Media Release July 10, 2013 1
‘ASEAN tigers’ offer growth opportunities for New Zealand’s dairy sector
Burgeoning demand for dairy among consumers in the ASEAN-6 group of countries is creating substantial trade
opportunities for dairy export countries including New Zealand, according to a new industry report.
In the report Dairy – Milk for the ASEAN-6 Tigers, global agribusiness banking specialist Rabobank says the ASEAN ‘six majors’ (the six largest economies of the
Association of South East Asian Nations – Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam) should
be part of all dairy exporters’ global growth strategies, but particularly for New Zealand given its competitive
advantage in these markets.
The report says demand for dairy is growing quickly in the ASEAN-6 region – underpinned by favourable economic and
demographic conditions. And, with local supply unable to keep pace, this is leading to a sustained milk deficit, which
needs to be filled by imports.
“The region presents a significant trade opportunity now and in the future,” the report says.
However, it warns, success in these markets is not guaranteed and capitalising on the opportunities in the ASEAN-6
region will be challenging.
Report author, Rabobank senior dairy analyst Michael Harvey says the ASEAN-6 dairy arena is one of the last remaining
unconquered battlegrounds for all dairy exporters.
“To unlock the full potential and to maximise profitability, dairy exporters may need to rethink their export
strategies. Given the inherent price sensitivity across the region, exporters will need to continue to ‘stretch’ the
milk, adopting strategies where dairy produce is mixed with non-dairy components to make products more affordable,” he
says.
ASEAN-6 market growth
ASEAN-6 consumers’ taste for dairy has been growing and it’s not about to stop any time soon, the Rabobank report says.
Over the past decade, the collective volume of dairy products imported into the region has been growing at about four
per cent per annum.
In 2012, dairy trade flows to the ASEAN-6 region surpassed 1.6 million tonnes (11 billion litres in milk equivalents)
and equated to an export value of more than USD 5.5 billion.
By 2020, these markets collectively are likely to consume an additional three billion litres of milk compared to their
consumption in 2012.
Mr Harvey says Rabobank expects global dairy consumption overall to grow at an annual rate of 2.4 per cent out to 2020,
with consumption growth in developing countries continuing to outpace growth in the developed world.
“The ASEAN-6 countries will exhibit annual growth rates in dairy consumption that are well above the world average,” Mr
Harvey says. “Within the ASEAN region, the fastest rate of growth is expected in Indonesia and Vietnam.”
With per capita dairy consumption rates among the ASEAN-6 nations very low by global standards, the potential for growth
is huge, Mr Harvey says.
“The latest statistics indicate that Malaysians, who have the highest consumption rates of dairy among the ASEAN-6
countries, consume on average 51 kilograms of dairy per person each year, while Indonesians consume just eight
kilograms. Comparing this with consumption in developed Asian economies such as Japan, where annual per capita dairy
consumption is 85 kilograms, indicates there is significant growth potential in these markets,” he says.
Growth drivers
The ASEAN-6 markets are characterised by a mix of factors which will support continuing growth in dairy consumption,
according to the report.
“While a degree of diversity exists across the different markets, all exhibit generally favourable economic and
demographic features,” Mr Harvey says.
These include: overall high birth rates and young populations, rising incomes and the emergence of the middle-class,
improving diets and an increasing focus on health.
In addition, Mr Harvey says: “There has been the introduction of school milk programs in some countries and education on
the benefits of dairy nutrition, as well as a growth in modern retailing and food service which is increasing consumers’
exposure to dairy products while urbanisation is enabling dairy companies to reach more consumers”.
Local supply
The report says a common feature across the ASEAN-6 markets is they are all dairy ‘deficit’ countries, already heavily
reliant on imports.
And, while local production is growing – supported by private and public investment –output remains constrained and the
milk gap is more than likely to widen, according to Mr Harvey.
“In most of the ASEAN-6 markets, local milk production had grown at a reasonable pace in recent years, with governments
eager to reduce their high import dependency,” he says.
“It is expected local milk production will continue to grow, supported by further private and public investment.
However, local farmers face difficulties increasing output significantly, meaning local milk is unlikely to close the
deficit.”
Challenges for exporters
Despite the positive dairy dynamics in the ASEAN-6 region, export success to these markets is not a certainty, with New
Zealand exporters facing a number of challenges, including increasing competition from other exporters.
“For New Zealand dairy exporters looking to succeed in the ASEAN-6 dairy arena, there is a strong need for the right
export strategy,” the report says. “Despite having a competitive advantage due to geographical location and a rich
tradition of exporting dairy products to these markets, export success is not guaranteed.”
Dairy exporters need to make a long-term commitment to these markets, Mr Harvey says.
“New Zealand dairy processors have already undertaken investment to capture the opportunity, but more will be required.
Having a solid and expanding supply base will ensure a strong reputation as a reliable supplier,” he says.
Michael Harvey
ENDS