Opportunity for dairy as China enters new era of social evolution
A plan which Bord Bia has labelled Billion Dollar Baby looks like it is coming together nicely, with China’s recent decision to further relax its one-child policy potentially the icing on the cake for Ireland’s dairy industry.
At the end of October, Chinse leaders made the decision to allow one couple to have two children.
It’s big news for the infant milk formula (IMF) industry worldwide.
According to market analysts at Rabobank, the global agri-bank, there will be a 16.6% average increase in newborn babies annually over the five years following the full implementation of the ‘One Couple, Two Kids’ policy (the date of implementation hasn’t been specified yet).
Assuming also that the current breastfeeding ratio of 28% remains unchanged for the second child, Rabobank initially estimates that the IMF market could be boosted by about the same 16.6% a year, equivalent to about 117,000 tonnes/year (based on Euromonitor data of 704k tonnes in 2014).
This may add an estimated 3-4 percentage points to Rabobank’s IMF annual volume growth expectation of 7-8% into 2020.
Rabobank initially calculates about 1.6m new born babies a year, once the new policy goes into full implementation. This, by itself, would mean about 10% incremental demand for infant milk formula (about 70,000 tonnes) every year in the first few years.
Overall, the change will have little noticeable impact on the demand for milk and its pricing globally.
But disproportionate gains can be expected for the country which supplies the formula for one in seven children in the world, and which has been gearing up this year to capitalise even further on that in China.
That country is of course Ireland, and promoting our IMF exports to China has been a key objective for the Bord Bia Consumer Insights Team.
With Irish infant formula exports valued at over 900 million in 2014, Billion Dollar Baby is an apt name for the Bord Bia project.
The Food Board began development of an export strategy for our major dairy and IMF producers in 2013.
“The missing piece in the strategic jigsaw was how would we brand Ireland and Origin Green to consumers in China,” said a spokesperson.
The team had to convince Ireland’s IMF producers and dairy industry that there is merit in investing in an Irish origin brand in China.
So far, it has been New Zealand, Australia and the Netherlands who established reputations as the leading sources of infant milk formula in China.
Ireland enjoyed little awareness among consumers as a product source, despite the 100% Irish origin of the most premium brand on the market, Wyeth Illuma, sales of which grew dramatically in recent years.
“Chinese consumers know little about Ireland.
"They know the name, they thought the country might be ‘part of the UK’ and little else,” according to Bord Bia.
The approach for the Irish Food Board staff to change this was face-to-face consumer immersion, getting really ‘deep’ into Chinese consumers’ lives, which involved living with them in their homes between May and June of 2014.
Only this approach could enhance the credibility of the Irish marketing message.
Next came painstakingly exploration of the Mandarin translation for every aspect of the Origin Green brand, before delivering the final marketing messages through advertising, online and other marketing materials.
The mission was to communicate Ireland’s world-leading sustainable dairy quality assurance as a point of difference for our nation-brand.
The approach was built around the balance which Chinese consumers value in their food and in their lives, evident in many aspects of their culture and philosophy.
The key therefore to communicate Ireland’s commitment to a ‘philosophy of balanced food production’.
Thus, Bord Bia supports Irish origin food in China with the compelling message that “Ireland Believes In Origin Green”, through a form of words that when translated to Mandarin proves very motivating, to open doors for other food sectors beyond IMF.
Is it working? Yes, according to Agriculture Minister Simon Coveney, who revealed last July that China is now Ireland’s second largest export market for dairy produce.
In the three-month period to the end of March of this year, dairy product exports to China from Ireland were up over 50% on the same period in 2014, with infant formula the key driver, said Minister Coveney.
Companies based in Ireland exported c.€400m worth of dairy produce to China in 2014, up from €104m in 2010.
Now, the groundwork by Bord Bia, and China’s decision to further relax its one-child policy, promises contiunaton of the huge rate of growth in our dairy exports to China.
