China: Ireland's largest Asian market for food and drink exports

One of the stand-out developments for Irish food and drink exports in Asia in 2013 was the exceptional performance of the industry in China, which is now Ireland’s second largest dairy and third largest pork market in the world.

Exports to China grew by over 40pc to sales of €415m in 2013. Now Ireland’s largest Asian market, China is the country’s sixth largest market overall in the world, driven in particular by strong dairy and pork exports.

Accounting for 6pc of Ireland’s total food and drink exports, sales to Asia climbed 30pc overall to reach €625m in 2013.

Director Asia at Bord Bia James O’Donnell says there are a number of reasons for China’s rising importance for Irish food and drink and why it will continue to be a growing market for years to come.

“Around 300 million of China’s 1.35 billion population are middle class and this is growing. When people move into the middle class they tend to consume more protein and are prepared to pay a premium price for quality products – if you compare the price of infant formula for example, it retails at €12–€15 a can in Ireland while a premium imported infant formula would retail at €40–€45 a can in China. Ireland produces over 10pc of the world’s infant formula and this is an area of significant potential in the region.”

There has been a lack of confidence in domestically produced products in China over the past few years, largely due to food scares – such as exploding watermelons due to chemical use (in 2011) or over 12,000 dead pigs floating down the Huangpu river near Shanghai Huangpu river (in March 2013).

“The Chinese government places great importance on food safety and major efforts are being undertaken to address the issues,” says O’Donnell. “The fact that Irish food and drink is stringently controlled by Government in terms of traceability and other measures is very important.”

Changing tastes

Particularly good for Ireland’s dairy sector is the fact that tastes are changing and this current generation of Chinese has been more exposed to products such as processed cheese through the likes of McDonald’s and Pizza Hut.

There is an increased awareness of the health benefits of dairy driven by messages such as that from previous Prime Minister Wen Jiabao, who said in 2006 that he had a “dream” to provide every Chinese person with a glass of “nourishing milk”.

O’Donnell says that while it is starting from a low base, dairy consumption generally is going to grow in the market and China’s worries about food security will boost Ireland’s prospects of becoming a strategic partner in dairy into the future.

“China accounts for about 8pc of the farm land in the world, but 20pc of the population, so it will be looking for strategic partners in various food and drink sectors. Closer links are already forming between Irish and Chinese companies.”

He cites the examples of Kerry Group’s partnership agreement signed with Beingmate in October 2012 for the supply of Irish dairy ingredients for infant nutrition applications in China and Glanbia’s landmark agreement with Shanghai-based food manufacturer Bright Group last year.

Managing director of Glanbia Siobhan Talbot says the group’s primary markets today would be in the US and in Europe, but the group is “a significant ingredients supplier into the Asia market and has been for many years”.

“As a large scale dairy operation when you have the scale of growth for example in infant nutrition in Asia, that’s an area of importance to us and an area where we have a number of relationships with key global customers.”

While Glanbia’s performance nutrition business is quite small at the moment, Talbot says it is “clearly interested in that space” because there are a number of consumers who recognise the nutrition and the functionality of dairy and the role that even aspects of dairy can play.

“There are various proteins and minerals that can be harvested from dairy that can have particular properties that can be of interest in the Asian market,” she says. “That can be products that boost immune health or that boost general health. And you have various regions of Asia that recognise the role of prevention, for example, and the interaction of exercise and diet in maintaining a healthy lifestyle. So we will be active in that space in Asia as indeed other regions,” she says.

Aside from dairy and dairy ingredients, O’Donnell says Ireland’s most important food and drink exports in Asia are beef, pork, seafood and alcoholic beverages.

This is an extract from an article that first appeared in the ‘Ireland Asia Business Yearbook 2014’, published by Asia Matters in association with Business & Leadership (B&L).

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