Yili on how ASEAN lactose intolerance and supply chain challenges can be overcome

Although dairy products, from milk to ice cream, are very common in the kitchens of ASEAN consumers, the fact remains that the per capita consumption of dairy products in the region is much lower than that of many other markets, at less than 20 kg per inhabitant compared to around 300 kg. per capita in the United States according to Statista.

It is very common for Western families to buy large 2-3 liter cartons of milk every week, but in Southeast Asia, the best-selling cartons are 1 liter cartons, which are not necessarily purchased neither does every week.

According to one of China’s largest dairy companies, Yili, this drop in consumption may be explained by widespread lactose intolerance in the region – studies have estimated that the frequency of lactose intolerance among consumers is between between 90% and 100%.

That said, the company remains confident in the plans it previously unveiled for the ASEAN region, remaining convinced that this current situation is due to consumption habits that have formed over the years – a situation that can still be corrected with proper consumer education and promotion.

“Dairy products have traditionally been considered foods for children and the elderly, and there are large populations of lactose intolerant people in Southeast Asia – this in turn means that dairy products have no [had the chance to be] still integrated into the regional cuisine”,Yili’s deputy chairman, Dr. Yun Zhanyou, said FoodNavigator-Asia​.

“The only way to overcome this is for the entire industry as a whole [to not merely accept the current situation as status quo]but focus on presenting the merits of dairy products to Southeast Asian consumers and letting them reap the benefits of this healthy food – a day will come when dairy products will be fully integrated into the regional cuisine.

“The health benefits of dairy products cannot be ignored. [especially] when it comes to protein and calcium, [and] increased health awareness among ASEAN consumers has led to an increase in their consumption of dairy products – there are over 650 million people in the region, which is a very big opportunity.

“Besides, [we also know that] various governments such as Thailand have been active in promoting the incorporation of dairy products into diets and have launched initiatives to encourage milk consumption in schools – Thailand has seen a boom in its dairy market in recent years , with local residents increasingly consuming dairy products to support healthier lifestyles, [so full incorporation is possible in the long term].”

The other main hurdle the dairy market has faced in the region is related to the supply chain, which inadvertently leads to higher costs for high quality dairy products – not the best situation. in an extremely price-sensitive market.

“The dairy industry has a very long value chain, [but in South East Asia the] the local dairy industry is relatively weak with a less developed industrial chain, a shortage of top quality natural farms and a lack of technical knowledge and skills among dairy farmers – meaning it is expensive to develop the industry In the region “,said Dr. Yun.

Yili has established two Southeast Asian facilities in Thailand and more recently in Indonesia, but Dr. Yun acknowledged that even with these local manufacturing plants and field operations, supply chain management on markets where it is not as developed – especially compared to markets where it is extremely advanced like China – remains a very big barrier to business expansion.

“Geographical and climatic factors also pose obstacles to the transport of dairy products – for example, the population of Indonesia and some other Southeast Asian countries is dispersed over countless islands, which creates challenges for the distribution of products,he said.

“Wet weather conditions also necessitate a better industrial cold chain system as it takes longer and costs more for dairy products to reach remote areas and islands – [which in turn] can lead to higher product prices for higher quality products.

Intense competition

Interestingly, Dr. Yun also pointed out that despite high levels of lactose intolerance and poor supply chain development, another major challenge the company faces in the region is ironically intense competition. in the market of other countries.

“The Southeast Asian market is highly import-dependent when it comes to dairy products, which means we have to compete intensely with other cross-border dairy brands in addition to local dairy companies,”he said.

“[This] shows how dairy has remained a popular product despite high levels of lactose intolerance here [but also that] In order to stand out from the rest, we must prioritize the development of high quality products and build differentiated and localized brands through innovative R&D and marketing here in this region.

According to a 2019 study on the ASEAN dairy industry, the countries with the highest dairy import volumes are Malaysia, the Philippines, Singapore and Thailand, with most imports coming from Australia, from Argentina, the EU, New Zealand and the United States.

Yili identified many “unmet needs”​ for dairy products in Southeast Asia, which it intends to satisfy by using its many complete product lines in the dairy sector which can cover the manufacture of products ranging from liquid milk to powdered milk and yogurt, ice cream, cheese and more.

“The many market gaps mean huge market opportunities here for us,”said Dr. Yun.

“As an example of this gap as well as one of the ways we overcame the supply chain challenge, we launched the premium yogurt brand AMBPOEIAL Greek yogurt in the region – This product can be stored at room temperature and does not require refrigeration. chain, [reducing the traditional logistical issues].

“This is how Yili hopes to innovate and grow, tailoring products to the unique characteristics of local consumer markets and cultures across Southeast Asia. [so as to] also overcome the unique challenges faced by the markets here.

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