Cheese consumption has grown at a rapid rate, making it one of the world’s largest traded agricultural commodities.
“The industry has benefited from robust global economic growth for much of the past five years, rising demand from the newly affluent economies of Southeast Asia and Latin America and clever product innovation,” said IBISWorld industry analyst Naren Sivasailam. “This has combined with falling supplies from dairy powerhouses such as New Zealand and Australia due to adverse climatic conditions and high feed costs.”
Consequently, dairy prices skyrocketed to near-historic highs in 2007, resulting in dramatic increases in revenue at the expense of industry profitability. This trend was reversed with the onset of the global economic crisis in late 2008, characterised by sluggish demand conditions and a buildup of unused inventory. In the five years through 2012, industry revenue is estimated to decrease by 8.0% per year to total $55.3bn.
The US is the world’s single largest cheese producer. Europe accounts for the largest share of revenue and production, largely due to its historical association with cheesemaking and the level to which cheese is ingrained into its culture.
According to Sivasailam: “Germany, France and Italy are the most dominant producers in the region, with a host of specialty cheeses that command a premium around the world.”
In the developing markets of India and China, cheese consumption has grown at a mid- to high double-digit rate due to increased urbanisation, westernised diets and rising incomes.
The global cheese manufacturing industry is characterised by a diverse range of participants, ranging from multinationals such as Kraft Foods and Fonterra to smaller dairy cooperatives and niche and artisanal producers.
In the developed markets of Europe, North America and Australia, cheese production is largely a mature and saturated industry with limited growth opportunities for domestic manufacturers. The European market, for example, is highly fragmented, with many small producers servicing niche domestic markets. In North America and Australia, the market is more concentrated, with large multinationals and dairy cooperatives that produce the majority of the domestic cheese.
Over the next five years, industry prospects are expected to be relatively bright. This will largely be driven by the forecast economic recovery, stability in dairy product prices and a resurgence in demand from the developing world.
Product innovation in the form of functional and health-based cheese products is expected to generate renewed interest in the mature markets of North America, Oceania and the European Union.
In addition, the industry needs to be wary of environmental and regulatory constraints imposed by various domestic and international agencies, especially with regard to import tariffs and sustainability.
Source: IBISWorld Inc
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