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What China's love of cheese means for the New Zealand dairy industry

New Zealand dairy exporter, Fonterra, is reaping the benefits as the Chinese food industry starts incorporating dairy products into its food.

China’s food industry makes around $150 billion US a year, or around $214 billion NZD. 

One of the main dairy distributors to China is New Zealand’s own Fonterra. Fonterra has opened dairy kitchens throughout China in an effort to teach chefs how to incorporate dairy into their dishes.

Dutch dairy cooperative Royal FrieslandCampina NV opened a training kitchen in Shanghai in January 2016, joining Fonterra in teaching Chinese cooks how to use milk-based products and incorporate them into popular dishes.

The special commercial kitchens owned by the dairy giant first opened in 2012. At the kitchens, chefs are taught melting temperature, consistency and mouth-feel of New Zealand dairy products.

The Fonterra Innovative kitchens aim, the company said to Bloomberg, is to help chefs become more confident working with dairy ingredients and, ultimately, to use them more.

Fonterra sold the equivalent of 271 million liters (72 million gallons) of milk in consumer and foodservice products to China in the quarter ended Oct. 31, a 36 percent increase from a year earlier.

The gross margin in China across both categories increased to 39 percent from 32 percent, the company said in November.

Foods Matter statistics show that lactose intolerance affects around 30% of Chinese children, and a study of Chinese adults showed that 92.3% suffered from some level of lactose malabsorption.

Despite the common theme of lactose intolerance in China it is becoming less of a problem as more and more people are exposed to milk products from a younger age.

Christina Zhu, Fonterra’s managing director in China, says sales to caterers and restaurants there are increasing more than 10 percent a year; Sales of mozzarella cheese surged 66 percent last year alone. 

“When we first entered here, people didn’t know how to make cakes with the cream and butter we had, and we had to help them with that,” said Zhu.

“Now is the window to build your brand with this segment of customers. I think it’ll be a lot harder to compete in five years, when the market is more established.”

China’s 360 billion-yuan dairy market is dominated by local suppliers and has usually proven difficult for overseas countries to trade, according to Euromonitor International.

Though now Fonterra has proven successful as the kitchens opened to keen chefs willing to relearn their trade to include dairy.

Theo Spierings, Fonterra CEO, said the first half result shows that Fonterra’s strategy of moving more volume into higher value products is working.

“We increased volumes and value across our Consumer and Foodservice business. Greater China export continued to increase its earnings through the strong performance of the Foodservice business.”

“The fundamentals of dairy are strong but there will be ongoing volatility in our global markets,” Said Spierings.

According to Fonterra’s 2017 interim results revenue is up five percent or $9.2 billion.

This story first appeared at The Register.