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On August 5, local time, Liu Jianchao, Minister of the International Department of the Central Committee of the Communist Party of China, met with Uruguayan Foreign Minister Paganini in Montevideo. Liu Jianchao said that China and Uruguay are good friends and good partners. In the 36 years since the establishment of diplomatic relations between the two countries, they have always respected each other, treated each other as equals, deepened political mutual trust, continued to expand economic and trade cooperation, and increasingly active cultural exchanges. China is willing to work with Uruguay to implement the important consensus reached by the two heads of state, continuously strengthen strategic cooperation, continue to firmly support each other on issues involving each other's core interests and major concerns, promote pragmatic cooperation in the fields of economy, trade, science and technology, strengthen cultural and sports exchanges, and promote greater development of the comprehensive strategic partnership between the two countries.

Bilateral trade between China and Uruguay has remained positive. China has remained Uruguay's largest trading partner and largest export market for 11 consecutive years. Uruguay's exports to China include beef, soybeans, dairy products, pulp, etc. Benefiting from factors such as being located in the "Golden Milk Belt of the Southern Hemisphere", the overall scale of Uruguay's dairy exports has shown an expanding trend. Among them, Conaprole, as the largest private enterprise in Uruguay and the largest dairy exporter in South America, has exported to more than 60 countries and regions so far, and has been operating in China for 15 years.

Tian Wenjing, Chief Representative of Uruguay's Cona Dairy in China, recently accepted an exclusive interview with a reporter from 21st Century Business Herald. She said that although the overseas brands in the Chinese dairy market are dominated by New Zealand and Australia, and brands from other countries have a low share, given the huge Chinese market, other overseas brands including Cona Dairy can also find development space that matches market demand and continuously cultivate brand recognition and acceptance.

In 2018, Uruguay and China signed a memorandum of understanding on cooperation in jointly building the Belt and Road Initiative. Tian Wenjing said: "For Kona Dairy, we are deeply inspired by the spirit of mutual benefit and win-win advocated by jointly building the Belt and Road Initiative, and continue to carry out international cooperation in dairy product R&D technology, market development, etc. under the framework of jointly building the Belt and Road Initiative."

Looking ahead to the future business layout in China, Tian Wenjing told the 21st Century Business Herald reporter that China is an important market that Kona Dairy does not want to give up and is an important partner. She emphasized: "We are still optimistic about the potential of the Chinese dairy market and hope to deeply participate in the development and cooperation of the Chinese dairy industry. We hope that under the background of the good bilateral relations between China and Uruguay and the joint construction of the 'Belt and Road' initiative, we can see that the two countries will usher in more preferential and favorable tariffs in the field of dairy trade, creating a better environment for Kona Dairy to develop its business in China."

Tian Wenjing. File photo

Kona Dairy is a "bridge" for cooperation and exchange of dairy products between China and Ukraine

"21st Century": Please briefly introduce Kona Dairy's business layout around the world and in China.

Tian Wenjing: Kona Dairy was founded on June 1, 1936. In 2000, the Food and Agriculture Organization of the United Nations established June 1 as World Milk Day. This is a beautiful coincidence. Kona Dairy is the largest private enterprise in Uruguay. It is a cooperative with more than 2,000 dairy farmers. It accounts for 76% of Uruguay's milk supply and 80% of Uruguay's dairy exports. It has been ranked first in exports by the Uruguayan Exporters Association for 11 consecutive years. As the largest dairy exporter in South America, Kona Dairy's export market covers more than 60 countries and regions, including Brazil, Algeria, Russia, China, North Africa, the Middle East, Southeast Asia, etc. In view of its population size, land area and resource endowment, Uruguay is an export-driven country. For Uruguay, the export of products, including dairy products, is not a choice, but a necessity.

The Chinese market is very important to Uruguay, accounting for about 30% of Uruguay's total exports. In the field of dairy trade, with the booming Chinese economy, there is a huge demand for raw materials. In addition, driven by the size of the population and market purchasing power, China's demand for dairy products has increased. Against this background, in 2009, Kona Dairy began to export dairy products to China. In the following ten years, its dairy product sales in China have maintained steady growth. Although the overseas brands in the Chinese dairy market are dominated by New Zealand and Australia, the share of brands from other countries is relatively low. However, given the huge Chinese market, other overseas brands, including Kona Dairy, can also find development space that matches market demand and continuously cultivate brand recognition and acceptance.

21st Century: Uruguay joined the Belt and Road Initiative in 2018. How do you view the impact of the Belt and Road Initiative on dairy cooperation between China and Uruguay?

