More cheese, please! Exporters toast China's taste for pizza and cakes
20/08/2015 22:00
By Meng Meng and Naomi Tajitsu
BEIJING/WELLINGTON, Aug 21 (Reuters) - At the upmarket Black
Swan bakery in Beijing, where well-heeled customers browse rooms
of glass cases displaying elaborate layered western-style cakes,
Jin Yuchen is buying a birthday cake for his mother.
Jin is one of a rapidly growing number of Chinese consumers
with a taste for non-traditional foods such as rich cakes and
pizza that is fuelling demand for imported cheese.
Like many others, Jin chooses domestic producers for his
daily milk consumption but wants that extra badge of quality for
a special occasion.
"I drink milk produced domestically," Jin says as he selects
a pink confection. "But for my mother, I insisted on buying a
cake that uses high-quality ingredients."
The Black Swan bakery imports cream cheese and other dairy
products from New Zealand's Fonterra FSF.NZ , the world's
largest dairy exporter, which is ramping up cheese production to
meet the growing Chinese demand.
Chinese diets have traditionally been low on dairy products,
in part because most adult Chinese are lactose intolerant,
meaning they have difficulty digesting the sugar found in milk.
Cheese and cream contain lower levels of lactose than milk.
Euromonitor International expects the China cheese market
to jump 23 percent to 3.5 billion yuan ($547 million) this year.
"The tastes of Chinese consumers are developing and more of
them are becoming more accustomed to Western food culture,"
Euromonitor said in a report this month.
"With the rapid expansion of fast food chains such as Pizza
Hut and McDonalds, the majority of Chinese people have already
tasted cheese and have found they are able to accept it."
Restaurants and bakeries account for up to 80 percent of the
market. Pizza chains in particular are multiplying rapidly - Yum
Brands Inc YUM.N is eyeing expansion beyond its 1,600 Pizza
Hut outlets in China.
"We absolutely love cheese, I want to eat it every day,"
said Ms Zheng, 45, a housewife eating in a Shanghai Pizza Hut
restaurant who declined to give her first name.
The remaining 20 percent of the market is driven by retail
consumers, mostly buying cheese for children as a healthy snack.
"Dairy import companies are really starting to think about
developing their cheese segments," said Matthieu David-Experton,
chief executive of Daxue Consulting in Shanghai. "The market is
wide open."
MILKING PRODUCTION
Fonterra, which already supplies mozzarella cheese for most
the 300 million pizzas sold each year in China, is moving
quickly, seeking to reduce its reliance on milk powder, which
has seen prices plummet to a six-year low.
Fonterra has ploughed more than $170 million into doubling
production capacity for mozzarella, cream cheese and processed
cheese slices over the past 18 months.
The company recently developed technology to create a
frozen, shredded version of mozzarella in one day, much faster
than the traditional two-month process. Its New Zealand plant
operated 24 hours-a-day through June, using milk redirected from
powder production.
"A higher proportion of our milk this winter has gone into
food service and consumer products and that is because we've had
the plants available, we've had the demand, and we're
prioritising milk into those areas," said Robert Spurway,
Fonterra's managing director of global operations.
New Zealand is the largest cheese supplier to China with
around 45-50 percent of imports, but other countries are
snapping at its heels. Australia has around 20 percent of the
market, the United States around 15-20 percent and Europe about
10-15 percent.
U.S. firm Kraft Heinz Co KHC.O , which sells products such
as Kraft Parmesan Cheese in China, said it sees "significant
untapped potential" for many of its brands in China.
The United States has ambitions to lift China above its
current position as the country's No.5 cheese export market, its
Dairy Export Council said.
"Just as Fonterra and other supplies from Oceania and Europe
are seeing, we see China as a growing opportunity," Alan Levitt,
the council's vice president of communications, said by email.
Denmark-based co-operative Arla Foods ARLAF.UL , Europe's
biggest mozzarella producer, said it expected its branded
business to double in China this year.
"We continue to see that Chinese consumers use and eat
cheese more and more," said Asia chief Jesper Colding.
Domestically, the leader is Bongrain (Tianjin) Foods Co Ltd,
a subsidiary of France's Savencia Fromage and Dairy SAVEN.PA .
Bongrain last year opened the first internet cheese retailing on
Alibaba Group Holding's BABA.N Tmall Global online marketplace
and also launched a cheese dessert, packaged like ice cream and
marketed as a snack.
But for many, part of the cache comes from using
foreign-sourced cheese, no matter the expense.
Lin Yuwei, a chef at one of Beijing's five hip With Wheat
Bakeries, uses Fonterra products in creations inspired by a
visit to dairy farms in New Zealand and Australia.
"As a high-end bakery chain, we are willing to pay prices
for dairy products of a superior quality," Lin said.
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GRAPHIC-China's growing appetite for cheese
http://link.reuters.com/jaq45w
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($1 = 6.3982 Chinese yuan renminbi)
($1 = 1.5188 New Zealand dollars)
(Additional reporting by Adam Jourdan in SHANGHAI, Anjali
Athavaley in NEW YORK and Gus Trompiz in PARIS. Writing by Jane
Wardell; Editing by Lincoln Feast and Alex Richardson)
((jane.wardell@thomsonreuters.com; +61 2 9373 1817; Reuters
Messaging: jane.wardell.thomsonreuters.com@reuters.net))
Keywords: CHINA CHEESE/