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China ‘bridge’ emerges from milk deal

Edition_177_Van_Milk

Fresh milk exports from north-west Tasmania to Ningbo in eastern China will create airfreight opportunities for Tasmanian fruit, vegetables, seafood and other perishable products.

Moon Lake, the owner of Van Diemen’s Land Company (VDL), aims initially to send 10 million litres of its annual 100 million litre production via direct flights from Hobart.

The milk will be sold at the top of the fresh milk market in Ningbo and Beijing and will be promoted as a premium Tasmanian product under a new Van Milk label.

It will initially be sold in one litre and 600ml cartons at a retail price of between $10 and $15 a litre.

There are plans to expand the product range to include yogurt and other dairy foods.

Moon Lake’s Managing Director, Sean Shwe, said there were also plans to extend the Van Milk market to Shanghai, Hangzhou and other cities after the product has become established in Ningbo and Beijing.

Mr Shwe described the initiative as a “game changer” not only for his own company, but for other Tasmanian exporters.

He told a Hobart media conference in October it was the first step towards a vision by Moon Lake’s owner, Lu Xianfeng, of the creation of a trade bridge from Tasmania into China.

“It is great for VDL and the north-west coast community as it moves the farms from ones that previously just produced milk and watched it leave through the farm gate to ones that now produce a high-quality, value-added export product, giving them more security and certainty about prices,” Mr Shwe said.

“It will create new jobs in Tasmania in processing and exporting and there is enormous potential for a boost to Chinese tourism off the back of our promotions of Tasmania and the north-west coast as part of our marketing plans in China.”

Mr Lu bought VDL – Australia’s biggest dairy business – in April for $280 million.

Positive publicity was soon flowing from his Van Milk announcement.

The People’s Daily reported: “China’s path to food security is taking a big swing to the south. In fact, 8,500km south to Tasmania.”

The State’s Premier, Will Hodgman, said the plan was a great opportunity to promote Tasmania’s brand to consumers in the world’s largest export market.

“Van Milk can become a … partner for other Tasmanian exporters, taking advantage of distribution channels, warehousing, cold-chain logistics and significant business introductions,” he said.

Moon Lake will underwrite the establishment of a new freight-only air link and is negotiating with airlines and airports to fly weekly round trips, starting in the first quarter of 2017.

The company plans to increase flights to two or three a week within 12 months.

Mr Shwe said the company chose Ningbo because it was Mr Lu’s home town and he had networks there to sell the product.

“Also, the city has among China’s highest average incomes and is less saturated with western products than, say, Shanghai,” Mr Shwe said.

“Even before we have started commercial shipments we have forward-sold more than 15 million yuan [$2.8 million] of Van Milk, which is very exciting.

“There will be a sophisticated marketing campaign including social media and a consumer reward where buyers of Van Milk will have an opportunity to win a visit to Tasmania and see where the milk comes from.”

Chain of custody became important for Chinese consumers following milk contamination episodes within the country, involving melanin, mercury and other toxins.

Chinese consume less than a third of the global average of dairy products and there is huge potential for growth in consumption among the burgeoning middle class.

The Executive Director of Brand Tasmania, Robert Heazlewood, told Tasmanian Country: “Tasmanians are fortunate that Moon Lake was the successful bidder for the VDL dairy operation.

“We have always produced food and beverages of extraordinary quality in this State, but we have often struggled with distribution and found it difficult to achieve scale.

“Now Moon Lake and its Van Milk off-shoot have sorted those problems for 10 per cent of their own dairy production and potentially for many other Tasmanian products.

“They have the capital to effectively promote their own product and the Tasmanian brand in their home city of Ningbo and further afield in China.

“This is exciting; and you get the feeling that Ningbo, one of China’s oldest cities with a population approaching 2 million and a reputation for affluence, will become an important export destination for many Tasmanians.”

Mr Heazlewood congratulated Moon Lake on its vision.

“Tasmania’s reputation as one of the premium food producers on the planet will only be enhanced by this initiative,” he said.

“The State’s dairy industry will benefit, the Circular Head district will benefit in the longer term and Chinese consumers will enjoy wonderful, fresh Van Milk from Tasmania.

“It is just terrific!”

Dairy Tasmania’s Mark Smith said: “I think it’s a very positive move. It’s something new for Tasmania and it will bring growth opportunities for farmers and for the dairy industry.”

Mr Smith said the branding of the milk as a premium product made in Tasmania would create opportunities.

The Tasmanian Farmers and Graziers Association’s Andrew Lester said: “Moon Lake Investments’ continued confidence in the sector will further reinforce the importance of our dairy industry and the Tasmanian brand, in general, to key international export markets.’’

Milk from VDL is usually processed by Fonterra, but Van Milk will be processed in Hobart by Lion Dairy because it holds a licence to export pasteurised milk and has capacity to handle the volume required.

The initiative will help address an emerging shortage of air cargo space between Australia and Asian markets.

Lucy Gregg from Reid Fruits, said: “Getting air space is our biggest challenge because we are in this market only six weeks per year (after picking). That limits our bargaining power.”

One Melbourne exporter said Australians were missing out on up to $100 million in potential sales each year because of limited air space.

Image courtesy of Van Milk

3 November 2016, Tasmania's Stories Edition 177

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