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Logo of Phnom Penh Post newspaper Phnom Penh Post - For ASEAN-6 countries, dairy demand is high

For ASEAN-6 countries, dairy demand is high

Soaring dairy-consumption growth in the so-called ASEAN-6 – Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam – has been outpacing local supply, according to a new report by international financial services provider Rabobank released last week.

While the inability to meet local demand is creating large trade opportunities and intense competition between international producers, dairy exporters trying to capture these markets still encounter structural challenges.

“We expect dairy consumption across ASEAN-6 to grow by 2.4 per cent per year through to 2020. This creates a requirement for an extra 3 billion litres of milk, which local players are ill-equipped to deliver,” Rabobank analyst Michael Harvey said in a press release.

Factors that have been supporting the growth in dairy consumption in these markets include high birth rates, rising incomes, improving diets, growth in modern retailing, urbanisation and countrywide school-milk programs.

Per capita dairy consumption rates in the ASEAN-6 are still comparatively low. Yearly consumption rates are eight kilograms in Indonesia, 14 kilograms in the Philippines, 51 kilograms in Malaysia, 30 kilograms in Thailand, 32 kilograms in Singapore and 15 kilograms in Vietnam, the report says.

By contrast, in Japan per capita consumption reaches 85 kilogrammes.

But while the ASEAN-6 will likely show the second-fastest annual growth rate in dairy consumption following China, lifting production to meet the demand remains a challenge.

“The combination of unaccommodating climate, poor farming practices, unsuitable land and limited access to credit, creates a difficult environment for domestic producers and a great opportunity for exporters,” Harvey said.

“This trend is fueling fierce competition among international dairy companies, particularly between producers from Oceania and Europe – that benefit from historic trade relationships in the region – and new players from the US who are determined to build a foothold in the market.”

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