Innovate to accumulate, dairy sector told

- Last updated on GMT

Related tags: Milk

Innovation will be the key driver of growth in the western European
dairy market, claims a new report from market analysts Zenith
International, but old favourites such as butter and cheese
continue to grow in popularity.

The European consumer may be turning towards healthier food products, recent figures show that butter and cheese sales in western Europe continue to grow and innovation is paving the way towards new market segments.

A report from market analysts Zenith International reveals that while the main dairy markets are mature, innovation and structural change are placing the European industry on a more secure footing.

According to the report, provisional figures for 2002 indicate that consumption of: butter edged up 0.1 per cent to 1.75 million tonnes, cheese advanced by 2.6 per cent to 7.18 million tonnes, but drinking milk lost favour and sales declined by 1.8 per cent to 33.3 million tonnes.

"New hope is being fostered by new segments - such as organics and probiotics,"​ said Zenith research director Gary Roethenbaugh. "The key word for future growth is innovation. The challenge facing the European dairy industry is to continue investing in research, developing innovative products that meet consumer needs and backing them with sustained marketing activity."

Germany is Europe's largest milk producer, with output of 28.3 million tonnes in 2001. Only two other countries, France and the United Kingdom, produced more than 10 per cent of the 127.8 million tonne west European total. According to the report, with over €15,000 million in dairy sales in 2001 Nestlé attained the top company position. Four other businesses had dairy sales above €5,000 million - Danone, Parmalat, Lactalis and Unilever. In terms of processed milk, Arla led the 2001 rankings, followed by three more groups processing in excess of 5 million tonnes - Lactalis, Campina and Friesland Coberco.

The Zenith​ forecast to 2006 anticipates that butter consumption will remain static, with cheese consumption rising by 1.5 per cent a year and drinking milk consumption picking up again in 2003 before resuming its slow long term decline.

"The euro and EU enlargement will undoubtedly lead to further industry consolidation,"​ added Gary Roethenbaugh. "Economies of scale are fundamentally important in such a price sensitive and highly competitive market. Companies must concentrate on value added products to improve profitability. Functional, ecologically friendly and consumption occasion products along with increased attention to product quality and safety seem the way forward,"​ he concluded.

Related topics: Retail & Shopper Insights

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