A divergence in supply and demand is influencing activities within the global dairy industry, as Dennis Jõnsson, president and CEO of Tetra Pak, revealed in his presentation of the 7th Dairy Index, which reports on the opportunities and challenges that dairies face now and in the years to come.
While a 36% increase in global demand for milk is anticipated during the next decade, this growth will be seen in the developing nations in Africa, Asia and Latin America, while traditional dairy markets such as Europe and the US at best stagnate.
This disparity in performance is shaping the landscape of supply and demand as those developing dairy markets are challenged to source sufficient raw milk supplies to fulfil the ever greater demand of their growing populations with their rising incomes, while developed markets compete to meet this demand for raw milk and tackle falling consumption at home.
“It is a new, interconnected world offering opportunities and challenges in equal measure,” said Jõnsson, who highlighted that Nigeria, where dairy production is limited due to climate, already imports 110,016 tonnes of liquid and powdered milk a year, and its population of almost 174 million is forecast to grow by a further 20 million people by 2018. China, which currently imports 1,038,983 tonnes of liquid and powdered milk, is poised to double its share of global milk imports in the next 10 years.
According to the Dairy Index, whereas global milk supply between 2011 and 2013 was slightly ahead of requirements, by 2018, with the growth in demand from Africa and China, dairies everywhere are likely to struggle to fulfil on unprecedented demand.
To this end, countries such as China are investing fast and furious in their own internal dairy production, and the market is being supported by government initiatives to support domestic rather than imported dairy product consumption.
In the EU, where milk quotas are finally to be lifted in 2015, many countries have already opted to absorb fines for exceeding their individual quotas rather than lose out on the chance of supplying raw milk to the developing world.
According to the Dairy Index, the 28 countries of the EU are expected to increase raw milk production by 11% from 2012 to 2023, with the biggest growth expected in the Netherlands, France, Poland and Ireland. Dennis Jõnsson cited the Irish dairy giant Glanbia, which exports milk to over 130 countries and has recently completed the work on a dedicated new plant to produce long-life milk and cream, including export versions of its leading dairy brand, Avonmore.
‘Stretching’ the milk content – by combining milk with other contents such as juice, nut proteins or even exploring the potential of whey – to make milk go further and obtain greater value per litre sold, is another option in the predicted future of raw milk shortage.
“The predicted surge in global demand offers a huge opportunity for dairy companies in developed markets (where there is a surplus of liquid milk) to export powder and ambient liquid dairy products to the growing economies,” said Jõnsson. “However, to ensure long-term success, these producers need to balance the ‘quick wins’ of export against the requirement to continue to grow their domestic markets.”
White milk consumption in Western Europe is set to fall by 0.3% between 2013 to 2016, following a drop of 0.8% between 2010 and 2013, and milk sales in the US are at their lowest level for 30 years. To stem this flow, dairies are turning to innovation and value added products that deliver extra nutrition, flavour or other lifestyle benefits such as convenience, plus enhanced powders and cheeses, novel yogurts etc, all designed to capture consumer attention in the dairy category.
“Meanwhile, dairy companies in import markets must overcome the challenge of securing their own sustainable, high quality milk supply,” said Jõnsson. “Markets such as China and Saudi Arabia are doing so in multiple ways: increasing investment in domestic dairy farming, partnering with well-established foreign companies, and diversifying their offer with value-added products.”
He stressed that despite its hot and arid climate, Saudi Arabia now meets more than half of its domestic consumption with local supply: “Fundamentally, these are measures that will help to achieve the vital balancing act of shoring up the future of a sustainable diary industry.”
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