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More than a decade after melamine-tainted milk crisis, the demand in China for safe and nutritious milk and milk products has a bright future indeed. The market for milk and dairy products in China is expected to reach $114 billion (USD) by the year 2024, just five short years from now, positioning China as the world’s largest dairy market. And, since China’s domestic producers currently provide only about 70% of the total demand for dairy products, there is significant opportunity for foreign producers who can supply quality dairy products to the Chinese market.
This article explores the dynamics of the China’s market for dairy products, and discusses the challenges of testing of dairy products for compliance with China’s strengthening safety regulations.
By most accounts, average consumption of milk and dairy products in China still lags considerably behind other major economies. According to dairy economic consulting firm CLAL, per person consumption of milk in China is just over 9 kg per year, compared with more than 70 kg per year in the U.S. and nearly 66 kg per year in the European Union. Milk consumption in China also lags other Asia-Pacific economies, including Japan, in which an average consumer uses over 31 kg per year, and India, where the annual consumption rate is nearly 49 kg.
However, Chinese consumption of milk and dairy products has been on a steady ascent over past 15 years. Per capita consumption of dairy products was already increasing quickly in cities and urban centres prior to 2005, but growth accelerated significantly after that due in large part to increased consumption in rural areas. Consumption by rural populations now constitutes more than 25% of all milk and dairy product consumption in the country. These numbers portend continued strong growth in the years ahead for milk and dairy products in China.
At the same time, Chinese consumers have responded enthusiastically to an ever-widening array of premium dairy products, including infant formula, fresh yogurt and dairy-based drinks. Accordingly, major dairy producers in China are responding to this demand by introducing new and innovative dairy products, emphasising a greater variety of flavors as well as potential health benefits. This has resulted in dairy products generating one of the strongest performances in China’s food industry, representing an average 13% brand value growth year over year, compared with just 4% growth for the food industry as a whole.
In the 2008 melamine-tainted milk crisis, infant formula marketed by more than 20 different dairy producers was found to contain melamine, a potentially harmful industrial chemical. When added to milk products, melamine creates false protein content readings, resulting in a nutritionally-deficient product that can lead to malnutrition and other maladies when ingested by infants and other at-risk populations.
In response to the crisis, Chinese officials took a number of steps to help ensure the safety of milk and other food products in China and to reduce the likelihood of such incidents in the future. Passed in 2009 and amended in 2015, China’s Food Safety Law imposed new safety restrictions and further strengthened the management for food and food products. More importantly, the government ultimately established the China Food and Drug Administration (CFDA) in 2013, a ministry-level federal agency intended to consolidate the government authority over food and drug safety. In March 2018, the CFDA was merged with the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) into the newly established State Market Regulatory Administration (SMRA), a move intended to help strengthen the government’s oversight.
China also implemented broader and more stringent food safety regulations near the end of 2015. Perhaps the most important of these regulations was the requirement that manufacturers of infant formulas register their product formulations with the CFDA, and a ban on any product-related advertising claiming that such products were a substitute for breast milk. The regulations also imposed larger financial penalties and more strict consequences for failing to comply with its requirements, and gave Chinese consumers the right to demand financial reparation for exposure to non-compliant food products.
Regarding milk and dairy products, China now has nearly 100 dairy-related food safety regulations and standards. These mandatory requirements cover the entire supply chain, and include farming and processing activities through marketing, product labelling and product claims. As an example of the scope of regulations related to dairy products, product safety standards for milk products alone include standards for raw milk, pasteurised milk, sterilised milk, modified milk, fermented milk, milk power, whey powder and whey protein powder.
Although the implementation of these and other regulations and standards for milk and dairy products can help to ensure the safety of Chinese consumers, they can present significant challenges for both domestic producers as well as producers based in other countries that export milk and dairy products for sale in China.
For more than 20 years, TÜV SÜD has embraced a strategic approach to the testing of milk and dairy products. As one of the leading third-party organisations in China, TÜV SÜD offers advisory, testing and auditing services to food producers seeking access to China’s lucrative market. We maintain comprehensive food testing capabilities throughout China, and are accredited to conduct both quality and safety testing consistent with accepted test methods in China and in the international market. We have the knowledge and expertise to understand and apply China’s food safety regulations as appropriate, and to help food producers control safety risks for consumers.
TÜV SÜD also pays great attention to the frontier of dairy industry, especially regarding potential risk along the dairy supply chain. For example, in response to reports in 2017 regarding mineral oil contamination of some food products and food contact materials, we introduced advanced technology and testing capabilities that could be used not only to assess the content of mineral oil in dairy products but to identify the originating source of the contamination. These services helped to protect Chinese consumers from potentially unsafe milk and dairy products.
In addition, TÜV SÜD has also focussed on developing strategic cooperation relationships with dairy companies and groups. During the first China International Import Expo (CIIE) in November 2018, TÜV SÜD signed a strategic partnership memorandum of understanding (MOU) with YILI Group, the largest producer of dairy products in China and one of the top ten producers of dairy products in the world. The agreement with the YILI Group is illustrative of TÜV SÜD’s commitment to forming strategic partnerships with the leading food and dairy producers throughout China and to help ensure the safety of Chinese consumers in the future.
For decades, TÜV SÜD has been a trusted partner to food producers and distributors worldwide, addressing the full range of food testing and auditing services required by the global regulators and under the leading food certification schemes. TÜV SÜD team of experienced food professionals actively work with many food industry innovators to help ensure that their products are consistently produced to meet all applicable regulations as well as the highest quality standards. We also remain current with key industry developments and directly support the development of essential dairy safety standards and codes that support dairy safety as well as continued innovation in the dairy industry.
 “China Dairy Market & Forecast Report 2018,” a report by Research and Markets, October 9, 2018. Available here (as of 15 December 2018)
 “China: Dairy supply and demand,” a Market Trend report posted to the website of DairyGlobal, 11 January 2018. Available here (as of 15 December 2018)
 Data on dairy product consumption in 2017 from the website of CLAL. Available here (as of 15 December 2018)
 “China: Dairy supply and demand,” see #2 above.
 “Chinese-brand Yili ranks among world’s best-performing food brands: report, posted to XinhuaNet, 27 June 2018. Available here (as of 15 December 2018)