Profits skimmed: Low revenue growth expected until demand increases and milk quotas end
London, United Kingdom (PRWEB) September 05, 2013
Firms in the Milk & Cream Production industry have come up against difficult conditions during the past five years. According to IBISWorld industry analyst Steven Connell, “highly volatile dairy prices, depressed demand conditions and heavy discounting of milk prices by supermarkets have squeezed industry revenue and profitability”. The industry has also been affected by changing consumer preferences as consumers turned away from full-fat milk in favour of low-fat and skimmed milk. The troubled outlook for the industry has also resulted in consolidation, evidenced by Arla Foods' acquisition of Milk Link and Robert Wiseman's acquisition by German firm Muller in 2012.
Milk and cream processors face another tough year in 2013-14, with revenue estimated to grow by 2.0%. Strengthening global dairy prices should support UK prices but producers will continue to be squeezed by supermarket discounting and pressure from dairy farmers to lift farm-gate dairy prices. During late 2012, dairy farmers staged a series of protests and blockades against falling farm-gate milk prices, which farmers claimed were below the cost of production. Dairy producers were forced to increase prices later that year. This highlights the unfavourable position milk producers are in. IBISWorld estimates industry revenue will contract at a compound annual rate of 1.1% to £4.5 billion in 2013-14.
The industry is expected to recover during the next five years through 2018-19 with industry revenue forecast to return to growth. Domestic demand for milk and other dairy products should strengthen from 2014-15 onwards as the economy recovers. Rising demand for high-value milk products like flavoured milk should help producer's boost revenue. Global dairy prices will remain volatile but are expected to be supported by rising demand for dairy in emerging markets. Consumers should continue to switch from full cream to low-fat milk. Connell adds, “the end of EU milk quotas in 2015 should result in higher production from 2015-16 onwards and open up new export markets to milk producers”. Consolidation is likely to continue at a production level, while many uncompetitive dairy farmers will be forced to exit the industry.
The Milk & Cream Production industry is highly concentrated. The industry is dominated by dairy farmer cooperatives, both domestic and international, with own-label brands accounting for about 85.0% of liquid milk sales. Producers have been attempting to increase the share of branded products within their portfolios as they offer higher margins and foster a sense of loyalty among consumers. The top four players are estimated to account for 80.6% of the industry in 2013-14. Major companies include Arla Foods Group, Dairy Crest Group, Muller Wiseman Dairies, First Milk Group and United Dairy Farmers Co-Operative.
For more information on the Milk & Cream Production industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
The industry comprises establishments that produce fresh liquid milk, pasteurised, sterilised, homogenised and ultra heat-treated milk. It also includes the production of cream from fresh liquid milk, pasteurised, sterilised or homogenised milk.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on many UK industries. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in London, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.co.uk or call (020) 7222 9898.