Dairy is big ticket item in growing Ireland-China agri-food trade
Minister for Agriculture, Charlie McConalogue, meets Chinese chefs during a Bord Bia's Chef Masters event in Beijing in May 2023.
China Agri-Food Exports Rachel J Martin It might be famously known as “the silk road”, but these days trade to China is more like the “milk road”, with Irish dairy exports to the east a key market.
Built on Ireland’s reputation for safety, nutrition, and trust, Chinese buyers are a discerning audience, seeking out the highest standards for their food, with a keen interest in social and environmental sustainability.
It might be Ireland’s sixth most important agri-food export market, but China also holds a key role in the global market. Of all the milk produced in the world, just 8% of it is traded, and of this 8% China is the most influential player.
China trades between 25% and 33% of all globally traded dairy products annually. The more it purchases, the more in demand dairy commodities are.
Such is the frequency of visits from Chinese buyers, that some Irish dairy firms — such as Lakeland Dairies — have even been known to include signage in both Chinese and English their factories.
China’s one-child policy might have ended in 2016, but — after decades of restrictions on birth rates — Chinese mothers only want the best for their babies. Part of that demand is met with quality dairy imports.
The free-trade agreement between China and New Zealand allowed Fonterra to supply vast quantities of Whole Milk Powder for the growing Chinese population. This FTA was mutually beneficial and became the bedrock for China’s infant formula industry and allowed successful expansion of the NZ dairy industry from the 80s through to the 2010s.
Seen as a bastion for food safety and high standards, Irish dairy also soon filled the gap in the premium market.
However, demand for baby formula appears to have peaked. The slowing of the birth rate post-Covid has played a factor in reducing demand for infant formula.
Five years ago, infant formula accounted for more than 75% of Irish dairy exports to China. In the year ended in August 2023, it accounted for 60%, while the overall value of exports to China over the five-year period dropped less than 2%.
One of the companies to really capitalise on this has been Kerry Group, which has had a presence in China since 1999. Kerry Group in Charleville was developed on back of demand for infant formula in China.
As in the many international markets in which it operates globally, Kerry has invested in China and operates facilities there, serving the local market and wider region, and has built a notable employment base in the country, numbering over 1,400.
A Kerry spokesperson said: “Recent acquisitions over the past number of years have seen Kerry’s footprint in this major global market increase. In 2023, Kerry acquired Greatang, strongly complementing Kerry’s leading authentic taste position in China, and expanding Kerry’s strategic positioning and capability as an innovation partner for local foodservice chains and with local and international customers within the meals and snacks markets.
“Previous to that, in 2021 Kerry acquired Jining Nature Group, a leading Chinese manufacturer of savoury flavours, seasonings and prepared food products, with well-established nationwide positions in the savoury flavour and prepared foods sectors in China. This has provided Kerry with deeper access to China’s large regional markets via well-established distribution channels.”
Today, China is focusing on more domestic production, curtailing its dairy imports. The country is now the third-largest producer of milk in the world.
The slowdown of infant formula imports into does not come without risks, and industry experts have suggested that it is one of the key factors behind the closure of the Wyeth infant formula plant in Askeaton, Co Limerick.
There is still a strong interest in dairy imports into China, however. The focus has shifted away from commodity products to higher value, value-add offerings.
As part of this, Kerry’s Dairy Ireland division has recently added to its export offering with the launch of Origimel, a consumer product targeting adult nutrition.
China also continues to have a very strong indulgence and foodservice demand for creams, blended creams and cream type products. These are small, high value products and are in growth in China. Ireland is a player here in this space.
Irish dairy co-operative Lakeland Dairies is the third largest exporter of cream into China.
Other sectors have also done well off Chinese trade. Ireland’s total agri-food product exports to China in 2022 reached over €722m — a 76% increase over the last decade, according to the CSO.
Last year, dairy exports to China amounted to €463 million; with pigmeat exports at €125m, as well as €35m of fish and €15m of beverages.
Such is the importance of the Chinese market, that it was Agriculture Minister Charlie McConalogue’s choice for his first full Ministerial trade mission post-pandemic in May 2023.
And it’s no wonder, according to Bord Bia, 32% of Chinese beef buyers are willing to pay more for quality-assured beef.
The timing also coincided with Irish beef's re-entry into the Chinese market following China's lifting of restrictions earlier that year.
And the values of Chinese buyers does appear to align closely with Ireland’s offering. Speaking ahead of the visit, the Minister said the trip would promote “safe, high-quality, sustainably-produced” meat, dairy, seafood and beverages.
A briefing document from Bord Bia explained that that sustainability in China is “evolving” and “becoming more important with each generation”.
Figures collated by the Irish food promotion board show almost half of Chinese consumers (45%) feel that sustainability is very important when choosing food and drink, only behind health and enjoyment. And it’s a trend that looks set to continue, with more than two-thirds (72%) saying that buying more sustainably-produced products will become more important to them in the next three years.
“Current focus is on quality, safety and nutrition and interestingly community contribution,” the organisation explained.
“Consumers consulted in China appear particularly enthusiastic about sustainability. Sustainability is certainly becoming more influential among the biggest cities in China; in particular, the aspects that relate to personal health (nutrition) and also the reduction of food waste.
“For the Chinese consumer, reassurance on quality and safety is essential. Evidence that you are contributing to the local community is also a strong way to connect to sustainability in China; a perspective that they share with some other Asian markets.
“Another interesting observation in this market is that the perceived responsibility for improving sustainability rests with food producers and government and policymakers, with farmers considered to have very limited responsibility for this.”
