Say cheese

Dairy producers plan for the future of fromage in China


Top that: there’s an 80% chance the cheese on there is made by Fonterra

Charles de Gaulle once lamented of his native France: “How can anyone govern a nation that has 246 different kinds of cheese?”

It was a fair point, but the same concept cannot be applied to China – a country much larger than France and which got by without cheese for almost five millennia.

In fact, the closest delicacy to fromage in traditional Chinese cuisine is made of bean curd rather than dairy. To make the dish – which is named Fu ru – cubes of bean curd are fermented and then added to a brine made of rice wine, vinegar and chilli pepper. The curd is then soaked for weeks (or sometimes even years). The end result is a savoury tofu of velvety texture. Rather like blue cheese, it’s an acquired taste – indeed its critics complain that the fermented tofu whiffs like the most pungent Stilton.

In recent years, plainer cheese has started to feature in some Chinese diets. Thanks to the proliferation of Western-style restaurants and fast-food chains like McDonald’s and Pizza Hut, cheese consumption has been growing steadily. Last year, China’s cheese market reached Rmb3.5 billion ($540 million), up 24% on 2014. Turnover is expected to pass Rmb5.4 billion by 2017, says market research firm Euromonitor.

Convincing the Chinese to shop for cheese on a regular basis hasn’t been easy. Apart from the absence of cheese in the Chinese diet, most Chinese are lactose intolerant, which means they struggle to digest many of the dairy products on offer. But cheese might actually have an edge here: like yogurt, the fermentation process breaks down the lactose in milk, making it easier to eat.

At the moment, restaurants and bakeries account for up to 80% of China’s cheese market, while retail consumers make up the remainder. But with the global dairy industry in the doldrums, foreign producers are hoping to convert millions of Chinese consumers into cheese lovers. Fonterra, the New Zealand dairy giant that already supplies much of the cheese for the 300 million pizzas sold each year in China, invested $170 million in doubling production capacity for mozzarella, cream cheese and processed cheese slices in China last year, says CBN Weekly. A senior Fonterra executive also told Bloomberg that if you eat a pizza in China there’s an 80% chance it is topped with its Kiwi mozzarella.

Similarly, Bongrain, a subsidiary of France’s Savencia Fromage and the market leader in China’s cheese sector with a 19.3% share (Fonterra has 14.5%), has launched a virtual storefront on Alibaba’s Tmall to make the dairy product more accessible for consumers outside major cities.

The biggest local maker of cheese is Shanghai-based food conglomerate, Bright Food, which now has access to imports of Israeli cheese after its acquisition of Israel’s biggest food firm Tnuva.

Although many Chinese are likely to taste cheese for the first time as a pizza topping or in a savoury pastry, marketeers have tried to persuade younger Chinese consumers that the cheese plate is a symbol of sophistication and luxury. Huang Dongli, a business executive at Budweiser, told CBN that she fell in love with cheese after sampling different varieties during her overseas travels. “I like to eat cheese with a bit of dried fruit and beer,” says Huang.

And even if most Chinese adults didn’t grow up eating cheese, they are now more willing to offer the dairy product to their children as a snack, cheese firms have reported. To that end, dairy producers like Bongrain have been releasing child-friendly novelty products for parents to put in their kids’ lunch boxes, like cheese in popsicle-form or cheese custard.

Similar to many consumer goods firms, cheese producers have also adapted their products to cater to Chinese taste buds. In general, the locals prefer cheese that is milder and sweeter. Flavours that incorporate blueberry, banana and strawberry have proved popular. And instead of being an occasional indulgence, cheese is also being marketed as a health food. The cheeses sold in China are typically lower in fat content and higher in calcium than those in other parts of the world. Texture-wise, Chinese consumers also like cheese that can be spread easily on bread.

“Basically, the most popular cheeses in China are soft, processed cheese. These have a strong dairy taste and can be turned into a gooey puddle when the cheese is heated. They can also be spread directly on the bread,” CBN summarises.

More pungent types of cheese, like Roquefort and Gorgonzola, have failed to catch on. “Not only does blue cheese look like it has gone bad it also smells very stinky so not many Chinese are interested. Though, more people are curious to try,” one upscale cheeseseller in Shanghai told CBN.

Although cheese accounts for a very small segment of China’s $40 billion dairy industry, it presents a growth opportunity.

Conditions in other parts of the dairy business look decidedly tougher. Milk prices have fallen around 60% since two years ago, in large part due to weaker demand from China after massive buying of milk powder in early 2014.

“There was a miscalculation towards the end of 2013 among the milk industry that domestic milk supply (in China) was going to remain very tight,” one dairy analyst told the Wall Street Journal. The forecast of shortfalls was an error and a glut was the outcome instead.

Domestically in China, large dairy farmers have been struggling to stay afloat, especially as milk imports from overseas increase. Some have resorted to feeding their surplus milk to pigs or culling their dairy herds to deal with some of the chronic oversupply (see WiC267).

A price war is also being fought to try to reduce the surplus milk sloshing through the global market. “We are turning negative on China’s dairy sector,” Christopher Leung at HSBC has warned. “While raw milk prices have rebounded a little in recent months, we don’t expect a meaningful recovery in 2016 because, one, there is still an abundant global supply of raw milk, and, two, prices in China are still much higher than overseas.”

For cheesemakers, the lower prices for their key ingredient is more of a delight than a disaster. Men like the Beijing-based cheese-maker Liu Yang are on a mission to change China’s perception of the dairy product. In spite of constant complaints from his wife, Liu has been making French-style fromage in his small Beijing workshop since 2009 (see WiC27 for our first mention of him), having trained in the craft in France.

Nevertheless, he told the China Youth Daily recently that – despite the growing popularity of cheese in China – the creation of a more vibrant cheese culture is still a work in progress. “Many customers are curious; they come here because they have read about it in the media. But most of them don’t know how to appreciate cheese and more often than not, the cheese ends up going to waste,” he laments.

He is out to prove though that China can produce good cheese. Liu’s local cheesemaking skills earned a major stamp of approval last year when his Beijing Blue, a pungent blue cheese, was given top honours at the prestigious Mondial du Fromage cheese trade show in Tours, France.

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