U.S. cheese shipments to China, South Korea, Mexico and Japan have soared, and the broader outlook looks promising as the world's growing love affair with cheese continues, according to Merle McNeil, business unit director, Latin America and Caribbean, for the U.S. Dairy Export Council (USDEC).
“Not all are wearing orange, wedge-shaped, foam hats yet, but the way major cheese importers are buying cheese these days suggests that they are increasingly walking the path to become what are known affectionately in Wisconsin as ‘cheeseheads,’” he said.
In 2016, cheese exports from the five leading global dairy traders — Argentina, Australia, the European Union, New Zealand and the U.S. — increased 5% to a record 1.66 million metric tons.
This growth, McNeil said, is picking up steam. “Over the four months from March to June 2017, exports from the top five grew 10% from the same period the previous year. Cheese shipments to China, South Korea and Mexico increased more than 25% each, while exports to Southeast Asia and Japan jumped 16% and 8%, respectively,” he said.
The main beneficiary for that four-month period was the U.S, which McNeil said boosted exports 32% compared to the previous year — a welcome shift after significant cheese volume declines in 2015 and 2016.
“That is very good news for U.S. cheese makers, but in the years ahead, in order to ensure a healthy U.S. dairy industry, we will need to see more consistent sustained expansion of cheese exports — not 32%, but annual export volume growth of greater than 10% per year,” he explained.
USDEC estimates that the U.S. dairy industry needs to increase dairy export volume from about 15% of the annual milk supply to around 20% — an effort called “The Next 5%” — to maintain strong overall U.S. dairy industry growth.
Increasing cheese exports by around 200,000 mt over the next five years is a critical component to achieving that goal, McNeil said. “While such a gain is ambitious, given global dietary trends, we believe it is achievable,” he said.
USDEC research suggests that global cheese imports will increase more than 500,000 mt by 2021. This means that U.S. suppliers essentially would need to win about 40% of that additional volume to get an additional 200,000 mt, McNeil said, adding, “and therein lies the challenge.”
To reach that plateau, the U.S. will need to target the highest-growth regions (not necessarily regions where it is traditionally strong in cheese trade) with products suited to their particular consumer palates (not necessarily products the U.S. is accustomed to exporting), he explained.
USDEC estimates more than half of the additional 200,000 mt will need to come from North Asia (China, Japan, South Korea) and the Middle East/North Africa (MENA) — regions currently dominated by U.S. competitors.
“If the industry is to get to ‘The Next 5%,’ it must start exporting more cheese to those two regions, and it must broaden its portfolio to cheese categories and varieties where the United States currently lags its competitors,” the council said.
Mexico, the number-one market for the U.S., can be seen as both a guide and a proving ground for U.S. efforts in other regions, McNeil noted. The U.S. expanded cheese exports to Mexico from less than 5,000 mt in 1995 to about 90,000 mt last year.
“Developing close partnerships has been one of the keys to growth," he noted. "U.S. cheese makers going above and beyond to work with buyers to create gouda suited to Mexican applications and tastes went a long way to demonstrating how seriously U.S. suppliers wanted to build relationships. That kind of effort needs to be repeated in other major markets — and again in Mexico moving forward.”
A recent USDEC research report on natural cheese in Mexico estimated per capita cheese consumption at only 8.4 lb. per year — a number far less than the U.S. and significantly lower than many of its Latin American neighbors.
“Room for growth is significant,” McNeil said.
If U.S. cheese makers expect to become global players in world cheese trade, McNeil said they will need to defend and grow share in Mexico by better catering to market needs, “but even more importantly, they will need to branch out and pursue strategies in the higher-volume potential of MENA and North Asia.”