According to recently US government trade data, American exports to Southeast Asia reached a historical high last year, increasing 28% over 2017 to 441,000 tonnes.
At the same time, the country saw 9% growth in overall shipments worldwide in a bumper year for the dairy export trade there.
“The supply is abundant all over and competition is definitely here in Southeast Asia. Dairy ingredients and products need a home to go to,” said Dali Ghazalay, regional director of the US Dairy Export Council (USDEC), who is based in Singapore.
“There are some factors these days that no one can control, like barriers and so forth, and Southeast Asia is definitely the best location due to the diverse needs of the market.”
Shift in focus
The most famous barrier since the Great Wall of China, erected by presidents Trump and Xi, has led many American exporters to shift their focus towards the Asean countries.
The US-China trade war will bring more options to the region in terms products and ingredients from an increasing number of American suppliers interested in entering a market of nearing 650m consumers.
The region may also be used as a stepping stone for ingredients that its manufacturers can process and sell on to the Chinese market, Dali continued.
“Directly from the China trade war, we see more eyes on SE Asia. This is the time for exporters to think about innovating or increasing their product lines with product extensions and new launches.
“Market forces move in mysterious ways. This region is friendly with China, so I’m very sure that importers and manufacturers are looking at ways to work with our US exporters to penetrate the Chinese market. I wouldn’t be surprised, I’m sure it’s happening now.”
Southeast Asia is now ahead of China and behind only Mexico as the second-biggest export destination for American dairy exports, both in terms of tonnage and value.
Trends emerging
Shipments to the region grew by nearly 100,000 tonnes last year over 2017 thanks to strong orders for whey ingredients, milk powder and cheese, which all reached new all-time records. In contrast, exports to China started off strong but slowed mid-year following strong headwinds amidst retaliatory tariffs.
Though still small compared to North Asian neighbors, cheese exports to Southeast Asia followed a similar uptrend, posting a 15% increase last year to 19,000 tonnes.
Also impressive has been growth in demand for ingredients in regional giants Indonesia and the Philippines. Dairy beverages is also a segment particularly worth watching, especially in Thailand and Malaysia.
An unusual trend has also been emerging whereby more startups and smaller companies have been dominating new beverage product launches.
“I see quite increased interest and more product launches in the beverage category. And what is interesting is these players are newcomers, not necessarily the traditional beverage companies we know of. It’s not the big guys, it’s the up-and-coming ones, which makes it a segment to watch,” said Dali.
“Our main focus is on ingredients, though, just from the sheer volume. Infant formula is another important market for us. When it comes to that category, they see our major markets demand higher value dairy ingredients.”
Regional presence
Increasing numbers of American dairy exporters are investing more in growing their presence in Southeast Asia by setting up offices in the region, especially in Singapore and Indonesia, Dali explains. This has spurred groups like USDEC to increase their support of these companies by laying on more provisions.
Last year’s deal for USDEC to back an innovation center at Singapore Polytechnic has prompted more local application work and research to understand the needs of the region’s end-users.
The agreement allows the council and American dairy suppliers to work with the Food Innovation and Resource Centre at the university to develop innovative products for the local market and provide consumers in the region with more options suited to their specific tastes.
The center was formed in 2007 to provide food companies with technical expertise in new product and process development. It is part of the government’s vision to position Singapore as a leading food and nutrition hub in Asia.
“We expect the dairy knowledge and spirit of innovation brought by USDEC and its members will advance progress toward our goal to leverage science and technology to develop food innovations and capture new markets,” said Loong Mann Na, the century’s director, on signing the agreement.
There is also a need to demonstrate that US dairy ingredients are versatile enough for fast-evolving local applications, Dali says.
“That’s one of the reasons for the partnerships we’ve got with the Food Innovation Resource Centre at Singapore Polytechnic. And also with the World Gourmet Summit. It’s about showing, it’s about proving that US Dairy ingredients have got craftsmanship, versatility, variety and innovation that end-users are looking for.
“There’s been a lot of work we’ve been doing in terms of expanding the use of US dairy ingredients and products in various applications. US dairy companies have ramped up a number of activities in Southeast Asia.”