Dairy to Taiwan

Trends and Opportunities

The Market

Taiwan is a raw milk producer but further opportunities exists for more dairy products to be imported. In 2015, 375,499 tonnes of dairy were produced domestically, over 90 per cent of which was used in milk production. The total dairy import volume in the same year was 149,053 tonnes valued at US$471 million. This represented a 13 per cent increase in volume and an 18 per cent decrease in value compared to imports for 2014.

The demand for imported milk has expanded in recent years, due to the growing coffee and tea market. Currently, Taiwan applies an import quota system with the total quota volume of 21,298 tonnes each year. Import quota biddings are held by the Bank of Taiwan in November and March every year.

In the last two years, the quota was fully allocated in the first bidding in November, and the bidding costs have increased every year. This reflects the growing demand for liquid milk and strong competition for the quota rights amongst importers.

Percentage of dairy products imported to Taiwan

• Milk powder and milk concentrate: 40 per cent
• Milk and cream: 21 per cent
• Cheese: 17 per cent
• Butter and buttery spread: 14 per cent
• Whey: seven per cent
• Yoghurt: one per cent.

(Source: Directorate General of Customs, Import Statistics, 2015).

New Zealand continues to dominate the market as the largest supplier of dairy products to Taiwan. Its total import volume increased 10 per cent and market share was slightly down one per cent, from 51 to 52 per cent in 2015. They have a leading position in milk powder, cheese and butter.

The United States (US) is the second largest dairy product supplier in Taiwan. Cheese, liquid milk and whey powder are their three largest export items, with milk experiencing significant growth in these few years. Costco Taiwan is the largest milk importer and most of their imported milk is from the US. With the rapid growth Costco’s business in Taiwan through its current 12 stores, the sale and demand for the US milk have grown accordingly.

Australia is the third largest dairy product supplier. The total Australian dairy export volume to Taiwan decreased six per cent from 2014 to 2015, mainly due to the decrease of milk and milk powder to Taiwan. Key Australian milk importers did not successfully obtain milk quota rights, causing Australian milk to lose its leading position from 2015. Some Taiwanese dairy manufacturers switched to Australian frozen milk concentrate (FMC) to replace milk in their dairy productions, so demand for FMC increased from the same year.

Opportunities

The following items offer good potential for Australian exporters in Taiwan:

• cheese and butter
• frozen milk concentrate
• extended shelf life milk
• organic dairy products.

Australian dairy products have a high and positive profile in Taiwan with local consumers confident in the quality of imports.

Competitive environment

New Zealand’s dairy products are also held in high regard, making it Australia’s biggest competitor. With a trade agreement between New Zealand and the Separate Customs Territory of Taiwan (ANZTEC) signed in July 2013, besides of liquid milk, the majority of New Zealand’s imported dairy products enjoy a zero tariff rate.

For liquid milk, New Zealand enjoys an additional zero tariff quota of 5,500 tonnes for the first three years with an additional 1,500 tonnes increased in every three to year ten, meaning it will reach to the maximum of 10,000 tonnes by 2020. The tariff for out of quota imports is NT$14 per kilogram.

Australian milk powder has also lost its competitiveness edge in Taiwan due to ANZTEC, with a market share of only four per cent in 2015. This is because majority of New Zealand’s dairy products enjoy free tariff or favourable trading conditions, and Australian milk powder received the strongest impact due to a ten per cent difference in tariff. As the tariff rate for cheese and butter is five per cent, the impact is less. Imports of Australian cheese and butter into Taiwan fell in 2014, but recovered and jumped over 30 per cent in 2015.

This poses a serious challenge to Australian dairy exporters, especially for those exporting milk powder as the current tariff rate is 10 per cent, while cheese and butter attract a tariff of five per cent for World Trade Organization (WTO) members in Taiwan. As a result, imports of Australian milk powder have decreased dramatically from 2014, mainly due to the difference in tariffs imposed on Australian and New Zealand products.

