Producer share of milk pie to decline further, says Euromonitor

In its latest food industry briefing, the research firm provided a breakdown of the 2009 retail price of processed milk and compared it to predictions for 2015.

The share of the price going to producers is expected to drop from 42 per cent to 38 per cent over this period, in line with a downward trend that began in early 2008. Processors are predicted to benefit the most with their share of the pie climbing three percentage points to 37 per cent while retailers edge up one percentage point to 25 per cent.

Fewer farms ​

Explaining the forecasts, Euromonitor said the number of EU dairy farmers is likely to drop in the coming years as volatile prices drive smaller farmers out of the market.

In the meantime, big farmers linked to large co-ops are likely to benefit from their more efficient logistical structures that are more closely aligned with processors.

The net result of these changes is predicted to be a reduction in total average costs facing farmers as a group, which will reduce their share of costs across the supply chain.

Processor optimism ​

Over the next five years, Euromonitor said processors are likely to benefit from closer integration with larger farmers. As the economic situation improves, they are also expected to sell more added value milk, increasing both costs and margins.

For retailers, Euromonitor said the next five years is likely to see greater polarisation of the milk market whereby mass market brands will lose out on one side to private label and on the other to premium lines.

The market researcher said this trend will boost retailer margins for milk, but it will be offset somewhat by retail consolidation and the continued use of aggressive price promotions among large grocery chains.