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Rabobank: China's Dairy Sector Holds Tremendous Growth Potential
Jun 17, 2007

Dairy product consumption in China is likely to remain strong in next decade, as per a major agriculture bank.

There are significant growth opportunities in dairy sector in China, as per Dutch bank Rabobank. Dairy sector in China is luring new players & is witnessing return of overseas firms, which were unsuccessful in their previous attempts to enter the market & are now eyeing for cooperation with domestic players.

High economic returns are luring more foreign firms to invest in the sector. Chinese consumers are increasingly expanding their consumption of dairy products. Modern processing techniques like Ultra-high temperature (UHT) processing have significantly improved dairy products' shell life, which has made inter-regional transportation possible. Dairy cattle & genetics imports from US, Europe & Canada plus increasing adoption of management practices & advanced feeding has dramatically enhanced dairy productivity in China.

Dairy Consumption has doubled in 5 years to around 25 Million Tons of milk per year in 2005, making China's dairy market a US$ 11 Billion business, growing at an annual compounded rate of 30% since 2001.

Presently, China is facing a deficit in net supply, producing around 24 Million Tons per year, short of a Million Tons, which is met through imports. Chinese production, on an average, increased at a compounded rate of 28% per year for last 5 years, driven by increasing number of farmers attracted by high gains from dairying compared to other farming pursuits. Milk demand is nearing saturation in big cities but consumption is still in development stage in rural areas & small cities.

The bank said that dairy firms are becoming major merger & acquisition targets. Overseas firms are eyeing domestic players after initial failures & are focusing on local co-operation as a 'route to success' in China's dairy sector.

"The outlook of China's dairy sector is changing as milk production growth is outpacing demand growth. Consumption is increasing & market is increasingly becoming sophisticated as consumers move to UHT milk from milk powder, consumption of higher-end dairy products like yogurt & cheese is increasing, modern retailers are improving distribution & size and consumers are become brand conscious for ensuring quality & safety", said an analyst at

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