Dairy Products China News

According to Forbes’latest China rich list, the country’s richest man is now worth over $3 billion more than Wahaha’s founder Mr Zong, last year’s holder. His Wanda Group has done rather well in a range of industries as well as in property and in films –not even a dairy magnate can keep pace! The group is likely to do even better going forward, as it is an ideal exponent of the “soft power”of the cultural industries in which China wants to raise its profile.

It nicely indicates the importance of businesses being aligned with Beijing’s thinking and priorities. In terms of economics these centre upon two core objectives now. Firstly there is growth led by consumption, fuelled by urbanisation and the further growth of China’s middle class. The number of middle-class households –those earning USD18,000 (RMB110,000) to USD37,600 (RMB230,000) a year –will soar to 170 million in 2020 from 14 million in 2010. China is, after all, expected to gain 7 new cities with populations exceeding 10 million by 2020 –taking the total to 21 such cities. By then 60-70% of the country’s population are expected to live in cities: all will need to eat, and will come increasingly under the influences of international style foods including dairy. This reminds us, for example, of the huge foodservice opportunity the country represents.

The second objective is restructuring industries. In January the Chinese government issued guidelines for M&A and restructuring in the country’s core industries. Between 2013 and 2015, M&A will be encouraged in industries that have serious overcapacity problems. These include steel, cement, shipbuilding, aluminium, rare metals, automobiles, electronics, agriculture and pharmaceuticals. This puts the drive from restructuring in China’s dairy industry in some perspective, and reminds one that dairy is far from the only area likely to continue to see major changes over the next five to ten years at least.