Dairy potential remains for emerging market push - report

By Neil Merrett

- Last updated on GMT

Related tags: Milk link, Middle east

With a number of dairy manufacturers committing to emerging market growth, countries outside of the EU and US will continue to hold strong potential for processors, despite undergoing difficulties during 2008, says new research.

With a number of dairy manufacturers committing to emerging market growth, countries outside of the EU and US will continue to hold strong potential for processors, despite undergoing difficulties during 2008, says new research.

Over the last few weeks, groups such as New Zealand-based cooperative Fonterra and UK processor Milk Link have announced plans to boost their presence in certain Middle Eastern and Asian markets to court demand for cheese products.

However, in new findings by Proteus Insight, the total volume consumption of dairy products in 2008 was down by 0.5 per cent across 68 markets in the emerging regions of Asia, Latin America, Eastern Europe, Central Asia, Middle East and North Africa and the Caucasus.

“Eastern Europe was hit particularly hard, with consumption and spending dropping in Ukraine and Serbia following the economies needing assistance from the IMF,”​ stated the report.

At the end of 2008, the group said that reduced consumer spending and currency fluctuations led to declines in the value of the US dollar and the euro in these markets by 2.5 per cent and 8.5 per cent respectively.

Processed potential

Despite the apparent difficulties felt in the market during 2008, the analyst suggested that the decisions of Fonterra and Milk Link to establish new deals with partners in emerging markets like China and Egypt could prove prudent. Of about 4.5 million tones of cheese consumed in the 68 sample markets, the report estimated that only two per cent of the products were supplied as private label brands.

“These markets represent great potential for manufacture brand development as private label products have not penetrated to the extent found in Western Europe or North America,”​ stated the analyst. “[This occurred] even though key accounts such as Carrefour and Tesco have established themselves in many of these markets.”

Proteus Insight said that over the course of last year, sales volumes of processed cheese grew by 1.4 per cent in the 68 International markets it studied, with spreads holding a 70 per cent market share.

North Africa and the Middle East were seen the key drivers for processed cheese demand with volumes up by 2.8 per cent, according to the analyst.

Sales of white and mature cheese products were found to have fallen by 0.7 and 0.5 per cent respectively, compared to volumes in 2007.

Manufacturer moves

As of this month, UK-based Milk Link says it will begin working with Chinese manufacturer Yili to supply Stilton and Cheddar cheeses to major supermarkets in the country.

Fonterra similarly announced an agreement this month with leading Egypt-based dairy supplier for licensed production of its Anchor range of goods in the country.

Arab Dairy Products, which already works with Fonterra to manufacture processed cheese portions in a number of gulf countries like Iraq and Bahrain, will take up responsibility for the processing and distribution of Anchor in Egypt.

Related topics: Markets, Emerging Markets

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