Joe Dyer, Buckhurst Hill, UK
Liz West, Miami, US
Mike, Dayton, US
Global consumption of dairy products, including milk, cheese and butter, is expected to rise by 36 percent during the next decade, reaching in excess of 710 million tonnes of liquid milk equivalent by 2024.
Booming demand, fuelled mainly by population growth, rising prosperity and urbanisation in Africa, Asia and Latin America, will likely outstrip supply, creating a deficit within the next 10 years that will almost inevitably be met by climbing prices.
Combined with changing consumption habits and shifting global demographics, our industry is in the throes of transition, with dairy companies increasingly looking beyond their own domestic markets to the wider global landscape, be it to source or to sell. It is a new, interconnected world, which will present opportunity and challenge in equal measure.
As milk producers in established markets look for new ways to respond to a boom in demand in the developing world, they are facing the mirror challenge of falling consumption at home.
In Europe and in North America, for example, changing lifestyles and dietary requirements have caused a significant shift in traditional consumption habits. Milk sales in the US are at their lowest levels for 30 years, while white milk consumption in western Europe has fallen 0.8 percent in the last three years.
To maintain a viable business in these markets and drive value into the sector, dairy producers are shifting towards value-added products that deliver extra nutrition, flavour or other lifestyle benefits, which have greater consumer appeal.
This includes products that meet the rising preference among consumers in developed nations for snacking, ‘deskfasting’ (eating breakfast at work) and ‘on-the-go’ consumption, creating considerable opportunity for innovation, both in terms of the product and the package.
Meanwhile, rapidly rising demand in many less-established markets for milk products towards the more basic end of the spectrum is creating greater incentive for local dairy companies to increase their own production. To sustain high quality raw milk supply, these companies are reaching out to the export countries to form partnerships.
At the same time, however, with competition for raw milk becoming ever-more fierce, and traditional milk exporting countries reaching production capacity, developing nations are coming under increasing pressure to invest in greater self-sufficiency. In doing so, of course, they will need to address challenges related to the environment, natural resources and the availability of expertise.
Several markets have already begun that journey. For example, despite its hot and arid climate, more than half of Saudi Arabia’s domestic milk consumption is now met from local supply, and it has built a strong export business to countries across the Middle East.
In parallel, more and more companies in emerging geographies are looking for ways to ‘stretch’ milk, combining it with ingredients such as juice, cereals, nuts or other ingredients to create new products and formulations.
Taken as a whole, the outlook for the global dairy industry remains extremely strong, particularly for companies that are able to tailor their operations to serve both the booming demand in developing markets, and address the need for exciting new products among consumers in mature geographies.
The dairy industry is approaching one of its most transformational eras. As a traditionally domestically focused industry, it is now facing the challenges and opportunities posed by ever increasing globalisation. Dairy companies today need to take a world view of the supply of milk and the demand of consumers.
For dairy companies in developed export markets, meeting the demand from rapidly growing emerging markets offers a huge opportunity. However, to ensure long-term success, these producers need to balance the ‘quick wins’ of exporting to fast growing economies against the need to continue to grow their domestic markets.
This means understanding and adapting to changing consumer demographics, behaviours and lifestyles. Product diversification, innovation and brand differentiation will be crucial.
On the other hand, dairy companies in import markets must overcome the challenge of securing a sustainable, high quality milk supply. Those who are getting it right are doing so in two ways: increasing investment in domestic dairy farming, and partnering with companies in the export market.
As businesses realise the positive effects of these collaborations, we are likely to see greater consolidation in the industry, perhaps even across borders. At the same time, companies are also working on product innovation to reduce the pressure on the milk supply.
In the context of these considerable global developments, the reaction of dairy companies over the next few years will have a significant and long-term impact on the future of the global dairy market.
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