‘Drinking’ milk remains key

By Fiona Gowers

The liquid ‘drinking’ milk market remains crucial to Australia’s dairy sector, with improved domestic retail pricing and opportunities for further export growth.

In an industry report, Australia’s Drinking Milk Markets: From Loss Leader to Improving Performer, Rabobank says the liquid milk category has struggled with many challenges.

These have included retailer discounting, which is a major “pillar” for Australia’s dairy sector, accounting for 30 per cent of milk production and generating more than $4 billion in revenue annually.

This is important, not only for revenue generation, but also strategically for supply chain efficiency, helping to support the Australian “dairy value chain and leading to stable farmgate milk prices“, the specialist agribusiness bank says.

“Drinking milk, being a staple product in the consumer basket, will remain a large and important category for Australian milk utilisation,” the Rabobank report says.

Australia’s domestic drinking milk market is, however, “very mature” with falling domestic consumption.

This is being offset, however, by growing exports of liquid milk, according to report author, Rabobank senior dairy analyst Michael Harvey.

Domestic milk market

“As we begin 2023, the market is experiencing a structural increase in consumer prices across the dairy aisle, led by drinking milk in particular,“ Mr Harvey said.

“This has been driven by dairy processors passing through record-high farmgate milk prices and higher supply chain costs, along with tight supply due to declining Australian milk production.

“An extended period of industry-related disruption and low margins is slowly coming to an end.

“For dairy farmers, higher consumer prices for milk and dairy products across supermarket aisles is welcome news. It will solidify the end of frustrations over the discounting of drinking milk.

“Additionally, it will ensure higher and more stable returns for the market and mitigate the potential volatility in returns in other channels – both onshore and offshore – for those with access to the drinking milk market.”

Mr Harvey said domestic consumption of drinking milk was a significant market for Australia’s dairy industry, “hence the health and performance of the category still has an important role to play in the industry’s profit pool”.

In 2021/2022, according to Dairy Australia, Australians consumed more than 2.5 billion litres of drinking milk, about 30pc of the estimated 8.554 billion litres of raw milk produced in Australia for that year, with the remainder going into manufacturing of dairy products and ingredients for the domestic and export markets.

Big ‘drinkers’

Australians are big consumers of drinking milk, the Rabobank report said, with Australia’s per capita consumption ranking among the world’s highest.

“The average Australian consumes a large volume of drinking milk, ranking only behind Ireland, Finland and New Zealand, according to the International Dairy Federation,” Mr Harvey said.

“In 2021/22, Australian per capita consumption of milk stood at 93 litres per person for the year, which equals just over 250 millilitres per day.”

Full cream milk is “category king”, equating to 56pc of all drinking milk sold in the country.

However, the report said, the drinking milk market in Australia is “extremely mature” and domestic consumption is trending lower as dietary habits shift, a trend that is expected to continue into the medium term.

Dairy Australia figures indicate domestic milk consumption peaked in 2012/13 at 106.7 litres per person and has since fallen by 13pc. And in 2021/22, total drinking milk consumption in Australia contracted by 1.1pc or 36 million litres.

“This is not a story unique to Australia, however,” Mr Harvey said. “In many westernised economies, consumption of drinking milk shows a similar trajectory.”

Cost-of-living pressures and food price inflation are also providing some near-term headwinds globally, even though the consumption of dairy, including drinking milk, is “relatively inelastic”.

There are signs of consumers trading down, resulting in declines in drinking milk consumption in grocery retail and out-of-home sales channels, the report says.

The “long-term dynamics of the drinking milk category” in Australia will be difficult to reverse, Rabobank says.

However, it’s not all bad news for domestic dairy consumption, with consumers simply consuming dairy in different forms.

“While fluid milk consumption is declining, other categories – such as cheese – continue to grow,” Mr Harvey said.

Growing exports

Export volumes of Australian liquid/drinking milk have also been growing, the report says, with the total volume exported increasing by more than 200 million litres annually over the past decade.

“The Australian liquid milk export sector has continued to perform strongly in recent years, despite dwindling milk supply,” Mr Harvey said.

In 2021/22, Australia exported more than 380 million litres of packaged milk to offshore markets.

Between 2012 and 2022, Australia’s exports of liquid milk grew by an average of 17pc each year.

The ‘Greater China’ markets – of mainland China, Hong Kong, Macau and Taiwan – have underpinned this export growth, the report says, with China itself the “clear stand out”.

Total volumes of liquid milk to Greater China have expanded by an average of 25pc each year over the past decades, Mr Harvey said.

“And while not growing at the same pace as China, export volumes to Southeast Asia have been increasing on average by double digits over the same period,” he said.

“There has been broad-based growth across Southeast Asia, but Singapore, the Philippines and Malaysia have been standout performers for Australian dairy exporters in the region.”

Looking forward, he said, there was still plenty of “runway” left for export volumes in these markets, supported by positive “demand and trade settings” in their economies.

These included an increasing appetite for sustainable nutrition, limitations in local dairy supply capacity, cost competitiveness of imported milk and consumer preferences for imported brands.

The key to long-term export success in these markets will be the ability to grow export volumes despite limited growth in Australian milk production, while also maintaining a competitive price point, the report said.

That’s gold! Queensland ale named Australia’s best beer

By Fiona Gowers

For the second time in three years, a Sunshine Coast couple have produced the best beer in Australia.

Husband and wife brewers Shaz and Matt Wilson of Moffat Beach Brewing Co created the Moff’s Summer Ale, which was named the Rallings Grand Champion Beer of Show at the RNA’s Royal Queensland Beer Awards.

It also won in 2020.

The brewery received a $5000 Lion bursary and further opportunities to be showcased during Queensland’s largest event, the Royal Queensland Show (Ekka).

Judge Steve Henderson said the beer was well-made, easy-drinking and it was “obvious“ that a team of talented brewers had produced it.

“Moffat Beach Brewing Co has demonstrated in this competition they can make a good beer, year after year,” he said.

“The fact they won Grand Champion in 2020 and have backed it up again this year, shows they’re a high-quality brewery consistently outperforming the rest of the industry.”

The Grand Champion trophy was just one of four awards for the couple.

They also collected Best Queensland Beer, Best Session Beer and Best Small-to-Medium Brewery.

It was fierce competition in this year’s national awards at the Brisbane Showgrounds, with a record 663 beers entered, an increase of more than 15 per cent compared with last year.

A team of 50 experienced brewers, sensory experts and industry figures judged the brews over two days.

Mr Henderson said, just as the number of entries rose, so did the quality of beers.

“There was a marked improvement in the standard of beers this year,” he said.

“One of the areas that improved the most was non-alcoholic beer, which has just gone from strength to strength.

“You don’t even know they’re non-alcoholic beers when tasting them – it wasn’t like that a few years ago.”

The Royal Queensland Beer Awards also recognised up-and-coming brewers, through The Star Entertainment Group Best New Queensland Craft Brewer of the Year.

Josh Batten from 10 Toes Brewery on the

Sunshine Coast claimed the award and will now have his beers sold at The Star outlets across southeast Queensland.

Meanwhile, Glass House Brewery won the Champion Pale Ale category, with their Tropical Pale Ale Draught.

RNA chief executive Brendan Christou said the Royal Queensland Awards showcased Australia’s best.

“As one of the most prestigious food, wine and beer awards in Australia, the Royal Queensland Awards is dedicated to unearthing the nation’s top food, beer and wine products year after year,” he said.

“Our awards date back to 1875 and the RNA continues to give Australian brewers a platform to shine, be judged against their peers and get great consumer market exposure.”