An expanding opportunity across the Pacific Ocean awaits U.S. dairy exports, according to industry experts.

In 2020, southeast Asia became the top export destination by volume for U.S. dairy after exports rose 26% year-over-year, Anoo Pothen, director of consumer insights for the U.S. Dairy Export Council, said last week during the virtual Dairy Experience Forum.

That growth was despite the COVID-19 pandemic. And going forward, Southeast Asia — including Vietnam, Thailand, the Philippines, Malaysia, Singapore and Indonesia — continues to be poised to offer further growth.

Vikki Nicholson-West, senior vice president of export ingredient marketing for USDEC and executive director of USDEC Singapore, said opportunities in key markets like Mexico and China aren’t being ignored. But “we looked to Southeast Asia over the past few years because of the growth opportunity.”

The U.S. does not have the same large market share in Southeast Asia as it does in a market like Mexico, Nicholson-West said.

But Southeast Asia has been a leading destination for dairy ingredients — such as skim milk powder, whey ingredients and lactose — that can be used in other products, and the U.S. should capitalize on that, Pothen said. Southeast Asia has also become a growing destination for U.S. cheese.

Southeast Asia is expected to experience a growing milk deficit over the next decade. Urbanization, quick penetration of the internet and growing purchasing power, and relatively low dairy consumption per capita in the region also indicate opportunities for growing U.S. dairy exports.

In pockets of Southeast Asia where the middle class is growing, U.S. dairy has a another chance to insert itself because those consumers are looking to increase nutritional value in what they consume as well as try new things, Nicholson-West said. For example, U.S. cream cheese “has grown in volume and opportunity” as Southeast Asian consumers look to make their own or buy a cheesecake like the one they saw online, she said.

Overall, demand for U.S. dairy in Southeast Asia is “really strong,” Nicholson-West said. From 2019 to 2020, demand for U.S. dairy in the region grew by roughly 35%, she said.

That’s not to say that U.S. dairy doesn’t still have challenges in the Southeast Asia market.

The United States is likely to face competition from other exporters, primarily the European Union, New Zealand and Australia, Nicholson-West said. Competition in Southeast Asia hinges on factors including quality of product, availability of product, customer service and perception of value for price.

Because Southeast Asia is thousands of miles across the ocean from the U.S., exporting dairy products with a limited shelf life, like fluid milk, to the region can also be difficult.

Plant-based alternatives also have the potential to disrupt the dairy industry in Southeast Asia. Pothen said that “disruptors” of rice-based or nut-based alternatives are not only affecting growth for U.S. dairy but even for soy drinks, which have long been accepted in Southeast Asia and hold 97% of the plant-based beverage space.

“Plant-based beverages are on the rise,” Pothen said, “and this will be a space to watch out for.”

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