How China is shaping the future of dairy

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These days, it seems very few conversations about food, urbanization, or economics do not at some stage steer towards China. As Mark Lyons, vice president of Alltech, points out, China will play a defining role in what our future will look like, thus necessitating that we understand it better.

“(Former Chinese leader) Mao Zedong said, ‘You are not a man if you don’t go to the Great Wall and hike it at least once in your life.’ I would say you are not an entrepreneur if you don’t visit China at least once in your life,” Lyons said.

Lyons, who has been based in China for the past 20 months, said the growth of China is “really unfathomable.”

“The pace of change is so quick. By the time I get back, I can imagine a building half constructed, a new subway being built — things are happening so fast,” he said. “Even though we hear a lot about economic slowdown, seven percent growth in the second largest economy in the world is still a very considerable number,” he told those attending Alltech’s Global 500 event in Ireland in early October.

Will need more meat, milk
While it is estimated that 300 million more Chinese will move to cities, Lyons says it’s not about urbanization, but rather this group’s different habits and needs. While China will have the largest middle class in the world and will need 50 percent more meat, milk and eggs, volume will not be the only concern, but rather the type of products these increasingly selective consumers want.

“They have a penchant for imported products.

This is something that will define the next 17 years in our industry,” Lyons said. “They will spend more as incomes go up.”

However, China is in a position of food deficit, particularly in dairy. Currently, the country supplies 80 percent of its own milk, down from 90 percent just five years ago. Chinese dairy demand will grow faster than supply, so imports are a must, even though the government would prefer self-sufficiency.

“The previous thought was milk was for children or possibly the sick,” Lyons said. “Then, the former Chinese Premier had a dream that each Chinese person could afford to buy one jin or 500 grams of milk to drink every day. This has accelerated the growth of the industry.”

Another demographic to consider is China’s rapidly aging population. According to Lyons, this group is healthconscious and very concerned about what they are eating.

“This is a major opportunity for the dairy industry,” Lyons said. “We must consider what are the requirements of this population and how can we meet it more quickly?”

China’s own dairy industry
The country is also looking beyond borders to make the Chinese dairy industry more sustainable. Imported alfalfa continues to grow; trade in dairy cow numbers is holding steady, and Chinese dairy companies Yili and Mengniu are becoming global players.

The country is also seeing a vertical integration as the Chinese government is calling for large-scale, higher-production farms. Programs have been put in place to help support alfalfa production, breeding and more than 300-head herds. Nestlé plans to build a dairy farming institute and Alltech China will be assisting with providing worldrenowned experts and nutritional technologies.

“One of our closest customers in China told us four things we must remember about doing business in China — the leader must be involved, the company must have its own technology, it has to have its own management style and culture, and it has to have the best people,” Lyons concluded.


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