Economy, melamine hinders dairy beverage market

by Keith Nunes
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BASINGSTOKE, ENGLAND — Growth in the global dairy beverage market slowed to 0.5% in 2008, a decline from 2.7% growth achieved during 2007, according to Canadean Ltd. The research firm pinned the decline on two factors: deteriorating global economic conditions and the affects of the melamine scandal in Asia.

The Asian market, which accounts for approximately 45% of global dairy beverage demand, witnessed the most marked deterioration with total volumes expanding at just 0.5% in 2008 compared with 5.1% in 2007. The overall situation was also compounded by the first absolute declines in demand in both North America and Western Europe since 2004. Africa, Eastern Europe, Central America and South America as well as the Middle East all maintained positive growth in 2008, but the regions are thought unlikely to escape the impact of the global downturn entirely in 2009.

Milk remains by far the most important category overall accounting for 79% of total global dairy beverage demand in 2008 or just under 200 billion liters (53 billion gallons). Growth in the category halved from 0.6% to 0.3% in 2008.

The fastest expanding markets since 2002 have been value-added products such as drinkable yogurts, flavored milk and fermented milk. The products also experienced the sharpest slowdown in 2008, with flavored milk being particularly hard hit by the Asian melamine issue and falling back 2.9% over the year. Analysts in the region expect it will take at least five years for the category to fully recover in Asia, according to Canadean.

In spite of the negative trends, some categories and subcategories have remained resilient; growth in soy-based drinks has been good, for example, as some consumers switched or switched back to the products and there also has been a strengthening in demand for evaporated and condensed milk and some specific market niches, such as low-fat milk, probiotic drinks, organic and fortified milks.

With dairy beverage volume growth rates still in decline the short-term outlook for 2009 is expected to be marked by a further intensification of competition and an extension of new products, brands and packaging types aimed particularly at meeting the demands of a more frugal and cost-conscious consumer.

But, while the short-term outlook looks bleak, Canadean estimated some of the fundamental drivers for longer-term growth will remain in place. They include growing world population and per capita consumption, rising long-term disposable income levels and greater consumer interest in more sophisticated value added, functional and healthier products.

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