The consumer landscape in China is changing rapidly and New Zealand's dairy industry needs be aware of the extent of change and the opportunities opening up ready to be seized.

The simple fact is that China is importing more dairy products, but less of New Zealand's main export, whole milk powder. There is emerging evidence that milk powder will be a declining component of the market in future.

Take a look at the numbers: In the two years to 2015, cheese imports increased 60 per cent, butter imports grew by 36 per cent, liquid milk imports were up 150 per cent and imported infant formula increased by 57 per cent. Over the same period, imports of whole milk and skim milk powders decreased.

New Zealand has been nimble and innovative in carving out a dominant position in China, accounting for 90 per cent of exported whole milk powder market to China. Yet for the more valuable infant formula, the Netherlands dominates with 36 per cent and Ireland is second with 17 per cent. New Zealand comprises only 11 per cent of the market share, with Germany on its heels at 10 per cent.

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Global infant formula exports to China for the first nine months of 2016 had a landed value of US$2.1 billion (NZ$2.98b). By comparison, exported whole milk powder over the same period was valued at only US$870 million. On a per kilo basis, infant formula had a landed value of US$12.63, whereas New Zealand's primary export was valued at only US$2.52 per kilo.

To understand what's happening in China, you need to look at the consumer market. Demand for health food is soaring, presently worth US$29b per annum. Other trends include a significant shift to healthier traditional foods, with 30 per cent of consumers prepared to pay a premium for better quality and healthier food items, such as dairy, meat and seafood.

China's changing demographics starkly illustrates why this is happening: the middle class are now an estimated 300 million-strong and forecast to increase by a further 150 million over the next decade.

Households with incomes above US$35,000 are expected to increase by 300 per cent in the next 10 years.

Then there's the baby factor. China ended its one-child policy on January 1, 2016. The response from families was immediate, with birth rates increasing 7.9 per cent to more than 17 million births last year. This trend is expected to continue.

But it is not a simple case of more families with more money having more babies. There is a fundamental shift to high quality goods that is changing the market, and demographic and income shifts are the drivers of that change.

Yashili NZ chose this country in which to build a state-of-the-art production plant because of its global reputation for dairy innovation, its clean, green credentials and access to the best dairy farming industry in the world.

We are proud to call New Zealand our home and our fortunes are very much tied to this country's, so we have a vested interest in seeing this great dairy industry succeed.

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We keep a close eye on the market trends on the mainland and can see the demand for premium food products exponentially increasing over time.

It is the right time for Kiwi food and beverage companies to increase their presence in the Chinese market.

I am not criticising the New Zealand dairy industry, whose people I have great admiration for, but not nearly enough is being done to leverage all the sector's advantages, particularly in China. I understand operating in China isn't easy and things can come quickly unstuck - as Australia's Bellamy's has recently illustrated.

I would like to see more Kiwi infant formula brands on Chinese shelves in the future.

To stick with shipping the same old raw product in the face of this inexorable market trend represents a lost opportunity cost to New Zealand.

- William Zhao is General Manager of Yashili New Zealand