| KN15263 |
| KEY NOTE MILK AND DAIRY PRODUCTS : MARCH 2003 |
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This report covers: milk, dairy, liquid milk, whole milk, semi-skimmed milk, skimmed milk, milk powder, cheese, processed cheese, yoghurt, chilled desserts, fromage frais, yellow fats, butter, margarine, dairy fats, low-fat spreads, cream, hard cheese, soft cheese, fresh cream, UHT cream, milk products, curd, doorstep milk deliveries, milk rounds, raw milk, packaging, processing equipment, milk quotas, farmers' co-operatives, milk prices,
Companies covered include: Arla Foods, Dairy Crest, Express Dairies, Glanbia Foods, The Ilchester Cheese Company, Müller Dairy UK, New Zealand Milk Products (UK), Uniq, The Yeo Valley Organic Company, Robert Wiseman Dairies, Unilever Bestfoods, The Kerrygold Company, Kraft Foods UK, Nestlé,
| Executive Summary 1 |
| 1. Market Definition 9 |
| REPORT COVERAGE 9 |
| MARKET SECTORS 9 |
| MARKET TRENDS 9 |
| Branded Products 9 |
| Added-Value Products 10 |
| Organic Products 10 |
| Convenience Cooking Products 11 |
| Healthy Eating, Luxury Indulgences and Taste 11 |
| Snacking 12 |
| MARKET POSITION 12 |
| The UK 12 |
| Table 1: Consumer Expenditure on Milk and Dairy Products and on All Food (£m at rsp and percent), 1998-2002 12 |
| Overseas 13 |
| 2. Market Size 14 |
| The TOTAL MARKET 14 |
| Table 2: The Total UK Milk and Dairy Products Market by Sector by Value at Current Prices (£m at rsp), 1998-2002 15 |
| by MARKET SECTOR 15 |
| Liquid Milk 15 |
| Table 3: The Total UK Liquid Milk Sector by Value at Current Prices (£m at rsp and percent), 1998-2002 16 |
| Table 4: Sales of Liquid Milk by Type by Volume ( percent), Year Ending February 2003 17 |
| School Milk 17 |
| Leading Manufacturers and Brands 17 |
| Cheese 18 |
| Table 5: The Total UK Cheese Sector by Value at Current Prices (£m at rsp and percent), 1998-2002 18 |
| Table 6: Sales of Cheese by Type and Weight ( percent), 2001 19 |
| Leading Manufacturers and Brands 19 |
| Yoghurt and Chilled Desserts 19 |
| Table 7: The Total UK Yoghurt and Chilled Desserts Sector by Value at Current Prices (£m at rsp and percent), 1998-2002 20 |
| Table 8: Sales of Yoghurt and Chilled Desserts by Type by Value (£m at rsp and percent), 2002 21 |
| Leading Manufacturers and Brands 22 |
| Yellow Fats 22 |
| Table 9: The Total UK Yellow Fats Sector by Value at Current Prices (£m at rsp and percent), 1998-2002 23 |
| Table 10: Sales of Yellow Fats by Type by Value (£m at rsp and percent), 2002 23 |
| Leading Manufacturers and Brands 24 |
| Cream 24 |
| Table 11: The Total UK Cream Sector by Value at Current Prices (£m at rsp and percent), 1998-2002 25 |
| Table 12: Sales of Cream by Type by Value (£m at rsp and percent), 2002 26 |
| Leading Manufacturers and Brands 26 |
| OVERSEAS TRADE 26 |
| Imports 26 |
| Table 13: UK Imports of Liquid Milk, Butter, Cheese and Yoghurt by Country of Origin by Volume ( percent), 2000 27 |
| Exports 27 |
| Table 14: UK Exports of Liquid Milk, Butter, Cheese and Cream by Destination by Volume ( percent), 2000 28 |
| 3. Industry Background 29 |
| Recent History 29 |
| Number of Companies 29 |
| Table 15: Number of UK VAT-Based Enterprises Engaged in the Manufacture of Dairy Products by Turnover Sizeband (number and percent), 2002 30 |
| Table 16: Size Distribution of Dairy Companies by Annual Milk Intake in England and Wales (number of companies and percent), 2000 31 |
| Table 17: Size Distribution of Dairy Companies by Annual Milk Output in England and Wales (million litres, number of companies and percent), 2000 31 |
