairy experts from universities, consulting firms and Vi-Cor employees. The aim was to establish a think tank for China’s dairy industry and recommend a model for improving it.

Vi-Cor’s president and CEO Mark Holt opened the summit by acknowledging that China has to ‘walk before it can run’ regarding improving its dairy practices.

He said: “The country needs to improve in a number of basic areas before it will become a viable market for US dairy-related products and services.”

James Roy, senior analyst at China Market Research agreed. He told FoodNavigator-Asia that the development of China’s dairy industry is going to be a gradual process and identified production and supply chain as areas of concern.

He said: “Supply chain security is a key area that really needs to improve. It is still a very opaque area. Part of the solution would be greater consolidation in the dairy sector with larger, more reliable companies with less room for smaller sub-contractors.”

Roy said production quality, in some cases, can be of a lower standard from smaller farmers, firstly due to capacity but also due to pressures for them to sell their milk – for example including additives for higher protein levels or thickening.

He said: “The dairy industry has been very fragmented with smaller suppliers squeezed to point with small farm areas. At the base of the dairy supply chain you find small scale, poor farmers trying to make ends meet.”

Currently, the Chinese government offers subsidies to encourage the building of dairies in China and summit attendees said that it is imperative for distributors to take action to ensure that future dairies in China are following best practices.

New Zealand milk giant Fonterra already has two dairy farms in China, with negotiations underway for a third. Its strategy is to build up a high quality, sustainable fresh milk supply for customers in China, selling milk to local and international brands in China.

The China Dairy Summit recommended that distributors identify and partner with an existing dairy in China and implement quality standard operating procedures so it can serve as a model.

Market analyst Roy said: “It’s about encouraging better practice and greater efficiency.”

The Chinese dairy industry has been hit by a number of scandals over the years including the 2008 melamine contamination which hospitalised around 54,000 children and killed at least four.

“The big challenge continues to be confidence in safety and quality of products especially after repeated inspection findings of safety problems in dairy farms,” said Roy.

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