Dairy Australia regularly conducts seminars and scholarship programs to promote Australian dairy products in Taiwan and Australia is still a preferred destination for companies to source high-quality dairy products. With many large Australian dairy organisations already doing business in Taiwan, there are increasingly more companies wishing to import Australian dairy products to keep up with market demand.

Tariffs, regulations and customs

The tariff rates for milk powder are:

• 04021090 - SMP: 10 per cent
• 04022190 - WMP: 10 per cent
• 19011000 - infant milk powder: five per cent
• 19019021 - prepared milk powder: 12 per cent
• 19019022 - other milk powder: 12 per cent

Tariffs for other dairy products are:

• 04061000 - fresh cheese, including whey, cheese and curd: five per cent
• 04062000 - grated or powdered cheese, of all kinds: five per cent
• 04063000 - processed cheese, not grated or powdered: five per cent
• 04064000 - blue-veined cheese: five per cent<
• 04069000 - other cheeses: five per cent
• 04011090 - cream and other milk, not concentrated and unsweetened, of a fat content, by weight, not exceeding one per cent: 20 per cent
• 04012090 - cream and other milk, not concentrated and unsweetened, of a fat content, by weight, exceeding one per cent and less than six per cent: 20 per cent
• 04013090 - cream and other milk, not concentrated and unsweetened, of a fat content, by weight, exceeding six per cent: 20 per cent
• 04041090 - whey and modified whey, not concentrated or concentrated, whether or not containing added sugar or other sweetening matter: five per cent
• 04012010 - fresh milk (excluding raw milk and milk of goat and sheep), not concentrated and unsweetened, of a fat content, by weight, not exceeding one per cent: NT$15.6/kg (TRQ)*
• 04012020 - long-life milk (excluding raw milk and milk of goat and sheep), not concentrated and unsweetened, of a fat content, by weight, exceeding one per cent but not exceeding six per cent: NT$15.6/kg (TRQ)*

* Tariff Rate Quota (TRQ) means that the product is permitted under a normal tariff up to a certain annual quota volume, at which point a ‘prohibitive’ tariff is given on any additional imported quantities.

(Source: Ministry of Finance, Directorate General of Customs, Tariff Database, October 2015).

Industry standards

Australian exporters must meet the Food Sanitary Standards defined by the Ministry of Health and Welfare and Taiwan’s nutrition labelling regulations.

Marketing your products and services

Market entry

Australian dairy suppliers should have a well-planned long-term marketing strategy and be able to provide assurances of quality in order to build a solid reputation with buyers. This is fundamental to take advantage of the diverse range of export opportunities available in Taiwan.

Before exporting, suppliers should:

• Assess current demand for the product or service in Taiwan.
• Identify levels of local production and imports of the product.
• Identify major players in the market and potential agents and distributors.
• Understand the regulatory processes, import tariffs and trading regime relevant to the product or service.
• Identify competing products or services in the market and the organisations servicing this competition.

Taiwan buyers remain extremely price-conscious and have a preference for stable and well-proven products, turn-key solutions and a strong reliance and expectation on the supplier to provide after-sales service and support.

It is also important to be aware of significant cultural differences in Taiwan. As well as having a general understanding of the historical and cultural background of Taiwan, understand and practice the day-to-day business culture to develop successful business relationships.

Australian dairy already has a reputation in the market as being both high-quality and consistent, as well as healthy and natural.

To export successfully in Taiwan:

• Develop a good marketing plan with a clear long-term vision.
• Provide high-quality and consistent produce.
• Establish strong relationships with supermarkets and importers with good distribution channels and networks.
• Visit Taiwan frequently to support your agent and participate actively in any trouble-shooting or problem-solving.
• Follow up quickly on issues raised in your visits.

Distribution channels

The majority of Australian dairy products exported to Taiwan are used in food processing factories and the food service channel. Some large food manufacturers deal with Australian dairy manufacturers directly.

For the food service channel, importers deal with large food stores or bakery chains directly and use wholesalers to sell the products through regional or smaller retail stores.

Links and industry contacts

Government, business and trade

Council of Agriculture
Ministry of Health and Welfare
Taiwan Customs

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Contact details

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