Chinese entrepreneurs milk Germany's supply

PUBLISHED : Monday, 19 August, 2013, 6:25pm
UPDATED : Tuesday, 20 August, 2013, 3:40am

"A delicious, tasty and safe product for Chinese children, and their parents”, blasts a video ad for German pasteurised milk aimed at the Chinese market. Germany, the world’s third-largest milk producer, is making its presence felt in China, a country with insatiable demand for milk, but a local trade association says they are only seeing a small part of the benefits of Chinese demand.

“We don’t make the big bucks in milk exports to China, it must be the distributors or retailers in China.” said Eckhard Heuser, managing director of the nation’s leading dairy producers’ lobbying group, the Milchindustrie-Verband.

We are selling our milk at around €0.60 per litre to China, on par with local prices, but our milk ends up being sold for a more than two Euros per litre there

“According to customs data, we are selling our milk at around €0.60 per litre to China, on par with local prices, but our milk ends up being sold for a more than two Euros per litre there,” he said.

A survey by market researcher Gfk backs this statement up finding that a litre of pasteurised milk costs between €0.63 and €0.68, including tax, in Germany. In Chinese supermarkets, German milk can sell for several times the price.

Despite the high margins, milk exports are booming. Last year, exports of drinkable milk reached 47,300 tonnes, 91 times more than Germany sold to China five years ago, according to the trade association’s statistics. Exports are expected to at least double again this year.

During this year’s first five months, Germany exported 38,190 tonnes to China, an increase of 138 per cent compared to the same period a year earlier. China is already Germany’s largest costumer of milk products outside Europe.

“Chinese demand is driven by pasteurised milk and infant formula”, said Frank Feuerriegel, from the North Rhine-Westphalia dairy farmer association. “Even though the numbers are small compared to our exports within Europe, China’s demand has played a positive role in consuming our excessive production,” he said.

Larger dairy producers benefited most from the Chinese demand of pasteurised milk, he said, as they have stronger bargaining power with shipping companies, which would otherwise have to send empty vessels back to China.

China’s insatiable demand for safe milk products had become a topic in Germany in January, when the leading tabloid Bild reported that grocery stores in major hubs such as Berlin, Frankfurt and Cologne had run out of infant formula. “We neither sell nor export to the Chinese,” Stefan Stohl, a spokesperson of Milupa, a German producer of infant formula told the tabloid at the time. “On the contrary, we try to prevent it.”

Chinese small-scale entrepreneurs export most of the German infant formula that ends of up in China, said Feuerriegel. “Internet traders from China started bulk buying infant formula and shipping it to China in 30kg packages,” said industry lobbyist Heuser. “How they get through Chinese customs ... I don’t know.”

But producers have since embraced indirect Chinese demand and produced more, said industry specialist Heuser. “There are no shortfalls anymore,” he said.

Official milk powder exports from Germany to China grew 15.6 per cent to 40.5 tonnes in the first five months of this year compared to the same period a year earlier, according to data collected by the trade association. Exports to Hong Kong reached 114.6 tonnes, up 356 per cent from a year earlier.