Tian Wenjing: Uruguay has expressed a positive attitude towards joining the Belt and Road Initiative and is the first Southern Common Market country to sign a memorandum of understanding on cooperation in the Belt and Road Initiative with China. For Kona Dairy, we are also deeply inspired by the spirit of mutual benefit and win-win advocated by the Belt and Road Initiative and actively and continuously carry out international cooperation under the framework of the Belt and Road Initiative.

For a long time, Kona Dairy has been a "bridge" for cooperation and exchange between the dairy industry in South America and China. The bilateral delegations have visited each other to conduct inspections and exchanges on knowledge, technology, market development, etc. In addition, as a part of China's overseas milk supply chain, Kona Dairy has made corresponding investments and transformations in the ranch production process according to the demand for carbon reduction.

Hope to deeply participate in the development of China's dairy industry

"21st Century": What challenges does Kona Dairy currently face in its development in China?

Tian Wenjing: Kona Dairy faces severe challenges in gaining market share in China. From the perspective of the market structure, New Zealand dairy brands have a high market share in China due to their early layout, good quality and high recognition. In addition, all New Zealand dairy products can enter the Chinese market duty-free from January 1, 2024. The favorable tariff means that the competitive advantage of New Zealand dairy products in the Chinese market will be further highlighted in the future.

In contrast, Uruguay's dairy export tariffs to China vary from product to product, with a 10% tax rate for milk powder. In addition, in the past few years, China has continued to increase its milk self-sufficiency rate, domestic pastures and milk production have continued to increase, and the impact of factors such as the epidemic has led to a slowdown in consumption, and China's overall demand for dairy imports has declined. Against this backdrop, Cona Dairy's dairy exports to China have fallen "cliff-like", with the proportion of its total exports falling from about 15% in 2022/23 to less than 2% in 2023/24.

"21st Century": What are your opinions or expectations on Kona Dairy's future business layout in China?

Tian Wenjing: Kena Dairy has been deeply rooted in China for 15 years. Judging from the current market competition pattern, if the macro trade policy and economic environment do not change significantly, Kena Dairy's business development in China will be difficult. After all, agricultural products, including dairy products, are not luxury goods. Their international prices are unified and transparent, and the added value premium space is relatively limited.

Kona Dairy is a representative company in the production and export of dairy products in South America, and China is an important market and partner that we do not want to give up. We are still optimistic about the potential of the Chinese dairy market and hope to participate deeply in the development and cooperation of the Chinese dairy industry. Against the backdrop of the good bilateral relations between China and Uruguay and the joint construction of the "Belt and Road" initiative, we hope that the two countries will usher in more preferential and favorable tariffs in the field of dairy trade, creating a better environment for our business development in China.

For a long time, China's domestic milk production and overseas imported milk have formed a cooperative complement. Due to production traditions, consumption habits, costs and technical conditions, the United States, Europe, New Zealand, South America and Australia are China's main overseas milk suppliers. From a broader perspective, diversification of milk imports is beneficial to China. As a resource-based commodity, the global output of dairy products is relatively stable. Therefore, it is very important to ensure diversified sources. This can alleviate procurement risks caused by factors such as climate and geopolitical conflicts to a certain extent, and increase flexibility and choice in negotiating prices with suppliers.

There is still room for growth in China's dairy product consumption market

"21st Century": What are your views on the global and Chinese dairy supply and demand prospects?

Tian Wenjing: From the production side, considering that agriculture and animal husbandry are easily affected by weather and have production characteristics, and the world is committed to achieving net zero emissions, it is unlikely that global dairy production will increase rapidly in a short period of time. As for Uruguay, the current land area used for dairy production accounts for only about 5%, and there is still great potential for growth.

From the demand side, people are paying more attention to health and their demands for a richer diet are also increasing. As an important source of high-quality protein, dairy product consumption has great potential.

Currently, the per capita dairy consumption in Uruguay is 250 liters per year, while in China it is 30 liters. Based on the data, there is still a lot of room for growth in China's dairy consumption market. In terms of preference, the current consumption of dairy products by Chinese people is mainly liquid milk. In the future, with the increase in the consumption share of the new generation, the consumption of butter, cheese, etc. in the Chinese market is expected to increase further.

After years of development, Chinese people have a good understanding of the nutritional value of dairy products. To increase consumer stickiness, the key is to make the product more affordable and gradually develop it into a necessity in daily life. This may be the direction that the entire dairy industry needs to improve in the future.