Thailand’s dairy market

ASIA is no doubt flexing its muscles as a global milk producer. Recent statistics from the United Nation’s Food and Agricultural Organization (FAO) show that the region currently supplies 37% of milk worldwide. Thailand is well positioned in all this as its dairy market is valued at $850 million, with UHT milk and culture yoghurt as main drivers. Although there is a growing demand for cheese mostly from urban dwellers, cheese products continue to take a small bite into Thailand’s dairy market. Working against it is the local consumers’ lack of familiarity of cheese variety and benefits. In fact, most Thais tend to associate the product as a source of fat and a cause of obesity.

The long-running School Milk Programme subsidised by the state is also fuelling milk consumption amongst the young. The project daily provides 200-ml milk carton to more than eight million students below the age of 12 years.  Estimated cost to finance the project this year stands at $432.6 million, with some 80 dairy companies and cooperatives being roped in to process 1,252 tonnes of raw milk daily.  FAO estimates the project to account for more than 30% of the total liquid food market.

According to FAO, a precursor to the national School Milk programme was introduced in the mid-1980s to provide an outlet for locally produced milk. By doing so, it hoped to introduce milk nutrition into the diets of young people especially those outside of the urban and semi-urban region. A more long-term goal was for the programme to develop in students a lifelong taste for milk. And acquiring the taste for milk they did. Statistic show that from a low 2-litre milk per capita milk consumption in 1984, the rate has risen to as high of 23 litres by 2002. The dairy market has likewise increased from a 290-million-litres-a-year business in the early 1990s to a 1,146-million litres market by 2003. The ascent continues. Whilst milk production within Thailand has grown 30-fold in close to three decades and average dairy consumption in the Thai diet has more than quadrupled for the same period, experts say demand still exceeds local production.

Despite its rapid gains in domestic production, Thailand’s total raw-milk production in 2012 was estimated at 980,000 tonnes per year, a figure which covers only 60% of demand. This necessitates some 57,000 tonnes of powdered milk to be imported annually, putting Thailand in the top 10 importers of milk worldwide. The local Department of Livestock Development pegged total dairy product imports in 2010 at more than $602 million.  Most of the products were from New Zealand and Australia. Thailand’s exports of milk products for the same period meanwhile stood at $182 million, with Malaysia, Singapore, Cambodia, Indonesia, and Laos as main markets.

Major players

The key player in the $309-million UHT market, FrieslandCampina Thailand sells under its flagship brand Foremost. It initially made a name as an ice cream manufacturer until it shifted focus to milk and other products in the early 90s.  Today, its range of pasteurised milk, UHT milk, soy drink, yoghurt drinks, condensed milk and milk powder are enriched with vitamins, minerals and other vital nutrients. Amongst its recent releases is the UHT Banana milk, which is gaining popularity for its favourable taste and strong brand positioning.

FrieslandCampina, which focuses innovation on children’s nutrition, manufactures long-life dairy products including ‘Omega’ brand

FrieslandCampina Thailand operates from Bangkok, with production carried out in Samut Prakarn province, some 25 kilometres from the city.  The milk processed there comes from local farmers and local cooperatives. The company also imports products, primarily milk powder and evaporated milk, from the Netherlands and others places.

Innovation is an important part of FrieslandCampina’s strategy of generating growth and adding value. Given that market share for both milk for children ages 2 to 5 and health enhancing yoghurt drink has grown strongly, it comes as no surprise that the company focuses research efforts on growth and development (of children), daily nutrition, health and wellness, and functionality (structure).

Another strong contender in the local milk production scene is state-run Dairy Farming Promotion Organisation of Thailand (DPO), maker of the Thai-Danish milk brand.  The organisation, which prides itself in using only 100% fresh milk instead of powder milk, has ventured to increase market share through new offerings particularly in the drinking yogurt category. In 2012, DPO launched kiosks and shops as business channels for the sale of milk and related products such as ice cream. Whilst these kiosks focus mainly on schools, universities and other educational institutions, the milk shops are targeted at other buildings and modern-trade channels.  From a projected income of $9.3 million in the first year of operation, revenue from kiosks was forecast to rise to as much as $30.9 million annually within five years of operation.

