Global Dairy Consumption
The global and regional-based dairy industry is not isolated from
or unique in the challenges faced for competitive and sustainable
business into the 21st century.
In all dairy-related processes — liquid milk, crème,
yogurt, cheese, butter,
ingredients — there is an increasing and relentless requirement
to continuously seek business improve in productivity, yield, quality,
repeatability, plant utilization, life-cycle costs and environmental
and safety responsibility. The competitive pressure created by producers,
manufactures, retailers and consumer alike are causing many dairy
industry businesses to seek new investments in reliable process
and control systems technology.
In addition, making the right CAPEX investment choices of equipment,
software systems and technologies, proper servicing and routine
maintenance programs of process production plant is now an essential
and key component in achieving
competitive status in the industry.
During the past two years, particularly following September 11,
there has been an increasing interest in protecting people all over
the world from threats of food-borne bacteria and bioterrorism.
This has resulted in tighter regulations and an increased demand
for better automation and process control. From a global
perspective, we see all major sectors of the dairy and food industry
moving toward safer processes that can be monitored and controlled
at various levels ensuring safety and improved quality without increasing
In addition to improving food product safety and quality, process
designs must account for changes in consumer demand. Diet changes
and demand for better
nutrition often require that processors monitor and record recipes
for faster changeover and production run cycles.
To this end, APV continues to quietly lead the industry in quality
products, fully automated systems, process design and innovation
to help our customer’s processes perform with greater efficiency,
safety and cost-effectiveness.
A world market in review.
In 2003, the global dairy
products market saw value sales in U.S. dollar terms increase by 10.4
percent, largely due to the increasing strength of the euro against the
U.S. dollar. As Western Europe accounts for almost 40 percent of dairy
value sales, this currency trend proved highly favorable for the global
dairy products market.
Other macroeconomic factors driving value growth in
2003 included the partial recovery of consumer spending in countries hit by
recession in 2000 and 2001. These included Brazil and Russia, while an
improvement in market conditions was also apparent in the second-ranked
Japanese market. Rapid growth in emerging markets such as China, the
Philippines, Saudi Arabia and Greece also gave impetus to value gains in
A consistent feature across the global market in 2003
was the consumer trend towards health-oriented products. This description
encompasses functional dairy products, such as milk enriched with omega-3
fatty acids, A2 milk (a product that excludes the beta-casein protein known
as A1), probiotic yogurts and non-lactose goat cheese, as well as
reduced-fat variants of standard milk, cheese, yogurt and fromage frais
New flavors such as blueberry also claim to reduce the
risk of certain diseases, while fermented dairy drinks are thought to aid
digestion. In addition, the focus on health was a key factor in a number of
influential public health programs in the Asia-Pacific region, particularly
in China and Thailand, where school milk projects aimed to increase per
capita consumption of dairy products in order to improve national standards
of nutrition and diet.
A second key factor driving value growth in 2003 was
increasing demand for consumer convenience. Manufacturers such as
Nestlé, Kraft and Danone responded with the introduction of
single-serve cheese portions, smaller milk servings in resealable bottles
and the highly successful development of probiotic drinkable yogurt.
But this trend tended to be limited to the more
developed markets of Western Europe, North America and Australasia while
demand for the extended shelf life of UHT milk was more in evidence in the
emerging markets of Asia-Pacific and Africa and the Middle East. Lastly,
although private label growth slowed in 2003 due to demand for value-added
branded products in major Western European markets such as France and
Italy, private label products still held almost 20 percent of global value
sales in 2003, pushing down prices and inhibiting value growth.
Western Europe was the dominant region in the global
dairy products market in 2003, accounting for over 39 percent of value
sales. High per capita consumption in the region derives from a diet
traditionally rich in dairy products, while value gains in 2003 were partly
attributable to the increasing strength of the euro against the U.S.
dollar. But Western Europe also experienced significant constant terms
value growth in local currency terms in major markets such as France and
Italy, as well as in less developed markets such as Greece and Turkey.
In France and Italy, value growth was stimulated by
demand for health-orientated dairy products such as Danone’s lowfat
fermented drink with reduced sugar content, Actimel allégé en
sucre and Parmalat’s Fibresse UHT, which claims to aid digestion.
