A trade mission led by Minister for Agriculture, Food and the Marine Charlie McConalogue and Minister of State for new market development Martin Heydon to China and South Korea concluded last week, and there was plenty to learn from both legs of the mission.
One standout takeaway was the changing face of demand for dairy from China.
The demand is still there, and will continue to grow. But what drives that demand is set to change.
Up to now, milk powder for infant formula has been the main driving force for China’s demand for dairy produce. However, this is set to take a backseat in the future to powder geared towards health and nutritional products.
Speaking to Agriland in Shanghai during the trade mission, Minister Heydon explained this shifting demand landscape.
“We produce [infant formula] very well, it’s very safe and nutritious, and about 10% of all the infant formula in the world is Irish. It continues to be a very important market for us. But with a declining birthrate, from 18 million babies in China a few years to now nine million this year, we are looking at other growth sectors,” the minister said:
“The ageing population and adult nutrition is something there’s much more focus on now here in China then there would have been a few years ago,” he added.
“So obviously it’s a massive potential market, as is sports nutrition, and people understand, in the nutrients they consume in their food and supplements, its’s really important. So it’s a key market for us to go after because it is one of those higher value markets which is what we chase all the time.”
The changing demand was also highlighted by Bord Bia CEO Jim O’Toole.
He told Agriland during the trade mission: “There’s two things that are driving [the change]. The birth rate is declining very significantly. In 2017 there were 18 million births in China, last year there were nine million births in China, so do the math.
“The Chinese population is ageing, so while there are fewer births, there are more Chinese older people, and nutritional requirements for older cohorts of the population need attention,” O’Toole added.
“So therefore there is a shift, and I think the capability of the dairy industry in China to produce the ingredients for more functionality in adult nutrition, senior nutrition, for clinical, sports, and special medical purposes, is all shifting.
The Bord Bia CEO said that Irish dairy exporters will have to demonstrate the functionality of their product for the Chinese market.
“That is very much part and parcel of the shift in the type of dairy we will be exporting to China in the future, as we’re beginning to develop,” he said.
Conor O’ Sullivan, Bord Bia’s China manager, noted that whey production in China comes with a cost effectiveness issue.
“We make cheese, therefore we make whey, and you have both. In China, they need a lot more whey then they need cheese at the moment. So it’s not a cost effective whey producer. If they make the cheese to make the whey, the have too much cheese.
“So they don’t have the balance that we as an export-led nation that has cheese all over the word does, and therefore we can give whey ingredients to China,” O’Sullivan said, noting also that not all areas of dairy ingredient need have risen at the same level in China.
Cheese it not a particularly popular ingredient in China. During a seminar organised as part of the trade mission, dairy market analyst Song Liang pointed out that, in 2022, the per capita consumption of cheese in China was only 180g.
To put that into perspective, over 40 years ago people in Japan were eating four times that much cheese in a year.
During his presentation at the seminar, Song went into detail on the change in focus towards adult nutrition.
He noted that China’s demand for high quality whey protein will be much higher than casein protein in the future, due to the prominence of public health disease issues and growing health awareness, which has resulted in people paying more attention to their health, and increasing their expectations for nutritious and healthy food.
Their demand for food and drinks has changed from ‘eating enough’ to ‘eating well’ and also eating healthier and more nutritious.
According to Song, adult functional nutrition is a key trend for high value-added product development in the future.
More than half of the Chinese population showed an increased concern for nutritional supplements post-Covid 19, with the greatest increase in concern among people in the 36-40 age group, along with a relatively high percentage of heightened concern in the 20-25 age group.
Song predicted that, in the future, dairy imports from Ireland will be predominately high value-added raw materials, and that Ireland will be a key northern hemisphere player in China’s dairy industry.