It is ten years this week since China’s deadly tainted milk scandal, where infant formula products contaminated with the chemical compound melamine killed at least six babies and affected hundreds of thousands more. The country’s dairy sector has learned a hard lesson since, adapting significantly, but consumers have still switched allegiances to organic and imported dairy products.
One of the regions to benefit has been New Zealand. Using its grass-fed and family-owned image, the country’s dairy sector has been able to secure a strong foothold both in China and other export markets across Asia. But has the effect of the 2008 tainted milk crisis been felt as sharply by smaller producers as it has by the country’s poster-boys?
FoodBev spoke with Alex Gao, a spokesperson of WDairies – a subsidiary of WNS Group New Zealand. The company proudly claims that its products are “made in New Zealand, sold to the world” – and its core range of WDOM milks includes everything from full-cream to lactose-free.
How does Gao see the role that New Zealand dairy is playing in China, and the way in which it is changing?
We hear a lot about consumer trust in China being concentrated on imported products. Is that something you agree with, and something you see for yourselves?
The melamine incident in 2008 exposed the scars of China’s food quality and safety. The incident started in dairy products and affected every industry related to food. Chinese consumers are indeed paying more attention to imported dairy products; after the melamine incident, the market kind of narrowed down to four brands of infant formula: Mead Johnson, Abbott, Wyeth, and Dumex (performance is the lowest now). Nowadays, China has undergone years of adjustment of food quality and safety.
China is in an era of upgrading consumption. Consumers are more rational, from trusting ‘imported products’ to trusting ‘imported branded products’. In the future, I am more convinced that to build a high-quality dairy brand is more important than just the being an imported dairy product.
Would you say the benefit to New Zealand dairy has trickled down to smaller producers, or is it only the bigger players that benefited?
Meeting the needs of the market is a key to gaining benefits. There are a wealth of third-party resources in New Zealand in terms of technology and raw materials. Small to medium-sized producers are open to change, simple and flexible in their management system and more adaptable to market changes. Of course, the disadvantages are outdated equipment and capacity limitations; while large producers are just the opposite of small-to-medium-sized enterprises. However, I believe the equipment disadvantage can be improved with funding, but mind to make creative changes cannot be transformed with money.
Do you think New Zealand-made dairy is probably the most trusted in the world?
I personally think that New Zealand manufacturing still has many shortcomings, but it is indeed ahead of many other countries in the world, even developed countries. New Zealand also relies on the supply of international raw materials in many production materials. But I believe the most trustworthy aspect is the conscience of the enterprise, not the quality of dairy production.
How would you describe the state of China’s dairy industry now – is it still buoyant or still fragile?
China is a leader among developing countries. There is no shortage of funds and facilities. However, for innovation and talent, especially in agri-related business, I think it is still impossible to compare it with other developed countries such as New Zealand. There’s less research and development, less innovation, and greater exaggeration is a common phenomenon among dairy products made in China. Dairy products have been widely accepted by Chinese consumers, and the health benefits of dairy products are also widely recognised by Chinese consumers. Faced with the 1.4 billion consumer market, security, quality, and branded foreign dairy products do have the opportunity to grow rapidly now in China.
How does China compare in its nature to other Asian dairy products at the moment?
To analyse the market, we need to consider the players in the entire market: most of China’s domestic production companies and dairy brands are subject to many factors, many standards, which are not in line with international standards. And the vast majority of Chinese consumers are still in a state of lack of knowledge. China is not like other countries, such as Singapore, with rich knowledge and clear motivation. Therefore, the Chinese market is more special, and it is necessary to consider how to make Chinese consumers aware and accept more while ensuring the conscience [and] quality of products. Perhaps this is the experience of smarter Chinese local enterprises: satisfying the quality requirement is not as good as satisfying consumer psychology. This experience is not relevant to foreign brands because for China, the laws and regulations for imported products and local production are not the same, so this is also a disadvantage for importers.
How important is China to you as a business, and how do you approach it in terms of your marketing and communications?
For the reasons I’ve mentioned, the Chinese market and the Chinese consumer is different, so there must be unique marketing methods in line with the market such as word-of-mouth marketing, such as event marketing (some events help bring out the value of the product), and so on. The Chinese market is the most important for any business in any country because of the 1.4 billion consumer base. And other countries will have different situations due to their own cultures, which is the same idea as “every leaf is different”.
How important do you think the trust, transparency and traceability of your products are to your overall appeal in the current climate?
I believe that the creditability, transparency and traceability of a product is a reverse reasoning caused by the distrust that consumers have towards many products. These three points are all about production, and production… should not be made to satisfy the ignorance of consumers.
Do you have any predictions for what might happen to the Chinese dairy industry in the next ten years?
Cognition of the consumer market, enrichment of consumption knowledge, upgrading of consumption power, explosion of consumption ideas, and as the Chinese market becomes more open and more international, the consumer market will force Chinese dairy producers to upgrade. Real R&D and real technology will emerge in the the Chinese market. This is not being driven by the government or by industry; this is being driven by consumers.
© FoodBev Media Ltd 2019