Expats develop taste for organic dairy

Every four or six weeks, the Beijing-based rabbi Shimon Freundlich and his team buy 1,000 liters of fresh organic milk for members of the Jewish community in major cities across China.

Freundlich favors Green Yard, a small Chinese dairy brand barely known by most locals.

The "top notch" hygiene standards in Green Yard's dairy farm convinced him, he said.

Before Green Yard's first batch of kosher milk, Freundlich, who supervised production, invited a European dairy expert to examine the machinery and procedures at the Green Yard plant. The conclusion the expert reached was that the plant takes more extensive hygienic measures in its production process than some European dairy plants.

"They take their work very seriously. They're not trying to get away with the minimum standards but rather the maximum," Freundlich said.

The rabbi's trust in the brand reflects the growing popularity of Green Yard among expats in Beijing. So it's ironic that many Chinese don't like their products only because Green Yard is a domestic brand, said Hou Xuejun, general manager at Beijing Green Yard Ecological Agricultural Development Co Ltd.

Located in Yanqing county, Beijing, the Green Yard dairy farm is believed to be the first in the country to use certified organic fodder and organic raw material, as well as having certified production and processing lines.

The farm is home to 700 cows, with only 200 cows available for milking. The cows are played music and are fed organic feed mixed with traditional Chinese medicine.

Because of its limited daily production capacity, which is only 3 tons, the farm can only supply dairy products to 4,000 to 5,000 households.

The company provides fresh organic milk for 3,000 households every day. The milk is mostly sold through high-end local retailers in areas with foreign communities and through shopping websites such as Yihaodian.com and JD.com.

Green Yard's products usually cost two or three times more than other non-organic fresh milk brands.

Hou said that the cost of remaining organic throughout the production process is much higher than in the United States, for example, because the availability of suitable organic land in China is very limited.

The major problems in China for organic milk brands are milk sources and manufacturing bases, said Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Center of China Commerce.

Song added that the manufacturing process and the raw material sources are very important factors for companies.

"Like in wine production, the location of the manufacturing bases for organic milk is very important," Song said.

He added that the quality of the products depends a lot on the manufacturing location.

Organic dairy products still have a small market share in China, Song said, with most of them being organic formula milk and organic milk.

Hefty retail prices, difficulties in obtaining certifications and lack of awareness among local shoppers have held back the development of the country's organic dairy industry, he said.

However, despite the current lackluster demand, the market has huge growth potential, supported by the demand from affluent consumers for high-end food.

Established dairy producers such as China Mengniu Dairy Co Ltd and Yili Industrial Group are eyeing the organic sector to expand their high-end range of products.

Yao Tongshan, chairman of Inner Mongolia Shengmu Technology Ltd, said that the market for organic dairy products in the Asia-Pacific region is expected to increase about 20.2 percent annually in the coming years.

He added that his company's organic milk business is expected to reach sales of nearly 1.4 billion yuan ($226.45 million) this year, with the retail network expanding to 260 cities across the country.