China Milk Powder Market: Supply, Demand & Competition Situations Research Report

Beijing Orient Agribusiness Consultant Ltd.
August 1, 2007
124 Pages - SKU: BOAC1549179
License type:
Countries covered: China

Milk powder was the most important dairy product before the early half of 1990s. However, as Tetra Pak’s aseptic filing products powering into Chinese dairy industry, UHT milk keeps a sustainable and speeding development with an annual average increasing rate of 89.37% between 1999 and 2004. Thus, it promotes consumption pattern of Chinese dairy market to liquid milk as the main part from milk powder as the main part. Currently liquid milk takes up an absolutely main part of Chinese residents’ dairy consumption, e.g., per capita dairy consumption of Chinese urban residents was 22.54 kilograms, in which liquid milk amounted to 22.04 kg (fresh liquid dairy products were 18.32 kg, and yogurt was 3.72 kg), and milk powder was only 0.50 kg.

In China, milk powder is usually divided into two categories by insiders, one category is packet milk powder which directly faces terminal market and takes up 60% of total amount of milk powder estimated by BOABC; while the other is industrial milk powder which is usually called big package milk powder and takes up 40% of the total amount in 2006. Industrial milk powder is compared with packet milk powder on terminal market, so there is no substantial difference between them. Because industrial milk powder is usually used as important raw material of dairy products (e.g., milk formula, restituted milk, yogurt, ice cream, etc.) and dairy food (e.g., bread, cake, biscuit, milk chocolate, dairy drinks, etc.), it is lower than packet milk powder in many aspects---deep-processing degree, technological level, packing form, packing material and so on.

According to China Dairy Industry Association, currently milk powder is the most important solid dairy product, which takes up more than 86% share of Chinese solid dairy products. There are several hundred milk powder processing enterprises on Chinese market with different scales and standards. In 2004, there were only 30 safe milk powder enterprises published by the State Bureau of Quality Supervision, which was less than one tenth of the total number. The concentration ratio of milk powder market is much lower than liquid milk market. In 2006, the production of the ten largest Chinese milk powder processing enterprises approximately takes up 53% of total amount of milk powder estimated by BOABC. A lot of changes happened to milk powder market. The Fuyang Inferior Quality Milk Powder Event in 2004 reduced the development of milk powder market that year. In the first half year of 2005, the event of exceed stipulated content of iodine of Nestle infants’ milk powder had a bad effect on Nestlé’s brand image and market sale. So it is still difficult to say how the milk powder market will make for.

At present, Chinese milk powder market presents increasing international characteristics. With the decline of tariff, China keeps an interacting relation with major world trade economies, e.g., China is the largest milk powder export market and the second largest market for New Zealand exports, next to the US; China is one of the most important whey product markets for the US; EU is the most important supplier of nonfat milk powder and whey product for China. In recent years, some relevant dairy policies and production in Oceania, the US and EU have changed a lot. The drought in Oceania reduced raw milk production and caused the decline of milk powder output and export volume. The decoupling of support for the production and export of milk powder and butter led to a decrease in milk production profit and an influence on milk powder production and export in EU. The US largely transformed corn for ethanol use, leaving limited room for feed application and resulting in the growth of raw milk producing cost. In addition, the US and EU are inclined to choose the combination of cheese and whey instead of the combination of milk powder and butter. International milk powder market kept the current level although with the impact of production decrease in main producing countries. Milk powder price, especially nonfat milk price, had a sharp growth in 2007, which is expected to continue their trend increase in 2008. Milk powder, especially nonfat milk powder, is a kind of ingredient in dairy and milk-added products, which have a widespread adoption in food processing industry. The shortage of milk powder has attracted the attention in domestic dairy industry, which is doing research to provide relevant policies. According to BOABC study, in recent two years, new investment in Chinese milk powder industry has reached 5 billion and production has surpassed 400,000 tons. Domestic large dairy enterprises, such as Guangming, Yili, Mengniu and Sanyuan are planning to establish and expand industrial milk powder production, and currently about 40%-50% dairy enterprises have adopted nonfat milk powder production line. From the perspective of export, Chinese milk powder export will have new opportunities, e.g., China entered free trade convention with the ASEAN with no duties on milk powder export to Southeastern Asia countries; China also reached free trade agreement with Chile, enjoying preferential policies on milk powder export. In addition, due to the reduction of milk powder production and supply capacity in major export areas, the traditional markets provide a chance for Chinese milk powder export. However, in recent years, the RMB stayed firm against the dollar, which brought certain negative effect on China milk powder trade.


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