GLOBAL packaging giant Tetra Pak has flagged a new wave of dairy exports to Asia as Australian and New Zealand processors seek to tap unmet overseas demand and reduce their reliance on the local fresh milk market.
Tetra Pak chief executive Dennis Jonsson says the Swedish carton company is working with Australian and New Zealand processors on almost ten projects to increase exports of dairy products to countries such as China, Vietnam, Indonesia, the Philippines and Malaysia.
Tetra Pak's sales in Australia and New Zealand rose almost 10 per cent last year – more than twice the rate of global sales growth – fuelled by rising demand for packaging and processing equipment, materials and services, mainly in the dairy industry.
The company expects sales in the Oceania region to continue to grow around 10 per cent as customers invest in new processing capacity and grow export volumes.
"There's a realisation that there is an opportunity they can't miss," Mr Jonsson told The Australian Financial Review during a five-day visit to Australia this week.
"Asia demand for dairy products is fuelling a lot of projects," he said.
"Our customers are seeing a lot of opportunities both in south-east Asia and China for exports from New Zealand and Australia. We definitely believe if there hasn't been an interest before there is definitely interest now."
"Our assessment is that it's going to continue for quite some time, a number of years, and that is what is creating the opportunities."
Australian dairy processors have been urged by the likes of Fonterra director Ralph Norris to exploit Asian demand for milk. Exports also reduce local producers exposure to the domestic white milk market, where margins and returns are under pressure from Coles and Woolworths' $1 a litre private label milk strategies.
In some cases Tetra Pak, which has about 100 customers in China and accounts for about 68 per cent of the China food and beverage carton market, had alerted local processors to export opportunities.
"We are trying to support our customers by both seeing the opportunities and helping them with plant solutions and advising them on the best way to go about them," Mr Jonsson said. "At the same time we are trying to create a bridge between the people in China that see the need of supporting products coming from here."
Tetra Pak's largest Australian and New Zealand customers are Murray Goulburn Co-op, Fonterra, Parmalat and Goodman Fielder.
Last month, Murray Goulburn, which already accounts for 85 per cent of the long-life milk market in Australia, announced plans to invest $19 million at its Leongatha plant to increase ultra-high temperature processing capacity by 70 million litres a year. Another $180 million of investments will be announced mid-year.
Murray Goulburn managing director Gary Helou, who has signed a ten-year agreement to make private label fresh milk for Wesfarmers' Coles, wants to double the co-op's $2.4 billion revenue by targeting Asian markets.
Fonterra also announced plans last month to invest more than $100 million in a new UHT milk processing plant at in Waikato in New Zealand, while Parmalat Australia plans to build a 60 million litre a year UHT plant in Victoria.
"The Australian market is only so big, and there are hundreds of millions of customers on our back door step in addition to Coles and Woolworths," said one dairy processor.
In the past, most Australian dairy exports to China were in the form of powdered milk and cheese.
"What we're seeing now is there is a lot of interest for processed and packaged liquid milk – that is the new opportunity in this case," said Mr Jonsson .
"So we are speaking and working with many customers on specific projects for processing and packing the milk in Australia and New Zealand and exporting to those counties," he said. "And that is relatively new, at least in the quantities we are speaking about now."
Mr Jonsson also flagged opportunities for Australian processors to export liquid infant formula, flavoured milk and so-called ambient, or shelf-stable, yoghurt. China's Bright Foods, which owns Australia's Manassen Foods and Margaret River Dairy, is already selling ambient yoghurt packed in Tetra Pak's prisma aseptic cartons.
"Basically consumption is growing more than production of dairy products in China and it will take some time to catch up. That is where the local industry has an important role," Mr Jonsson said.
Tetra Pak's global revenue growth dipped slightly below the company's decade-long 5 per cent average growth rate in 2012, with global net sales rising 4.2 per cent to €11.16 billion ($14.8 billion).
Growth slowed across the board, even in developing markets.
