Succeeding in Asia Pacific: Exploring the Dairy Market and Consumer Dynamics

Asia Pacific will make up 63% of absolute dairy growth in volume terms over 2016-2021

The region will represent over a third of the global market size in 2021, compared with just 28% in 2011. This rapid growth offers significant opportunities for dairy players, as levels of consumption of dairy are still far below Western standards, and signify ample growth opportunities to be exploited.

Operating environment in the region’s largest market is proving challenging, with high local ownership. Smaller markets might offer an easier route to market

Despite growing foreign investment in Asia Pacific, 90% of the top 10 dairy players in the region are local, indicating a strong competitive advantage of local players over international. As such, whilst the majority of dairy growth will come from the region, the (disadvantaged) operating environment makes it very difficult to trade in some of the region’s largest markets, such as China and India. Other markets, such as Indonesia, might offer an easier route to market, where, for example, foreign players capture 50% of the top 10 dairy players’ sales, or Vietnam, where this is a third.

Future growth pillars in dairy are a growing middle-class, rapid urbanisation, health-consciousness and food safety

Mass urbanisation, reduced activity and poor diets will accelerate the rise of the average Body Mass Index (BMI) in Asia Pacific. Dairy products are well-positioned to offer a nutritious (“natural”) healthy product over many other food types. Also, as snacking will form a greater part of people’s diets, snack-packed dairy products offer a great alternative to products which are high in salt and sugar.

Health and food safety allow for higher margin pricing in Asia Pacific, and many companies’ growth strategies are aimed at just that

Given the widely publicised food safety scandals over the last few years, companies are now promoting their quality control over production processes more prominently, to help ensure food safety and restore consumer confidence in the industry. Associating dairy products with health and wellness and quality assurance allows for higher margin pricing, as well as differentiation. As such, several multinationals have now changed their corporate vision to reflect just that, including Yili, Nestlé and Huishan. Future innovations in dairy will therefore be centred on a health positioning, and give greater importance to technology which aids in tracking the dairy product from grass to glass.