Market Overview
In recent decade, with the increasing premiumization and diversification of consumer needs, the usage of milk has been expanding from traditional dairy products to new products with high added value. It is expected that this trend will lead to further growth in milk consumption with favorable long-term consumer trends and developing technologies. Demand for milk and milk products is increasing daily with an increase in the world population. High-end technology is required to meet these needs by increasing the milk processing capacity and maintaining the quality of the product.
The dairy industry is highly localized owing to the perishable nature of milk products. According to FAO, only 7% of milk in the U.S. is exported. Dairy products are exported to the regions where climatic conditions, unmet demand-supply ratio, unfavorable government measures, and change in exchange rates play a major limiting role. Use of technologically advanced transportation measures for maintaining the efficiency and quality of milk products during long-distance export are also anticipated to boost the dairy products market growth. However, dairy products industry has been volatile, particularly due to the fluctuations in raw milk prices and economic recession due to COVID-19. Some milk processors are also reporting difficulty finding drivers to transport milk from farms due to fears of contracting the virus.
Market Dynamics
Drivers
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Consumer interest towards nutrition-rich diets
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Rising demand for branded dairy products
Restraints
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Rise of plant-based dairy alternatives
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Rising veganism and lactose-intolerant population
The global dairy products market is highly competitive as Consumer dairy companies are striving to provide quality products at lower prices. Also, product developments are significant in liquid dairy category as per consumer preferences. Similar product portfolio and market fragmentation is furthering market competition.
Geographical Analysis
Asia-Pacific dairy products market is projected to grow at a CAGR of 6.51% during the forecast period 2020-2026. China is the largest market for dairy primarily driven by liquid milk and yogurt consumption. India and Vietnam are the fastest growing markets in the region driven by increased population and per capita consumption.
Asia Pacific dairy products market valued USD 100.41 billion in 2019 and is estimated to grow at a CAGR of 6.5% to reach USD 153.56 million by 2026.
Lack of cold storage in supply chain affected the growth of convenience and independent small grocery retailers as product freshness play an essential role in the growth of dairy products as more nutritious than shelf-stable variants, especially in emerging Asian countries, where health consciousness is gaining traction. Moreover, strong marketing activities by leading players, in addition to adopting new government policies, are some other drivers of dairy products in Asia-Pacific.
China is the largest dairy market in Asia Pacific region and is evolved as the second largest retail market in the world. Despite lower consumption levels of cheese and butter, the large consumption of liquid milk and yogurt made China as the largest market . Online retail is witnessing significant growth in the product sales. Low price offered by e-commerce sites for milk and other dairy products is also boosting the online sales in the country. Milk output in China in 2018 is estimated to have declined by 1.1 percent. Recently published census data for China indicated that milk output during 2015-2017 has been one average 15 percent below that of the preceding three years, mostly attributed to the ongoing industrial restructuring process and downscaling of small-scale farms in view of the strict environmental regulations pursued by the government.
Competitive Landscape
The global dairy products market is highly competitive. The large market potential and ever-lasting demand for dairy nutrition in human diets made dairy as the most promising sector in food industry. The market is extremely fragmented with wide product differentiation and large number of players. The top 10 companies operating the market accounting for nearly 25% of the total market value. These companies are striving to offer quality products at competitive prices to hold their share in the market. Dairy industry in most of the developing economies has been highly unorganized. Liquid milk in particular is witnessing significant portion of its consumption at source or sold through unorganized channels. However, factors such as increasing disposable income, health consciousness, interest towards packaged products led to the growth of branded dairy products in these markets.
The local manufacturers in these markets are focusing towards development of value added products to cater this growing demand,
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For instance, Leading Indian milk and dairy products company Prabhat Dairy initiated shift of its integrated B2B business model towards consumer business. In 2017, the company has proposed to increase its retail outlets from 1 lakh to 2 lakhs by 2020. Also, the company has entered into dairy beverages segment to widen its branded consumer products.