New Zealand currently ships more than NZ$7-billion worth of dairy products including powders, cheeses and 'in-demand' infant milk formula (IMF) to China.
With a 25% market share, New Zealand is the second largest supplier of IMF alone to China, behind the Netherlands (with 34% market share). Domestic production of IMF accounts for 26% of the market.
Now with China's advancement in dairy process fermentation-derived protein there lies the potential for a major shift in consumer preferences towards alternative dairy products made from microbial protein which directly threaten New Zealand's export market.
Chinese bio-tech startup Changing Bio is leading innovation of dairy process fermentation with the unveiling of China's first fermentation-derived products at the annual Bakery China Expo in Shanghai.
Source: Changing Bio
Changing Bio's 'Changing PRO' range includes whipping cream, cream cheese, parmesan powder, and ice cream, all made from a microbial ingredient called Kluvy Protein. This protein is derived from yeast found in the Qinghai-Tibet Plateau's southeastern edge, around the town of Shangri-La. Observers at the expo say these products closely resemble animal dairy in taste and texture.
The development of China's alternative proteins has received support from President Xi Jinping, clearly signalling a government-backed push towards promoting these innovative food technologies. China’s protein uptake is expected to grow from 57 million tonnes to 70 million tonnes by 2025, accounting for 35 per cent of the global protein market value, according to a Food Innovation Australia report.
Source: Changing Bio
If Chinese consumers increasingly opt for these environmentally sustainable and plant-based dairy alternatives, it will inevitably lead to a decline in demand for animal based dairy products, including those imported from New Zealand.
Without doubt these are warning bells for the New Zealand dairy industry and an urgent need to investigate and develop cost affective process fermentation product development.
Late last year, Fonterra, New Zealand's biggest dairy products producer signed an agreement with Dutch based company Royal DSM to establish a start-up to accelerate the development and commercialisation of fermentation-derived proteins with dairy-like properties. But will it be quick enough?
Currently Fonterra is responsible for approximately 30% of the world's dairy exports with revenue exceeding NZ $22 billion, making it New Zealand's largest company.
Meanwhile China is already bringing products to the market sending an ominous signal to New Zealand.