In Turkey, a key factor driving growth was the launch
of convenient products such as Huptrik Yogurt Tupu, a fruit yogurt in a
squeezable tube. In Greece, increased demand for functional cheese with
added vitamins underscored prevailing health trends. Trends towards
value-added health-orientated products also drove strong value growth in
Australasia in 2003.
North America was the second-largest region in the
global dairy products market in 2003 but suffered share erosion due to the
weakening of the U.S. dollar. Slow growth in 2003 was largely due to price
pressure in the milk and cheese sectors due to the incursion of private
label. Lower raw-milk prices in the United States in 2003 also diluted
value, following four years of high prices due to shortages in milk supply.
Key areas of growth outside of the major milk and
cheese sectors included increased demand for refrigerated soymilk, such as
Dean Foods’ Silk in the United States and in Canada, Parmalat’s
Vitasoy Sensational Blends, a mix of soymilk and fruit juice. Probiotic
drinkable yogurt and non-bovine products such as goat milk, also drove
value growth in the region, particularly among health-conscious young
Asia-Pacific and Latin America form a second tier in
the world dairy products market, accounting for just over a quarter of
global value sales in 2003. The two regions experienced contrasting
fortunes over the review period, however, with Asia-Pacific seeing
consistently strong growth due to the development of markets with
significant potential, such as China, Thailand and India.
In 2003, the region also benefited from a partial
recovery in consumer spending in Japan due to strong demand for probiotic
yogurt and soymilk, and receding fears over food safety. In China, Thailand
and elsewhere in the region, large strides in per capita consumption of
dairy products were made in 2003 due to the success of public health
programs and private investment in domestic production.
In contrast, Latin America suffered from a series of
economic crises over the review period, culminating in currency devaluation
in Argentina and recession in Venezuela. To some extent, volume sales
weathered the crisis due to the staple nature of dairy products in the
region. Value sales tumbled, however, as consumers switched to budget
brands or artisan products. Nevertheless, signs of increased spending
were evident in the latter half of 2003, driven by stable economic
conditions in Mexico and rising demand for extended shelf life UHT milk in
Three regions — Eastern Europe, Africa and the
Middle East and Australasia — comprise the third tier of the global
dairy market, accounting for a value share of just 11.4 percent in 2003. In
Eastern Europe, growing consumer confidence in urban areas led to increased
demand for UHT milk in 2003, as well as rising sales of probiotic yogurt in
Russia and Poland. A downturn in the Polish economy in 2003 led to an
overall slowdown in regional growth, although this was offset to a certain
extent by the continuing transformation of the Czech dairy products
industry due to privatization and foreign investment.
In Africa and the Middle East, strong value growth in
2003 was underpinned by increased per capita consumption in Saudi Arabia,
Morocco and Egypt. Sales growth in Saudi Arabia was driven by the
development of emerging subsectors such as fruit yogurt, chilled desserts
and flavored milk drinks. In addition, new products with added value such
as flavored milk drinks and powdered milk enriched with calcium, vitamins
or iron, achieved increasingly wide distribution.
In Morocco and Egypt, there is a perception that
products with a high fat content are healthier than lowfat products. For
this reason, dairy products were increasingly consumed to compensate for
the lack of vitamins and proteins in other foods that are popular in these
countries, especially among low income groups.
Healthy value growth in the global dairy market in
2003 was underpinned by growth in the dominant Western European region. Two
key factors contributed to this growth. The first was the appreciation of
the euro against major world currencies, especially the U.S. dollar. The
second was value-added growth in mature markets such as France and Italy,
and rapid growth in lesser developed markets such as Greece and Turkey.
Value growth in 2003 also was driven by rapid
expansion in developing markets such as Asia-Pacific and Africa and the
Middle East. Successful public health programs, combined with the
development of products adapted to the specific needs of these markets,
were key factors driving growth. This included UHT milk with extended shelf
life and smaller-sized packaging to suit the higher frequency of food
shopping in developing economies.
