New market research indicates that China is on track to surpass the U.S. as the world’s largest dairy market by 2022, with India rising to fourth place, says global market intelligence firm Euromonitor International. With more than 60 percent of new dairy sales expected to be generated in Asia Pacific in the next five years, the region is receiving a great deal of attention from foreign investors, the study says. However, the challenging operating environment poses both opportunities as well as pressures for foreign investors.
Drinking yogurt is the key growth driver in China, with major players such as Mongolia Yili and its Ambrosial brand expanding its reach. U.S. consumers are meanwhile drinking less milk and shifting away from flavored milk drinks, the research found.
Yet despite growing foreign investment in Asia Pacific, 90 percent of the top 10 dairy players in the region are local, indicating a strong competitive advantage of local players over international. As such, while the majority of dairy growth will come from the region, the (disadvantaged) operating environment makes it very difficult to trade in some of the region’s largest markets, such as China and India.
Other markets, such as Indonesia, might offer an easier route to market, where, for example, foreign players capture 50 percent of the top 10 dairy players’ sales, or Vietnam, where this is a third.
In India, growing health awareness combined with urban consumers shifting from unpackaged milk to packaged milk will see the country overtake Japan, Russia, Germany and France by 2021, the report forecasts.
The dairy’s heavyweights, which combined make up two thirds of global sales in 2017, remain stable over 2012-2022,” said senior food analyst at Euromonitor International Pinar Hosafci. ““Yet in the next five years, countries will shift in importance due to a change in consumer demand in dairy … Americans are becoming wary of flavored milk drinks, which they perceive to be unhealthy due to their high sugar content. Ambient drinking [of] yogurt benefits from offering added convenience for both consumers and retailers, helping to achieve a wider distribution than chilled yogurts.”
Manufacturers are also focusing on probiotic variants of drinkable yogurts, Hosafci says, which contributes to boosting the health credentials of the category. “However, rising sales of drinking yogurts led to a parallel decline in for flavored milk drinks perceived as less healthy.”
The current top ten dairy consuming countries are: the U.S., China, Brazil, Japan, Russia, Germany, France, India, the U.K. and Mexico.