Emerging markets such as India must reform to reignite dairy growth


- Last updated on GMT

India's Taj Mahal (Picture Credit: Snickrap/Flickr)
India's Taj Mahal (Picture Credit: Snickrap/Flickr)

Related tags Milk

Slowing dairy sales growth in Brazil and India during Q2 2013 means that reforms and infrastructure upgrades are likely necessary to reignite such emerging markets, according to Rabobank.

“A slower period of growth in emerging markets characterizes the outlook period,” ​Rabobank’s Food & Agribusiness Research and Advisory analysts wrote in their report Rabobank Dairy Quarterly – Q3 2013.

“In addition to changed local demand and capital conditions, the lack of investment in infrastructure appears to have caught up with some of these countries (e.g. Brazil and India),” ​they added.

Reforms are needed to reignite the growth we have become used to seeing from these countries, the analyst wrote, given OECD September data stating that – since Brazil and India now account for such a large share of the world economy – a slowdown here will hit global growth despite a pick-up in ‘advanced’ economies.

Rising retail prices in EU, Asia, South America

Consumers in many markets worldwide are facing rising retail markets for dairy products, according to Rabobank, as the commodity market price surges of H1 2013 move down the supply chain.

“The cost of dairy has been rising in key EU markets (in some cases strongly) with prices also being jacked-up in many Asian markets and South America,”​ the analysts said.

But Rabobank notes the US as a notable exception to this consumption headwind – the effect of which it describes as modest – but says it will continue in Q4 as price rises continue to feed through in many markets.

Although the EU has officially exited recession, Rabobank noted that this hasn’t fed through to job creation and economic conditions remain weak.

During the second quarter of 2013 household consumption of most product lines continued to fall in Germany and France, while liquid milk sales are still falling at EU levels.

“Recent data suggests that yogurt and drinking yogurt sales remain extremely weak,”​ Rabobank wrote.

“EU cheese disappearance [the last word refers to a sales slump in Q1] offers the one ray of hope so far, having returned to growth in the three months to July,”​ the analysts added.

China the biggest ‘buy side’ story

Conversely, in the US, a better economy and benign prices led to strong growth in cheese and yogurt sales in Q2 although liquid milk consumption fell, while growth slowed in emerging markets compared with 2012.

In China, Rabobank said the sheer lack of product availability suggests that demand growth for many products is slowing, wrote, describing the country as the “biggest buy side story of Q2 2013”.

Due to contracting local supply, China imported 27% more product than in the prior 12 months, while Russia imported 10% more, resulting in a surge in dairy buying from these countries on global markets.

After 16 consecutive quarters where exports from ‘Big 7’ surplus production regions grew, there was a 5% fall in Q2 exports from ports there, as declines in local milk production fed down the supply chain.

Accordingly, China and Russia sought to buy an extra billion liters of product in Q2, forcing the rest of the world’s importers to reduce purchases by 1.5bn liters, in a move Rabobank analysts predict will hit the Philippines, Venezuela, the Middle East and many parts of Africa over the next 12 months.

Related news

Show more

Related products

Mastering taste challenges in good-for-you products

Mastering taste challenges in good-for-you products

Content provided by Symrise | 12-Sep-2023 | White Paper

When food and beverage manufacturers reduce sugar, salt, or fat and add fibers, minerals or vitamins, good-for-you products can suffer from undesirable...

Related suppliers

Follow us


View more

Food & Beverage Trailblazers

F&B Trailblazers Podcast