China Exclusive: Will China become cash cow for Australia's dairies?

Australian dairies are preparing an onslaught on China's market, now that a free trade deal has made things easier for them.

The free trade agreement means China will eliminate a 5 percent tariff on Australian milk formula within four years and the 9 percent tariff on liquid milk will go within nine years. According to Yan Jianjun, vice president of a China-Australia trade association, several Australian dairies are actively courting Chinese counterparts and supermarkets.

Australia's Freedom Foods Group launched its brand "Australia's Own" on the Chinese market this month and the product, aimed at toddlers, is just the first step. The ambitious company has many more brands in the pipeline. Australia's Own products are far from cheap. Each 200-milliliter pack costs 8 yuan (1.3 U. S. dollars), several times of the price of comparable domestic products.

Yan said, "According to the Australian industry association, demand for milk products in China will grow explosively in the next five to ten years. In the past couple of years, high-end liquid milk sales have grown by over 25 percent. It is estimated that this milk will account for 32 percent of China's liquid milk market in 2017."

Rory Macleod, managing director of Freedom Foods, said with China's demand for children's dairy products growing fast, there are plenty of opportunities for Australia's Own, despite numerous well-developed local competitors.

China imported almost 2 million tonnes of dairy products in the first 11 months of last year, up 18 percent on the previous year. Imports of milk powder grew by 20 percent year-on-year and liquid milk by over 75 percent.

Chinese consumers who can afford it have preferred to buy foreign brands since confidence in domestic brands was dented by a scandal over melamine-tainted baby formula in 2008.

Yan Jianjun said Australian dairy products are not unusual in big Chinese cities and are extending their reach into second and third-tier cities, while exploring online sales.

Yan claims foreign dairy products will not only bring more variety to the Chinese market, but will mean big improvements to China's own dairies. Endi