Cartons Ride Out the Melamine Scandal in China
Production and consumption of milk and dairy products have experienced phenomenal growth in both urban and rural China over the past 10 years. Demand for milk and yogurt is expected to expand at annual growth rates of 22% and 31% respectively over the next five years.
Other than rising incomes making milk more affordable, other factors have driven growth including the promotion of dairy as a healthy alternative, the introduction of milk product variations, a plan to supply milk to school students every day, and the rise of other dairy-based products.
All this has had a strong impact on the packaging business. Liquid cartons, especially brick type cartons, are needed to transport milk over long distances from North and West China - source of over 80% of milk - to affluent cities further south.
With the recent clampdown on milk sources due to the discovery of widespread use of melamine as an additive, production has fallen greatly. In September 2008, 66 out of 175 milk powder manufacturers stopped production, and consumers have yet to regain confidence in domestically produced milk powder. Liquid dairy products have fared much better however, already recovering 80% of lost sales value.
Thanks to this, and the fact that while melamine is a chemical raw material for plastic related food packaging, it is not used in liquid carton packaging. The dairy scandal will have relatively little impact on the booming liquid carton business in the medium to long term, according to the Dairy Association of China.
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