Most Chinese consumers favour domestic milk products, survey says
According to a recent online survey by the Social Survey Centre of the China Youth Daily, nine years after the melamine scandal, 50% of the interviewees see improvement in the quality of Chinese milk and 75% are confident in the future production. However, milk imports are still playing a huge role for Chinese demand, led by New Zealand and Australian producers.
In 2008, China has seen a huge quality scandal in dairy products, as chemical melamine was found in several dairy products. Since then, the government has implemented dozens of stricter rules and the quality of milk has improved significantly.
As a summary, the milk industry has been in the shadow of a safety scandal since 2008, when infant formula produced by Sanlu Group, then a leading dairy company in northern China’s Hebei province, was found to contain the chemical melamine, which killed six babies and left thousands seriously ill.
Milk is a daily consumable product, which requires sufficient quality standards to be accepted and bought by China’s growing middle class. Due to bad experiences in the past, Chinese consumers are still hesitating in buying milk produced in China and many keep to the purchase of foreign imported milk.
However, nine years after the scandal and many reforms later, the survey has revealed that more than 50% have confirmed that the milk quality of Chinese producers has improved in recent years. The share of those questioned who have a high confidence in domestic produced milk for the future is even higher, with more than 75%.
The largest group of interviewees was between 37 and 47 years old, an age bracket that remembered the melamine scandal and the previous low quality of China’s dairy products.
However, when choosing between domestic and foreign milk, China’s consumers are still torn. According to the survey, the preference for domestic milk is 1.4% points higher than for imported milk.
The biggest complaints about domestic milk quality are targeting the nutritional value of milk and safety concerns for consuming. These doubts are still existing, even though the dairy industry in China is ensuring that high quality and international standard procedures are followed.
The Dairy Association of China has said that 99.5% of dairy products checked in 2016 were up to standard and no illegal additives, such as melamine, had been detected in fresh milk for seven years.
Although overall confidence in domestic milk has grown to some extent, some customers are still concerned about the negative influence of air, water and soil pollution on domestic milk quality, so they continue to buy imported infant formula.
Australia and New Zealand are among the largest exporters of milk and other dairy products to China. Together with Germany, they are forming the top three import origins. Benefitting from high quality products by Chinese consumers and the geographical closer distance to China than Western milk producers, enterprises from these countries are making huge profits in the Chinese market.
One example for this is New Zealand’s A2 milk company, which is constantly investing in its marketing and product quality development to gain more market share in China. The enterprise sells fresh milk products through major cross-border e-commerce channels and 4,000 retail stores in China.
According to the company’s financial statement, China and other Asian markets contributed 133% growth in segment revenue and a 258% surge in operating EBITDA in the 2017 financial year.
Among them, China will continue to see increased production as a result of long term investments in dairy cattle genetics and from the consolidation and modernisation of dairy facilities.
However, the increased output bodes ill for China’s dairy import needs, because an improved domestic production is very likely to constrain imports, ending a multi-year trend of import growth in China.