China continued to present perhaps the greatest
potential for growth in 2003. A double-digit improvement in value sales was
underpinned by increased demand in UHT milk driven by increased consumer
awareness of the nutritional benefits of such products. Demand for milk
increased significantly due to government school milk programs designed to
address widespread calcium deficiency in the Chinese population.
The increase in consumer demand for dairy products
with functional properties was a key factor driving value sales growth in
developed markets in 2003. This led to the promotion of value-added
products such as reduced-fat and enriched milks, probiotic and natural
yogurts, and organic cheese.
Reflecting prevailing health trends, soymilk was the
fastest-growing product sector in 2003. Soy isoflavones found in soymilk
were promoted as ingredients that could reduce the risk of an array of
diseases, including breast cancer, prostate cancer, colon disorders,
Alzheimer’s disease and heart disease.
Another rapid growth product subsector was probiotic
drinkable yogurt. The beverage offers a winning formula that aids digestion
in a portable format. Such a product concept was also reinvigorated by the
blending of drinkable yogurt with fruit juice to produce smoothies, such as
Dannon Frusion in the United States.
Continuing strong demand for product convenience also
was a particularly strong force shaping product development in developed
markets. Due to smaller households, longer working hours and less formal
mealtimes, easy-to-use, portable and disposable products such as
pre-shredded cheese in resealable bags and spoonless yogurts benefited from
The launch of Nippon Milk Community’s Meg Milk
brand in Japan was a highlight of 2003 as it represented a significant
attempt to brand milk and change the consumer perception of milk as a
commodity product. In the long term, such branding efforts hold the key to
adding value to the major milk and cheese sectors.
A direct beneficiary of increased consumer concern
over food safety and production was the organic dairy industry. In addition
to the small global market for organic milk, there was growth over the
review period in organic varieties of cheese, yogurt and fromage frais as
consumers chose to avoid dairy products derived from cows and milk
cultivated with pesticides, herbicides and artificial growth hormones.
Increased segmentation of the market also added value
in 2003. New products were targeted at discrete consumer groups according
to such variables as age, gender, medical condition, and national culture.
Challenges and Strategies
In the past 30 years, the global dairy industry has
been transformed. From a supplier of commodities such as milk and cream,
the industry now provides lifestyle products with high added values such as
probiotic drinkable yogurt.
Change has not come without a price. A major trend
towards consolidation among leading dairy products producers such as
Nestlé, Kraft and Danone has led to scores of smaller dairy
producers and farmers leaving the industry. The rise of powerful retail
chains such as Tesco in the United Kingdom and Carrefour in France has also
changed the way consumers buy their dairy products, while putting heavy
pressure on supplier prices.
In the wake of these changes the dairy products market
faces key challenges in all areas of the industry, including operating
environment, supply chain, competitive environment, retail development and
consumer trends. The first and overreaching challenge is how to continue
adding value to the mature dairy markets of Western Europe and North
America. As rival products such as soft drinks and fruit juices compete to
attract young consumers away from dairy products such as milk, how must
dairy producers respond in order to maintain share of the packaged food
The key to long-term success lies in adapting to meet
changing consumer lifestyles. Key consumer trends in 2003 that are likely
to continue over the forecast period include rising demand for functional
dairy products with value-added health benefits and the increasing
popularity of convenient, ready-to-eat, portable dairy items such as
drinkable yogurt. At the same time, manufacturers must acknowledge that not
all consumers are the same and thus target their products at different
groups according to age, gender or cultural type.
While responding to consumer demand for high-quality,
low-cost dairy products, manufacturers also must take account of increasing
consumer fears concerning food safety. This means spending more time
communicating the authentic and safe nature of the supply chain for dairy
products, assuring consumers the milk supply is as pure and wholesome as
Global branding will also be necessary to expand the
world market while benefiting from economies of scale in terms of
production, distribution and marketing. At the same time, however,
manufacturers must be aware of growing consumer dissatisfaction with global
corporate entities and their bland homogenization of national cultures.
This will mean adapting global brands to suit local tastes and
sensibilities through strategic alliances and effective local market
In emerging markets such as China and India,
multinational manufacturers face the challenge of significantly boosting
per capita consumption. Cultural inertia or unfamiliarity with dairy
products must be tackled via extensive educational and marketing programs.
