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Health, convenience and indulgence drive dairy

Market size and growth

The dairy sector provides one of the most important food components in the European diet, accounting for 16% of all food consumed and, at a total value of €111 billion, 16% of consumer food expenditure. It is also a sector of contrasts. At an average 77 kilos per person, drinking milk is one of the largest volume segments after fresh fruit and fresh vegetables but at a retail value of €18bn it is worth less than chocolate confectionery. European milk consumption is also in long-term decline. By comparison, the dairy-based probiotic drinks market is highly value-added and one of the most dynamic food sectors, having doubled in sales in some countries over the last five years.

Despite the obvious successes of probiotics, flavoured milks, spreadable and low fat butters, yogurt and desserts, volume consumption of dairy as a whole is static. Due to the successes of the value added segments though, the value of the sector has been growing at an average of 1% per year.

The European dairy market (as measured) totals 48.5 million tonnes and is dominated by drinking milk at 30m tonnes. Cheese is the next largest segment by volume, followed by yogurt and fermented milks. However, when comparing volume with value  a completely different picture emerges. Cheese becomes the largest segment by value, followed by drinking milk and yogurt (including other fermented products).

The future for dairy

The future for dairy in Europe is varied. Despite the inexorable decline in milk consumption there are good prospects for certain dairy products. These prospects are closely linked to the main market drivers: health, convenience and indulgence.

In terms of health, dairy products in Europe tend to have a positive image and this can continue to be further exploited by the use of special cultures and healthy inclusions or simply by using dairy as a “base”.

Convenience can continue to be developed both through the way dairy products are packaged and through the development of new products and convenient formats.

Dairy plays a key part in the indulgence sector of the market, especially where butter or cream are used as important components. Examples include premium ice creams, cakes, pastries and ready meals.

Although average value growth for the European dairy sector is forecast at only 0.7% per year it may be seen that there are wide variations between segments and countries. To put this performance in context, the total food market is expected to grow by 1% per year in real terms over the next five years which makes dairy an underperforming sector of the food market. The key elements responsible for suppressing the dairy sector are:

•    Slow population growth with static to declining populations expected in the key dairy markets of Germany and Italy;

•    Continued declines in the main sector of drinking milk;

•    After years of growth, a slowing down of the yogurt segment;

•    Continued pressure from health lobbies to reduce intake of saturated fats;

•    Competition from other foods (soft drinks, snacks, cereal and breakfast bars, etc) and a move towards consumption of convenience foods and eating on-the-move (where dairy products are less well represented).


In summary, the key areas for the development of, and adding value to, dairy products include:

•    Health: quality low fat variants, probiotics, synbiotics, healthful additions, organic variants;

•    Convenience: the further development of more “ready-prepared” dairy products;

•    Snacking: dairy in formats for use on-the-move;

•    Indulgence: to continue to use and enhance the use of dairy in indulgent formats;

•    Ingredient: the further use of dairy as an ingredient in snacks and in prepared foods in general.


Taken from The Big Food Guide 2011 : Western Europe. For more information visit www.thebigfoodguide.com or call + 44 (0)1902 422282.

 

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