Australian dairy rolls out 'healthy' milk in China

By Dominique Patton

- Last updated on GMT

Related tags Milk Nutrition

Australian dairy company Montec has started the rollout across
China of its 'healthier' milk, hoping to appeal to the Chinese
awareness of food's nutritional qualities.

The company owns the Asia-Pacific licensing rights to a mono-unsaturated milk, Mono-Premix, or milk that has had all the animal fat removed and replaced with vegetable fat. This makes it naturally low-fat and low-cholesterol. Sold for 10 years in Australia under the Farmer's Best brand, China is the first international market for the product. Montec first announced its plans to expand in China in 2003 but has taken time to establish partnerships in the country and so far has only sold small volumes in the Qingdao area as a test market. In an announcement to the Australian Stock Exchange on Monday, the company said it was aiming to ramp up availability of the UHT milk from 40 to 2,600 stores by the end of December, and 6,000 stores by 30 June next year. Montec is working with Beijing dairy Sanyuan foods, which has just started full-scale production for distribution in Shanghai and Beijing. Other distributors will launch the product in Shenzhen, Fujian province and Dalian. While demand for low-fat, and especially cholesterol-free products, is not especially strong in China, all categories of the dairy market are growing substantially, said Peter Herd, Montec managing director. "The Chinese dairy market is growing at about 15 per cent per annum. If you can develop a position in the market at an early stage, you have strong potential for growth,"​ he told Moreover the Chinese have a good understanding of food's relationship with health. "The Chinese in particular, and Asians in general, have a better sense of awareness about what they eat and getting a general balance in the diet,""While obesity is not yet a major issue, there is a general awareness of the need to follow a healthy diet,"​ said Herd. Montec has had to adapt the taste to Chinese preferences for a lighter, sweeter milk compared to the 'green' fresh milk preferred by Australians. The new milk is a premium-priced product, at about CNY11 per litre, matching other foreign and high-end local brands so it will have a niche market appeal. But in a market the size of China, niche appeal still means large volumes. And for Sanyuan, the product offers a point of differentiation with higher margins in an increasingly competitive market. The milk is currently available in two pack sizes, and two additional flavours. Montec also has plans to create a whole range of products based on mono-unsaturated milk. "Sanyuan already produces yoghurt, cheese and ice-cream and in time we want to have a whole range of healthy dairy,"​ said Herd. The partnership with Sanyuan required it to fund product purchases and store entry fees to facilitate the rollout in Beijing and Shanghai. But Montec said in its stock exchange release that it expects growth, alongside increased promotional spending, to deliver a monthly operating cash flow break even position by the end of December 2007. The company is talking to potential partners in other markets but China remains 'the big market for us'.

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