How domestic Dairy Enterprises deal with the impact of EU Dairy products

The milk quota implemented by EU countries for more than 30 years will be officially cancelled tomorrow. Driven by this policy change, the global milk supply is expected to rise by 2% in 2015. Many dairy enterprises in Europe have already planned ahead of time to expand their production capacity to welcome the new policy. According to the analysis of the industry, from the customs data, the sector with the greatest impact of EU dairy products on China's dairy market is infant formula, and the most important countries are the Netherlands and Ireland, which is precisely the biggest competitor of domestic milk powder enterprises at present. therefore, after the abolition of the EU milk quota, the pressure of domestic milk powder enterprises will also increase sharply.

Advance layout of European dairy enterprises

The European milk production quota system refers to the total dairy production restrictions that EU countries have followed for more than 30 years, that is, each EU member state allocates national quotas to dairy farmers, and whenever the member states exceed their quotas, it must pay super taxes to the European Union as fines to limit and control milk production.

Starting from tomorrow, the EU will abandon this 30-year milk production allocation, which means that EU countries' milk production will develop freely according to domestic capacity and market demand, and will no longer be restricted by government quotas.

For the global market, the cancellation of milk production quotas in Europe means an increase in production capacity, with industry insiders predicting that global milk supply is expected to rise by 2 per cent by 4 per cent in 2015. ABN AMRO forecasts that EU milk production will increase by 4 billion litres by 2020.

As we all know, the demand for dairy products in China has maintained a rapid growth in recent years, and it has become a market for major dairy enterprises all over the world. After the opening of the quota system for milk production in Europe, China will also become a strategic focus for dairy manufacturers in European countries.

Companies are also laying out here in advance. Last year, when Wyeth launched Qifu for ultra-high-end infant formula, Irish Ambassador to China Herbalife said that with the lifting of EU dairy restrictions, Ireland's dairy production capacity is expected to double in the next five years, with China being the key market.

In addition, in addition to expanding production capacity in the Netherlands, Royal Fishland also decided to cooperate with domestic dairy company Huishan to produce infant milk powder in preparation for expanding production capacity.

Infant formula is the first to be hit.

According to dairy experts, after the abolition of the EU milk production quota system, the enthusiasm of dairy enterprises to enter the Chinese market will have a more or less impact on China's dairy industry, while judging from past data, the influence of EU dairy products on China's dairy market is mainly concentrated in the field of infant formula milk powder, rather than industrial bundles of milk powder.

According to data from the General Administration of Customs of China, in 2013, the main importers of milk powder in China were New Zealand, EU countries, Australia, the United States and other countries, of which the European Union accounted for only 6.3% of imports, and 80.4% of large packets of powder came from New Zealand. "although New Zealand dairy products have been abandoned by some enterprises because of the food safety incident and switched to EU milk sources and raw material powder, there is a wide gap in the proportion of imports between New Zealand and EU countries, and the liberalization of EU production quotas will not have much impact on the global raw material powder market, as well as on domestic raw material powder imports," said Wang Zi Heng, dairy expert and chief operating officer of China North Blue Ocean FMCG brand marketing planning organization.

Unlike large packets of powder, imports of infant formula are concentrated in European countries. According to data from the General Administration of Customs of China, only the Netherlands accounts for 33% of China's infant formula imports, followed by Ireland, accounting for 22%. France and Germany accounted for 9% and 6% respectively, and European countries accounted for more than 60% of imports.

"it is precisely because of the large demand for European infant formula milk powder, coupled with the advance layout of EU dairy enterprises, and after the abolition of the European milk production quota system, the domestic infant formula milk powder market will be the first to be impacted. The competitive pressure of domestic enterprises will increase," Wang Zi Heng said frankly.

Make a fuss on the "fresh" of domestic dairy enterprises

At present, the European infant formula milk powder which accounts for a large share in the domestic market has three brands of French Danone, Royal Dutch Fishland and Wyeth, as well as France, Denmark and Switzerland.

An unnamed local dairy enterprise told the Beijing Business Daily that nowadays the competition between domestic and foreign infant formula milk powder enterprises is becoming more and more fierce, leaving room for local and regional brands to become narrower and narrower. If EU milk powder is strengthened into China, it is bound to have a fierce impact on it, so in his view, it is gilded or a more reliable way to enter the EU lineage in various forms.

"in European countries, there are not many brands of infant formula milk powder, and well-known brands have already entered the Chinese market, so like other domestic dairy companies, they can either look for milk sources in Europe to improve their quality; or find a less well-known brand to work together to increase market share," the person said.

However, this person's idea has been questioned by people in the dairy industry, including Wang Ziheng. "the above approach is only one of the measures to deal with the symptoms rather than the root causes. For domestic dairy enterprises, the most effective way to deal with the impact of foreign milk powder is to base on their own conditions, enhance their strengths and circumvent weaknesses, tap the advantages of backwardness, and complete the transformation and upgrading as soon as possible."

For example, we should give full play to the advantages of pastures close to factories and factories close to the market, and make a fuss on "freshness"; in addition, we should integrate resources and reorganize advantages through various financing means such as merger and reorganization as soon as possible, so as to develop a moderately large-scale, intensive and modern dairy industry, reduce costs, improve efficiency, and improve product quality.