| Table 18: Size Distribution of Dairy Companies by Annual Cheese Output in England and Wales (number of companies and percent), 2000 32 |
| Table 19: Size Distribution of Dairy Companies by Annual Butter Output in England and Wales (number of companies and percent), 2000 33 |
| Employment 33 |
| Table 20: Number of UK VAT-Based Local Units Engaged in the Manufacture of Dairy Products by Employee Sizeband (number and percent), 2002 34 |
| REGIONAL VARIATIONS IN THE MARKETPLACE 34 |
| DISTRIBUTION 34 |
| Doorstep Delivery 35 |
| Table 21: Household Purchases of Milk by Channel ( percent), 1997-2001 35 |
| HOW ROBUST IS THE MARKET? 36 |
| LEGISLATION 37 |
| Dairy Products (Hygiene) Regulations 1995 37 |
| Food Standards Act 1999 and the Food Standards Agency 37 |
| Qualitative Ingredient Declaration (Directive 2000/EC/13) 38 |
| Genetically-Modified and Novel Foods (Labelling) (England) Regulations 2000 38 |
| Climate Change Levy (Finance Act 2000) 38 |
| Regulation (EC) 178/2002 of the European Parliament and of the Council 38 |
| KEY TRADE ASSOCIATIONS 39 |
| The Role of the Trade Associations 39 |
| The Dairy Council 39 |
| Dairy Industry Association Ltd 39 |
| Dairy Industry Federation 40 |
| Milk Development Council 40 |
| Royal Association of British Dairy Farmers 40 |
| The British Cheese Board 40 |
| The Margarine and Spreads Association 40 |
| National Farmers' Union 41 |
| Other Associations 41 |
| 4. Competitor Analysis 42 |
| the MARKETPLACE 42 |
| MARKET LEADERS 42 |
| Arla Foods PLC 42 |
| Company Structure 42 |
| Current and Future Developments 43 |
| Financial Results 43 |
| Dairy Crest Group PLC 43 |
| Company Structure 43 |
| Current and Future Developments 44 |
| Financial Results 44 |
| Express Dairies PLC 45 |
| Company Structure 45 |
| Current and Future Developments 45 |
| Financial Results 46 |
| Glanbia Foods Ltd 46 |
| Company Structure 46 |
| Current and Future Developments 46 |
| Financial Results 47 |
| The Ilchester Cheese Company Ltd 47 |
| Company Structure 47 |
| Current and Future Developments 47 |
| Financial Results 47 |
| Müller Dairy (UK) Ltd 48 |
| Company Structure 48 |
| Current and Future Developments 48 |
| Financial Results 48 |
| New Zealand Milk Products (UK) Ltd 48 |
| Company Structure 48 |
| Current and Future Developments 49 |
| Financial Results 49 |
| Robert Wiseman Dairies PLC 49 |
| Company Structure 49 |
| Current and Future Developments 49 |
| Financial Results 49 |
| Unilever Bestfoods UK Ltd 50 |
| Current and Future Developments 50 |
| Financial Results 50 |
| Uniq PLC 50 |
| Company Structure 50 |
| Current and Future Developments 51 |
| Financial Results 51 |
| The Yeo Valley Organic Company Ltd 51 |
| Company Structure 51 |
| Current and Future Developments 52 |
| Financial Results 52 |
| Other Companies 52 |
| The Kerrygold Company PLC 52 |
| Kraft Foods UK Ltd 52 |
| Nestlé 52 |
| OUTSIDE SUPPLIERS 53 |
| Raw Milk 53 |
| Other Food Ingredients 54 |
| Packaging 54 |
| Processing Equipment 55 |
| Service Providers 55 |
| ADVERTISING AND PROMOTION 55 |
| Table 22: Main Media Advertising Expenditure on Milk and Dairy Products (£000), Years Ending 2001 and 2002 56 |
| New Zealand Milk Product (UK) Ltd 56 |
| Table 23: Main Media Advertising Expenditure on Milk and Dairy Products by New Zealand Milk Product (UK) (£000), Years Ending 2001 and 2002 57 |
| Dairy Crest Group PLC 57 |
| Table 24: Main Media Advertising Expenditure on Milk and Dairy Products by Dairy Crest Group PLC (£000), Years Ending 2001 and 2002 58 |
| Arla Foods PLC 58 |
| Table 25: Main Media Advertising Expenditure on Milk and Dairy Products by Arla Foods PLC (£000), Years Ending 2001 and 2002 59 |
| Müller Dairy (UK) Ltd 59 |