In 2013, DPO saw business through border trade and local traders in Cambodia, Laos and Myanmar increase as economies improved and the number of tourists increased in those areas.  DPO further anticipates sales in other ASEAN markets to grow with the formation of the ASEAN Economic Community (AEC) in 2016, as it will open up a market of 601 million people.  It is most keen to see sales fledge in Viet Nam and China.

Repositioning yoghurt

Promoting awareness of yoghurt’s benefits and repositioning it as a drink for the whole family and not just children are set to continue spurring yogurt and sour milk sales. Dutch Mill Co Ltd is expected to maintain strong performance in this category, actively introducing new product lines including pasteurised drinking yoghurt and UHT drinking yoghurt. In 2012, the company dominated with 38% value share in the sector largely with the relaunch of its Dutchie Bio, which may enhance the digestive system through the B. Lactis in its pro/pre biotic spoonable yoghurt. Its other main lines are Dutch Mill drinking yoghurt, Dutch Mill fresh milk and Delight cultured drinking yoghurt. Aside from offering new flavours and healthy options, the company is also big on ensuring quality. The brand bagged Thailand’s Most Admired Brand for ready-to-drink-milk for 11 consecutive years beginning 2001 as well as Reader’s Digest Thailand Trusted Brand Award for seven consecutive years (2004 – 2011). Dutch Mills’s popularity in the local market is reflected in the market share it enjoys in ASEAN countries including Singapore, China, Brunei, Vietnam, the Philippines, Malaysia, Indonesia, Laos, Cambodia and Burma. With such success, the company is confident of expanding to other parts of the world.

Other products

Despite setback posed by the devastating 2011 floods that hit the country, particularly amongst condensed/evaporated milk producers, Thai Dairy Industry Co Ltd (TDI), manufacturer of leading brand Mali, managed to stabilise sales by outsourcing its manufacturing process to OEM players in neighbouring countries. It likewise tapped small consumer foodservice players and set up street stalls or kiosks franchise for drinks and coffee. Today, TDI maintains more than 40 % of the other dairy markets with its sweetened condensed milk/creamer and evaporated filled milk/creamer. The other dairy products market, which is projected to steadily reach $ 418 million by the end of 2017, is fuelled by higher consumption of coffee and hot drinks.

Research and development is a priority at TDI. Amongst its recent releases are the Mali Sweetened Condensed Milk in 420-ram brik package as well as the Mali Sweetened Condensed Milk in a two-kilogram foil package-especially for cafe businesses. Currently exported to more than 30 countries, TDI products are ISO 9001:  2000-, GMP- and Halal-certified. The company’s $40.2-million plant, built on 115,200 square-metres plot of land in the Bang Pa-in Industrial Estate, Ayutthaya,  is equipped with an integrated production system. It includes a Process Line Control (PLC) with a comprehensive system for the fully-automated production of sweetened condensed milk. The plant also houses a waste water treatment facility to purify used water before releasing it to the industrial estate’s waste water treatment system.

The Thai company also promotes the use of the local raw materials in its production process, especially the use of domestically produced milk. It engages more than 30 milk-producing cooperatives in different provinces to supply its milk. The company likewise works with other local producers of raw materials such as sugar, vegetable oil, and various kinds of packaging materials. As such it contributes to the country’s industrial development as well as supports domestic businesses.

In cheese production, Kraft Foods (Thailand) Ltd is expected to maintain its dominance. Demand for the sector is mostly spurred by urban consumers with moderate to high income. The deeply entrenched brand, with its competitively priced products across different categories enjoyed as much as 27% in retail value in 2012.