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Milk and Dairy Products Market Report 2003
Key Note Publications Ltd, March 2003
The UK milk and dairy industry has grown gradually but steadily since 1998, reflecting the commodity nature of many of its basic products as well as the strong innovation in other sectors. In 2002, the total value of the market increased by 2.9% to £7.23bn.
This is an extremely diverse market within the wider UK food industry, and its main sectors are liquid milk, cheese, yellow fats, yoghurt and chilled desserts and cream. Generally, the main growth has come from newer branded and added-value dairy products, particularly yoghurt and chilled desserts, flavoured milk and processed cheese. The traditional commodity products, such as milk and butter, have been experiencing slower growth. Across the dairy industry, organic products have increased sales and value growth.
After difficult years in 2000 and 2001, with extremely low farmgate prices and foot-and-mouth disease among UK herds, the UK dairy industry has generally continued to suffer from the poor world economy and low milk prices in both the EU and other international markets. Falling prices have been exacerbated by price cuts by the larger dairy companies, putting farmers under great pressure as farmgate prices drop below the cost of production. EU milk quotas also place an extra burden on those farmers who exceed their limits.
The most important influencing factors affecting sales within the dairy market continue to be consumer interest in health and taste. This is reflected in the continued success of organic products and the growth of the relatively new functional milk drinks such as Yakult. The yellow fats sector, in particular, is divided between the popular healthier products, such as low-fat and cholesterol-lowering spreads, and the more indulgent butter, which is experiencing a revival in interest. In the milk sector, doorstep deliveries are continuing to decline, but Express Dairies, in particular, is developing the network in new directions with the inclusion of other bulky food items and business post in their delivery system.
The market has so far survived challenging times and is expected to continue positive growth in the near future. Further rationalisation of the industry is expected, with increased integration up the supply line and strategic partnerships between producers, processors and retailers allowing for more stability in the supply sector. Health and taste are expected to remain the most important influencing factors on sales, and value growth will continue to be driven by strong new product development, particularly of branded and added-value products.
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