Next Dairy Darling

Figures released in the latest edition of the Tetra Pak Dairy Index last month – which tracks worldwide facts, figures and trends in the dairy industry – show that the consumption of ambient milk and other ambient liquid dairy products (LDP) in developed markets is projected to grow by 0.6% from 2008 to 2009. This growth comes during a period of worldwide economic recession, with total LDP consumption (ambient and chilled) in developed markets expected to dip by 1.2% from 2008 to 2009.

Total global consumption of milk and other LDP is expected to grow by 1.3% from 2008 to 2009. By the end of 2009, worldwide consumption of LDP is expected to reach 263 billion liters – up from 259 billion liters in 2008. This figure increases to 284 billion liters when soy milk and other dairy alternatives such as rice, nut and seed-based milks are included.

In some countries, ambient products are sold at more economical price points than chilled products and in others, they are offered as part of retailer promotions where consumers can buy large quantities at favorable prices.

LDP consumption

Tetra Pak is forecasting that total global LDP consumption will grow at a compound annual growth rate (CAGR) of 2.2% from 2009 to 2012 – in line with its projection last year. Much of this growth will be led by developing markets – that have driven 95.8% of global LDP consumption growth from 2005 to 2008 – due to population growth, rising incomes and the relative novelty of LDP.

Developed markets, which represent around one-third (32%) of global LDP consumption, face a tougher situation because many already have high per capita milk consumption rates. Ireland for example leads the world in per capita consumption of chilled and ambient milk products at 160 liters per person per year compared to per capita consumption of 19 liters per year in China.

Said Michael Zacka, VP, Marketing and Product Management, Tetra Pak: “In developed markets such as North America, Western Europe and Australia, where milk consumption is already high, dairy producers are driving new growth by developing new products and consumption occasions, promoting milk in appealing ways, catering to consumer trends and promoting the benefits of long-life products.”

“In Canada, dairy producers are positioning long-life milk as an attractive product for use at vacation cottages and on camping trips where refrigeration is difficult. In Spain, dairy producers have driven new growth by establishing a new segment in fortified and functional milk. This includes milk with added calcium for healthy bones and milk with Omega 3 for healthy hearts.”

Ambient LDP: A key growth segment

One of the key areas of growth worldwide is ambient (long-life) LDP. Ambient LDP consumption in developed markets is expected to reach a compound annual growth rate (CAGR) of 0.7% from 2009 to 2012. The four factors that drive this growth in developed markets are:

1. A general trend toward health and wellness, which is driving demand for enriched products often sold in ambient packages. In Spain, sales of fortified milk account for 20% of the country’s total milk consumption. This includes milk with added calcium, milk with Omega 3, milk designed for infants and lactose-free milk.

2. Busy, stretched lifestyles, which is driving convenient, time-saving solutions. In the US, parents are buying large quantities of ambient milk designed for babies and toddlers. They can store this milk at home, thereby avoiding frequent trips to the supermarket.

3. A desire to enjoy life with small treats and new consumption occasions that favor ambient products. This is driving consumption of flavored milk among adults and children in developed markets. In Germany, children drink flavored milk at school, while in the US, flavored milk is a popular accompaniment to adult breakfasts and children’s lunches.

4. A growing trend toward economization, with consumers deploying money-saving strategies. In some countries, ambient products are sold at more economical price points than chilled products and in others, they are offered as part of retailer promotions where consumers can buy large quantities at favorable prices.

The trend towards health and wellness is driving demand for enriched products often sold in ambient packages.

Soy and flavored milk

While white milk represents the largest segment of the LDP category across developed markets – with 76% market share – producers are also looking to flavored milk and soy milk as potential opportunities for growth. Over the past 12 months, Australia, Canada, Spain and the UK have seen growth in consumption of flavored milk, the second-largest LDP category after white milk in developed markets – although these started from low consumption volumes.

Soy milk, which is often positioned as a healthy natural alternative to cow’s milk, is expected to grow in developed markets by a CAGR of 1.0% from 2006 to 2009. From 2009 to 2012 both flavored milk and soy milk are expected to continue to grow globally at CAGRs of 3.3% and 3.1% respectively

Tetra Pak says total global LDP consumption will grow at a compound annual growth rate (CAGR) of 2.2% from 2009 to 2012, which is largely driven by developing markets due to population growth, rising income and the relative novelty of LDP.

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In 5 Minutes

Dennis Jönsson, President and CEO, Tetra Pak Group shares with Asia Food Journal on his views on the dairy market.

BY SHEILA WAN

AFJ: How is Asia’s dairy market managing the aftermath of the melamine incident in China in 2008?

Jönsson: In 2009, the industry was much concerned with the decline of dairy demand in China. We expected it would take two years for China to enjoy the same level of dairy consumption before the incident. However, the market is recovering faster than we have expected as the growing local consumer base boosted the demand despite a low consumption per capita. Consumers in China are willing to forgive and reassess how they can learn from the incident. We are also seeing healthy and strong growth in the dairy markets in Asia, excluding Japan and Korea.

AFJ: From your perspective, what are the ways to drive the demand of ambient milk?

Jönsson: Much work is needed to address market perceptions about ambient milk. There is a need to improve the level of awareness and understanding of ambient milk using new product marketing strategies. Nestle is doing well in the US, especially in the flavored milk category with new packaging and ways of offering. At the retail stores, we can still see ambient dairy products in the chilled section, indicating the need for ambient distribution and the chilled aisle in order to prevent consumer resistance.

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