Consumer demand for dairy products and convenience food in China is booming, driving strong sales growth that looks set to continue for years to come. To seize this opportunity, manufacturers need reliable local sources of key ingredients such as specialty starches. Cargill is responding to this need by investing in China and Asia more broadly to help manufacturers fulfill their growth potential.
Market research data show the growth potential is significant. Euromonitor tipped the value of the Chinese packaged food market to grow from $232bn in 2017 to $325bn in 2022, an increase of 40%.1 The forecast, which is in line with performance seen in recent years, is underpinned by predictions of fast growth in multiple categories, including dairy products, sauces and condiments.
Research from Innova Market Insights validates the view that the dairy sector is driving growth of the Chinese packaged food industry. The market research organization tracked a 44% increase in dairy product launches from 2016 to 2017 as food companies sought to capitalize on the near-double-digit growth of the sector.2
Demand for dairy products and convenience foods is rising quickly in other parts of Asia, too, led by mid-single-digit increases in annual sales in Indonesia and Vietnam.3 With sales stagnating in Western markets, these trends have made Asia a key growth territory for the dairy industry.
Demand for ingredients
The rapid emergence of the Asian market for dairy products and packaged foods is driving surging demand for ingredients from reliable, local and high-quality providers. Manufacturers need to access these ingredients to deliver the dairy and convenience food products demanded by a growing portion of the Asian population.
Hydroxypropylated starch, a highly-stable texturizer used in many dairy products, baked goods and other convenience foods, is one of the in-demand ingredients. Used in sauces, hydroxypropylated starch, provides viscosity, supports storage and heat stability and creates a glossy appearance. In baked goods and dairy products, manufacturers use the starch to manage moisture, thereby extending shelf life and creating a unique texture.
These characteristics make hydroxypropylated starch an important part of the toolkit for companies that want to develop novel, on-trend products without compromising stability or quality. To ensure Asian food manufacturers can reliably access the starch from a single supplier, Cargill is furthering its long history of investing in the region.
Cargill began investing in mainland China in the 1980s and has since gone on to commit around $7.5 billion to projects in the country.4 The latest wave of investments features spending on a facility in Songyuan, in northeast China, the golden corn belt part of the country
Investing to support mutual growth
Cargill is building an integrated plant with corn wet milling capabilities and an annual processing capacity of up to 2m tons, equipping it to turn the corn grown in the region into a steady supply of products for the food industry.
In designing the facility, which is due to open in the summer of 2019, Cargill has used its extensive experience and knowledge of agricultural processing to ensure production of high-quality ingredients that meet food safety standards.
The integrated model will allow Cargill to control quality across the supply chain, from the corn it buys locally through to the hydroxypropylated starch it ships to food manufacturers. By exerting such control, Cargill will enable manufacturers to source a wide range of high-performance starches from a single local source.
Through the investment in Songyuan and the 2018 creation of cold water starch capacity in Indonesia, Cargill is positioning itself to provide products tailor-made to the needs of manufacturers operating in Asia. In doing so, Cargill stands to grow with its customers and the markets they serve, resulting in benefits for everyone from farmers to consumers.
References
1. China Country Profile. FoodExport.org Available at: https://www.foodexport.org/get-started/country-market-profiles/asia/china-country-profile. (Accessed: 23rd May 2019)
2. China’s dairy demand: Huge growth and NPD being seen across all sectors. FoodNavigator-Asia.com (2018). Available at: https://www.foodnavigator-asia.com/Article/2018/07/09/China-s-dairy-demand-Huge-growth-and-NPD-being-seen-across-all-sectors. (Accessed: 23rd May 2019)
3. Southeast Asian dairy in a churn. DairyReporter.com (2018). Available at: https://www.dairyreporter.com/Article/2018/10/03/Southeast-Asian-dairy-in-a-churn. (Accessed: 23rd May 2019)
4. Cargill strengthens China commitment with US$112m new investment in Jilin | Cargill. Available at: https://www.cargill.com/2019/cargill-strengthens-china-commitment-with-us112m-new-investment. (Accessed: 23rd May 2019)
