Support for French dairy industry

Hervé Gaymard, France's agriculture minister, last week pledged some €60 million to help France's dairy farmers compete more effectively in today's cutthroat market. While most of the cash will be spent on keeping dairy farms in business and improving competitiveness, a large amount will be set aside to "develop innovation, create added value and open up new [export] markets"​.

France is famous for its dairy products - and its cheese in particular - and in Danone has one of the world's biggest dairy product companies. But the imminent reform of the Common Agricultural Policy is likely to means tougher times for France's dairy producers, until now relatively protected by quotas and subsidies.

Focusing on added value products such as yoghurts or functional foods will play a major part in keeping France's dairy farmers in business. This will mean investing in R&D to, for example, reduce fat levels and improve nutritional content, as well as getting a clearer understanding of consumer trends and improving the dairy industry's relationship with the retail trade, not only to ensure greater visibility for dairy products but also to maintain margins for farmers.

There will also be significant investment in promoting French dairy products to consumers both at home and abroad, with particular emphasis on the health benefits of many dairy foods.

The French government has finally decided to act to support the dairy industry after the realisation that it was lagging behind most of its European neighbours (and competitors) in tackling the problems faced by the modern dairy industry.

Europe is a continent of dairy farmers, with the dairy sector the most important within the food industry in a number of countries (Germany, with sales of €19 million, Italy with €13 million), but reforms are in progress across the whole of the EU, with the farms growing rapidly in size as the number of cattle continues to grow in countries such as Germany, the UK and Denmark.

Fewer, bigger farms has increased productivity in many countries, but France has clung on the rural tradition for longer than others, with the number of dairy farms falling by just 23 per cent over the last 10 years compared to 40 per cent in other leading dairy countries.

In some cases, the concentration is extreme: in Sweden, Arla Foods has a virtual monopoly (93 per cent of processed milk), while the Netherlands is a virtual duopoly between Friesland Coberco Dairy Foods and Campina, controlling around 80 per cent of the milk processing sector. Ireland's market is shared by Kerry, Glanbia and Dairygold.

But as the market becomes increasingly concentrated, some producers are increasingly looking to speciality, niche markets to survive. France, where production is not as efficient as in, say, Denmark, is still predominantly a producer of large volume dairy products - low margin goods such as butter - but is finding it increasingly hard to compete with countries with more efficient production, and which can better cope with declining prices for commodity products.