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DAIRYREPORTER.COM 2013 PREDICTIONS

What to expect in 2013 – DairyReporter.com predictions for the year ahead

By Mark Astley , 04-Jan-2013

Well…..wasn’t 2012 an eventful year for the dairy industry. Milk prices were up and down, Western dairy processors were forced to look East for growth opportunities, and even Coca-Cola tried to get in on the popularity of value-added dairy. But will these trends continue? DairyReporter.com looks at the year ahead….

Chinese Infant Formula Demand: In the last year, Western influence in the ever-expanding Chinese infant market has continued to increase.

Danish dairy co-operative Arla Foods was behind much of the movement – becoming an indirect shareholder of Chinese dairy giant Mengniu, and entering into a 10-year supply agreement with Chinese paediatric nutrition firm Biostime International Holdings.

The deals opened up invaluable Chinese distribution channels for Arla.

According to Euromonitor, Chinese consumer demand for infant formula products looks set to continue to drive global sales. The country’s infant formula market is currently valued at around $12.4bn. This is expected to increase to approximately $25bn by 2017.

While consumption grows, concerns about the safety of domestically-manufactured infant formula – driven by the 2008 melamine scandal - remain.

In a country where there is an aversion to domestically-manufactured infant formula products, Western dairy processors are certain to continue to benefit.

Getting into dairy: Speaking at the International Dairy Foods Association (IDFA) annual Dairy Forum in January 2012, PepsiCo’s Sam Lteif called the dairy sector a ‘key component’ of PepsiCo’s global growth strategy.

He added that dairy suited the nutritional needs of all consumers – from children through to the elderly – and said that the sector had “tremendous potential.”

Since then, PepsiCo has entered into a joint venture with German dairy giant Müller to create Muller Quaker Dairy – marking the entry of both firms into the US yogurt market.

US beverage giant Coca-Cola has even been getting in on the act. In December 2012, it announced that it was partnering up with US-based Select Milk Producer to invest in the Core Power high protein milk shake brand.

These deals follow a series of earlier moves by firms such as PepsiCo and Coca-Cola – behaviour DairyReporter.com fully expects to continue into and beyond 2013.

Milk price recovery: The volatility of global raw milk prices caused somewhat of a stir in 2012.

Low farm gate milk prices (FGMP) led to protests targeted at processors by farmers across the UK – protests many UK dairy processors eventually crumbled to.

These demonstrations later spilled over onto mainland Europe. Around 4,000 farmers from across Europe descended on the European Parliament in Brussels and subjected European Parliament buildings and some unfortunate riot police to a hose-down with milk.

Things, however, appear to be on the up.

According to Netherlands-based Rabobank, dairy demand growth is expected to slow – but this will not prevent price recovery in 2013.

“Continued upward price trajectory seems all but inevitable”, despite an expected softening of demand, said Rabobank’s Q4 Global Dairy Industry report.

Visit www.dairyreporter.com next week for part two of DairyReporter.com's 2013 predictions.

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