Dairy Products China News

In what is proving to be a difficult period for exporters, the international dairy sector is currently awaiting a revival in China’s commodity purchasing and reeling from the impact of the Russian trade ban. How long-lasting each will prove is open to question of course, but a resumption in “normal” trade patterns will be high on processors’ wish lists.

However these issues may work out, consideration of such issues should not distract consumer marketers from what has proven an interesting few months for China’s food retail sector. 

Wal-Mart has announced a major upping of its spend on food safety in the country – an increase of $16 million over the next two years.  Dairy Farm took a 20% stake in Yonghui, which operates close to 300 hypermarkets and supermarkets across 17 provinces. But much more notably, the local Monopolies and Mergers Commission has approved the 80%/20% JV between China Resources Enterprise (CRE, China’s no. 2 grocery retailer behind Sun Art) and UK grocery giant Tesco. The deal gives CRE a strong presence in Shanghai and in online retail. How beneficial it will prove for Tesco must be more open to question – will its name disappear locally?

These changes need watching for anyone looking to build a dairy brand in China, but – apart from how essential it is to have deep pockets - perhaps the wider lesson is the importance of timing and being an early mover. Tesco turned up late to the party in China, opening its first store in 2004 whereas Walmart entered China in 1996.  One can imagine that many exporters to China of infant formula and more recently UHT milk must be wishing they had moved earlier on the market opportunities that so many have been rushing to exploit in the last few years. Certainly marketers need a better grasp on timelines than a certain Mr. Mao, who was once reported as saying in economics discussions that a change would occur “in 200 years time, or perhaps 40”!