The first week of my individual Nuffield studies in China took me to two of the most sophisticated and densely populated cities in the world, Shanghai and Beijing. From street-side halal consumers to high-end super fresh culture, I got to experience it all.

The modernisation of how the Chinese consumer purchases food has already become the norm, making China a place where tech giants are part and parcel of everyday shopping across the country, even in the most rural communities.

Out of the 1.3bn people, I was one of the few who attempted to pay with cash or even credit card.

Mobile payments were typically the norm among Chinese locals when paying for everything.

At the click of a button, your fresh milk or veg would be at your doorstep that very day.

Out of the 1.3bn people, I was one of the few who attempted to pay with cash or even credit card

The speed and efficiency was incredible thanks to the largest online store in the world, Taobao, which is owned by e-commerce super giant Alibaba.

What also stood out was the array of different diets and food types, with most regions and provinces of China establishing their own unique dishes.

Chinese dairy sector

The dairy sector in China is an industry that continues to grow. Although cow numbers may have dropped from 10m to 7.6m cows, consumers are still increasing their consumption of dairy-based products.

The Pudong business district in Shanghai, China. \ Thomas Hubert

Chinese consumers put a huge amount of trust in the food safety standards and quality of imported dairy products, particularly from New Zealand, Australia and the EU.

If we think about the world's traded milk pool of 73bn litres, China imports about 20% of this, or 14.6bn litres, every year.

The largest exporter in terms of volume is New Zealand with almost half of Fonterra’s milk pool destined for the Chinese market today.

However, the EU is the leading exporter in terms of market value with close to 50%, surpassing New Zealand in 2016.

What I found most interesting was the difference in market share of categories compared with Irish supermarkets. The largest product categories in China are fresh, shelf-stable (UHT), yoghurt and flavored drinkable dairy products.

Chinese companies, particularly Yili and Mengniu, hold the majority of market share for these categories.

In Ireland, the retail price for fresh milk is roughly 3.5 times the farmgate milk price. In contrast, the retail price for fresh milk in China is five times the farmgate price, which highlights that dairy processors in China are doing extremely well in the fresh milk category.

However, by using a higher multiplier, Chinese processors are actually suppressing demand for locally produced fresh milk, which is opening up opportunities for imported milk from players such as Fonterra to sell fresh milk in China.

Fonterra has recently tapped into the cultural norm producing the first ultra fresh milk, which is delivered daily by online store Alibaba.

Grass-fed dairy

Grass-fed is not something that is high on the agenda for Chinese consumers compared with the US or Europe. However, Yili has recently launched a campaign promoting grass-fed dairy. There are only a few small regions in China where grazing cows is viable, most notably in southwest China and inner Mongolia.

Although cow numbers may have dropped from 10m to 7.6m cows, consumers are still increasing their consumption of dairy-based products

Almost all of China’s domestic milk is produced from American-style barns fed on a TMR system. I visited one of Fonterra’s 4,000 cow farms in the Shandong Provence, which is run by Australian Nuffield scholar Paul Nevin.

Although only two years old, it was the cleanest, most hygienic farm I have ever visited and was producing high-quality milk.

Challenge

The challenge for farms of this type is managing slurry and water quality, as spreading on the land is not permitted in China. This farm also had a bio-digester and cropping business in order to make the farm self-sufficient into the future.

Impressed

Overall, I was extremely impressed with my visit to China. The Chinese are a sophisticated nation steeped in history and tradition.

Aspects of the Chinese diet can be categorised as “westernising”; with a greater demand for dairy and a growing number of consumers seeking alternative, more luxurious and convenient food products. However, it’s clear to me that to state China is westernising is incorrect.

In reality, the country is modernising rapidly which is driving demand growth.