Manufacturers also must be aware of the kinds of retailing and household
infrastructure that has a bearing on such markets like lack of
refrigeration facilities. Longer-life dairy products must be designed
accordingly. In addition, smaller packaging at lower price points are more
likely to suit the high frequency of shopping habits in many developing
economies than high price point family-sized packs.
Finally, dairy producers must combat the threat of
value dilution posed by private label products. This will be achieved
through a combination of constant new product development and effective
branding of what are currently perceived as commodity products such as milk
and some types of unprocessed cheese.
Consumers are increasingly aware of the nutritional
content of packaged foods. A long-standing aversion to the wholesale use of
artificial ingredients such as chemical preservatives is closely tied to
concerns over the food safety of intensive methods of farming.
In response it is important that producers assure
consumers of the natural and authentic provenance of dairy raw materials.
In this respect, smaller farmers and dairy producers have a competitive
advantage as they are thought to use time-honored, wholesome methods of
production in comparison to the factory processing of multinational
Organic products offer one way of reassuring consumers
of the natural goodness of dairy products. Marketers must make the case
that organic foods may contribute to reducing the risk of certain common
modern ailments such as heart disease and cancer. The environmental
benefits offered by organic products are likely to be of secondary concern
to most consumers.
Manufacturers and retailers of soy milk must assure
consumers of the GM-free status of their supply chain. In the current
consumer climate, even the suggestion that products may contain traces of
GM-foods may lead to extreme reactions such as consumer boycotts and public
Functional products such as probiotic yogurts must
more-effectively communicate the meaning of terms such as pro-, pre- and
synbiotic. Considerable work still needs to be done to educate most
consumers into the whys and wherefores of gastrointestinal health.
Similarly, fortified products must emphasize that
vitamins and minerals and ingredients such as omega-3 fatty acids contained
by the products are naturally occurring. The promotion of the benefits of
such ingredients as soy isoflavones and the polyphenols found in
blueberries and cranberries must be shown to be found in nature, not
created in the laboratory.
Fitting Urban Lifestyles
An overwhelming trend towards lifestyle convenience
will favor portable, disposable formats for dairy products. These include
yogurt in squeezable tubes and soymilk and fermented dairy drinks in
resealable, squeezable plastic bottles.
This trend towards integrated urban lifestyles where
shopping and eating occurs in the midst of other daily activities will also
result in the ongoing growth in sales of dairy products through convenience
outlets such as service stations, and vending machines and foodservice on
Distribution via the Internet is also a growing,
though fractional, part of making dairy products compatible with modern
urban lifestyles. Packaging and products with longer shelf lives will
facilitate home delivery of dairy products that may be unrefrigerated for
short periods without harm.
Just as bottled water has become an essential portable
accessory for many style- and health-conscious consumers, dairy products
manufacturers must strive to make products such as drinking yogurt as
ubiquitous as bottled water. Endorsement of products by trend-setters and
celebrities is an effective way of raising the brand status of products
such a branded milk.
Manufacturers also must make products compatible with
the modern urban tendency to practice identity consumerism. This has arisen
in reaction to the one-size-fits-all philosophy of much mass production of
packaged food and can be addressed by segmenting the market to meet the
needs of niche groups such as older consumers requiring calcium,
diet-conscious female consumers, lactose-intolerant people, teenagers,
children and even babies.
Threat from Private Label
Manufacturers must respond to the competitive threat
from private label producers, which are expected to continue to closely
follow dairy product trends such as portability and functionality while
putting downward pressure on prices.
One strategy for competing with private label is to
use deep price discounting supported by heavy promotional spending. In the
United Kingdom in 2003, the cheese manufacturer Mclellands launched a
£2 million advertising campaign for its Seriously Strong brand,
supporting a price promotion. But while such a strategy builds volume in
the short term, it has the deleterious long-term effect of eroding brand
The best long-term strategy for combating the threat
from private label is to reinforce brand loyalty through product quality
and brand distinctiveness. In this regard the bright red packaging of
Nippon Milk Community’s Meg Milk aims both to capture consumer
attention and communicate high product values of food safety and good
Key areas in which manufacturers may most effectively
combat private label products are emerging sectors such as soymilk and
fermented dairy drinks. The structural economics of such small sectors
means that low volume sales make it less feasible for private label
manufacturers to compete on price with leading branded products.
