The global demand for dairy products underpins the market we work in and the success of our dairy farming customers. We all want a healthy marketplace with a fair price paid to dairy farmers, encouraging re-investment and increasing efficiency across all the countries we work in.
It is vital that Silostop have a broad overview of this and that this information might also be of interest to our customers, so I hope our summary of the market, taken from our research, is of interest.
The global view
Globally, dairy product consumption continues to rise, with an estimated value of over £576bn ($640bn) by 2030, a compound annual growth rate of 3.2%. This growth is very promising for dairy producers, though it comes with the caveat that the value or price of dairy products is not the same as the price paid to the dairy farmer – it is the price paid by the consumer. Note – dairy products include all major product types (Milk, Cheese, butter, yoghurts, dairy-based deserts).
Several key factors drive the rising value of the dairy product market:
• Population growth. More mouths to feed means more demand for dairy products.
• Disposable income growth. As economies develop around the world, incomes tend to rise. With a bigger budget, households can buy more dairy-containing products, which may have been previously unaffordable. Wealthier countries might assume that most dairy products are staples, but they are still generally considered luxuries in developing economies.
• People use dairy products to supplement protein in their diets. In some countries, there is a steady cultural shift from sourcing protein from meat (which may be more expensive and less convenient) to sourcing protein from dairy products, for example, cheese.
• Government intervention. Governments want to build healthy populations, and dairy consumption is a vital part of the plan in developing economies. To achieve this, governments support an increase in dairy consumption by increasing the efficiency of their domestic dairy industry or subsidising the production of dairy products. A recent phenomenon that attracts government intervention is the need to replace poor dietary options (fast foods) with more nutritional alternatives like dairy products.
• Disposable income growth. As economies develop around the world, incomes tend to rise. With a bigger budget, households can buy more dairy-containing products, which may have been previously unaffordable. Wealthier countries might assume that most dairy products are staples, but they are still generally considered luxuries in developing economies.
• People use dairy products to supplement protein in their diets. In some countries, there is a steady cultural shift from sourcing protein from meat (which may be more expensive and less convenient) to sourcing protein from dairy products, for example, cheese.
• Government intervention. Governments want to build healthy populations, and dairy consumption is a vital part of the plan in developing economies. To achieve this, governments support an increase in dairy consumption by increasing the efficiency of their domestic dairy industry or subsidising the production of dairy products. A recent phenomenon that attracts government intervention is the need to replace poor dietary options (fast foods) with more nutritional alternatives like dairy products.
Changing demand
We predict the dairy product market will grow globally, but some challenges exist. The demand for non-dairy alternatives is steadily increasing and putting pressure on the consumption of traditional dairy products.
The market for non-dairy products is due to the following:
• Animal and environmental reasons. Consumers are more aware of the potential harm to animals in the dairy industry. Their understanding of animal rights is influenced heavily by the social interest in dietary choices, such as veganism. Environmentally, there is conflicting information that traditional dairy farming is a source of emissions, which speeds up global warming and encourages a change in land use that releases more carbon or reduces carbon sequestration (the removal of carbon from the atmosphere). People argue that non-dairy alternatives are more environmentally friendly, but this is far from being proven.
• Lactose intolerance. More people are becoming lactose intolerant, which increases the demand for non-dairy alternatives.
• Lactose intolerance. More people are becoming lactose intolerant, which increases the demand for non-dairy alternatives.
Supply shocks
The pandemic had a significant short-term impact on the dairy products market and production. The challenge for producers was to survive the government’s lockdowns, which shut production facilities. Although food supply chains were protected, the wider supply chains feeding into them were significantly disrupted. This disruption impacted the sourcing of materials for construction, labour movement, availability of labour, and increased freight charges. Longer term, these effects are still being felt as supply chains struggle to return to pre–covid levels of pricing and production.
Product types
Liquid milk is still the dominant product type, accounting for 60% of the market value. The value of cheese as a product type is (19%) of the total market, and the rest is split between butter (4.5%), desserts (6.7%), yoghurts (9.2%) and other dairy items. Yoghurt is the fastest-growing segment due to an increased understanding of gut health and product innovation.
Where are dairy products sold?
Supermarkets also dominate the retail food market through sharp pricing and convenience. 53% of all dairy products are sold in supermarkets. The reasons for this are well understood. Dairy products must be consumed fresh and transported in refrigerated conditions which the supermarket supply chain can accommodate. We don’t expect this dominance to change, although there is increasing competition from convenience stores and specialist shops.