| Table 26: Main Media Advertising Expenditure on Milk and Dairy Products by Müller Dairy (UK) Ltd (£000), Years Ending 2001 and 2002 60 |
| Kraft Foods UK Ltd 60 |
| Table 27: Main Media Advertising Expenditure on Milk and Dairy Products by Kraft Foods UK Ltd (£000), Years Ending 2001 and 2002 61 |
| Robert Wiseman Dairies PLC 61 |
| Milk Development Council 61 |
| EXHIBITIONS AND TRADE SHOWS 61 |
| Dairy Day 61 |
| Dairy Event 62 |
| The Royal Smithfield Show 62 |
| 5. Strengths, Weaknesses, Opportunities and Threats 63 |
| THE TOTAL MARKET 63 |
| Strengths 63 |
| Weaknesses 63 |
| Opportunities 63 |
| Threats 64 |
| FRESH MILK 64 |
| Strengths 64 |
| Weaknesses 64 |
| Opportunities 64 |
| Threat 64 |
| CHEESE 65 |
| Strengths 65 |
| Weaknesses 65 |
| Opportunities 65 |
| Threats 66 |
| YOGHURT AND CHILLED DESSERTS 66 |
| Strengths 66 |
| Weakness 66 |
| Opportunity 66 |
| Threats 66 |
| YELLOW FATS 67 |
| Strengths 67 |
| Weaknesses 67 |
| Opportunity 67 |
| Threats 67 |
| CREAM 67 |
| Strength 67 |
| Weaknesses 67 |
| Opportunities 68 |
| Threat 68 |
| 6. Buying Behaviour 69 |
| CONSUMER PENETRATION 69 |
| Table 28: Penetration of Milk and Dairy Products ( percent of households), 2000 and 2002 70 |
| Penetration by Age 70 |
| Table 29: Penetration of Milk and Dairy Products by Age ( percent of households), 2002 71 |
| Penetration by Social Grade 71 |
| Table 30: Penetration of Milk and Dairy Products by Social Grade ( percent of households), 2002 72 |
| Penetration by Region 72 |
| 7. Current Issues 73 |
| MILK QUOTAS 73 |
| FARMERS' CO-OPERATIVES 74 |
| MILK PRICES 74 |
| LEGISLATIVE CHANGES 75 |
| EXPORT REFUNDS 75 |
| 8. The Global Market 76 |
| PRODUCTION 76 |
| Liquid Milk 76 |
| Butter 76 |
| Cheese 76 |
| Milk Powder 77 |
| Table 31: Cow's Milk Production in Specified Countries (000 tonnes), 1999-2002 77 |
| CONSUMPTION 79 |
| Liquid Milk 79 |
| Table 32: Per Capita Consumption of Liquid Milk (kg), 2001 80 |
| Butter 80 |
| Table 33: Per Capita Consumption of Butter (kg), 2001 81 |
| Cheese 81 |
| Table 34: Per Capita Consumption of Cheese (kg), 2001 82 |
| Milk Drinks and Fermented Dairy Products 82 |
| Table 35: Per Capita Consumption of Milk Drinks and Fermented Products Including Yoghurt (kg), 2001 83 |
| Milk Powders and Condensed Milk 83 |
| Table 36: The World's Top Dairy Companies by Turnover ($bn), 2001 84 |
| MAJOR TRENDS 84 |
| Corporate Activity 84 |
| Outlook 85 |
| 9. Forecasts 86 |
| INTRODUCTION 86 |
| Population 86 |
| Table 32: Forecasts for the UK Resident Population by Sex (000) 86 |
| Gross Domestic Product 86 |
| Table 33: Forecasts for UK Gross Domestic Product Growth ( percent), 2003-2006 87 |
| Inflation 87 |
| Unemployment 87 |
| Personal Disposable Income 87 |
| FORECASTS 2003 to 2007 87 |
| Table 34: The Forecast Milk and Dairy Products Market by Value at Current Prices (£m at rsp), 2003-2006 88 |
| FUTURE TRENDS 88 |
| Liquid Milk 88 |
| Cheese 88 |
| Yellow Fats 89 |
| Yoghurts and Chilled Desserts 89 |
| Cream 89 |
| EUROPEANISATION 89 |
| PRODUCT DEVELOPMENT 90 |
| COMPETITOR FORECASTS 90 |
| 10. Company Profiles 91 |
| Arla Foods Plc 92 |
| Dairy Crest Group Plc 94 |
| Express Dairies Plc 96 |
| Müller Dairy (uk) LTd 98 |
| 11. Further Sources 102 |
| Associations 102 |
| Publication 103 |
| General Sources 103 |
| Bonnier Information Sources 103 |
| Government Publications 104 |
| Other Source 105 |
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 percent 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
Text © 2003 Key Note
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Last updated by Amanda Porteous July 2003