Yogurt is also a key area in which branded products
are able to resist the threat from private label. This is because consumers
perceive that brands such as Danone and Müller offer superior taste
and health properties than private label brands, and because strong product
development in the yogurt sector means that consumers no longer see it as a
The implications of this are clear for the major milk
and cheese sectors. Manufacturers must continue to develop products that
offer more health, convenience and taste benefits than private label
products, such as Parmalat’s UHT brand Fibresse, and for this fact to
be effectively demonstrated in extensive advertising campaigns.
Think Global, Act Local
Globalization of the dairy products market continued
over the review period with multinational companies increasing their
penetration of emerging markets such as China and Thailand. One of the key
benefits to global players such as Nestlé, Kraft and Danone of such
international operations is insulation of revenues from regional economic
fluctuations. A second is economies of scale in terms of production,
distribution and marketing.
On the one hand, consumers in specific regions welcome
the increase in product choice afforded by the presence of global dairy
On the other hand, there is a growing current of
consumer mistrust and skepticism concerning the product quality and
provenance of many global dairy product brands. Above all there is concern
that regional or local tastes and traditions will be wiped out by the
marketing power of global brands that may not, in reality, offer consumers
best value or quality.
An aspect of this problem facing global manufacturers
was reflected over the review period in widespread consumer antipathy
towards genetically-modified food. This led to rapid manufacturer response
in terms of assuring consumers that packaged food products were GM-free.
In the dairy products market, examples of the think
global, act local strategy proved successful in 2003. In Mexico, for
example, Danone launched Vitalínea flavored yogurt in
Piña-Toronja and Manzana flavors to meet the taste expectations of
Emerging markets with vast populations and low
consumption per capita of dairy products such as China, India and Indonesia
hold the greatest long-term potential for volume and value growth. Rising
income per capita and increasingly liberal economies in these markets offer
outstanding opportunities to international dairy products manufacturers.
But dairy products do not hold a central place in the
traditional diets of many of these markets, especially not compared to
markets in Western Europe. This has contributed, in markets such as
Thailand and China, to a high incidence of lactose intolerance due to lack
of exposure to dairy products in childhood.
As a result, any attempt to increase per capita
consumption must be allied with a heavy strategic emphasis on consumer
education into the health benefits of dairy products, as well as the
culinary flexibility of such products. In Thailand and China over the
review period, government school milk projects encouraged consumers to
drink milk on a regular basis, and were aimed at improving the nutritional
content of traditional diets. Manufacturers must be cognizant of the way in
which such programs communicate dairy product benefits, and echo the most
important aspects in branded advertising.
Other key strategies to increase per capita consumption include
adapting product ranges and packaging to meet the needs of local consumers.
Source: Euromonitor International — The Global
Market for Dairy Products, 2004
Chicago-based Euromonitor International delivers
market insight on more than 60 countries to the world’s leading
consumer product companies and their suppliers. For a full report and
additional information on global dairy market data and analysis, contact
Euromonitor at (312) 922-1115 or visit www.euromonitor.com.
|Global Sales of Dairy
Products: Value 1998-2003 US$ million
||% value growth
Note: Global and regional historic market size growth is expressed in
current data terms throughout this report. National market size growth
is expressed in constant terms, i.e. excluding the effect of inflation,
to facilitate cross-country comparability.
|Global Sales of Dairy
Products by Region: Value 1998-2003 US$ bn
|Africa and Middle East
|Value Sales of Dairy
Products by Major Market: Value and % of World Total 1998-2003 US$ billion
|Global Company Shares
of Dairy Products 2001-02 % retail value rsp
(Société de Diffusion Internationale
Arla Foods Amba
Industry Co Ltd
Coberco Dairy Foods Holding NV
de Zeven Provincien UA)Fonterra Co-operative Group
Milk Products Co Ltd
|Source: Euromonitor Note:Philip
Morris, the parent company of Kraft Foods, changed its name to Altria
Group in 2003.
$OMN_arttitle="Global Dairy Consumption";?>