London – Increasing competition and declining profitability in the dairy industry are causing British dairies to target the value-added milk market for growth opportunities. The market is the fastest growing in the dairy industry with sales expanding by about 30% per year.
According to new research by Organic Monitor, sales of value-added milk expanded by 39% in 2005. Value-added milk now comprises over 6% of drinking milk sales in the UK. High growth rates are projected to raise the market share to over 10% in the coming years.
The highest growth is being observed in the organic milk and functional milk segments. The size of the functional milk market increased multi-fold in 2005 by the successful launch of Saint Ivel Advance. Fortified with omega acids from fish oil, the functional milk is targeted at consumers seeking specific health benefits. Similar product launches are expected to drive growth in the functional milk market.
The organic milk market is showing the fastest growth with many retailers reporting sales increases of over 50% in 2005. Sales have soared since scientific research found organic milk to have superior nutrient content than non-organic milk. Consumer demand for organic milk has broadened since several studies showed it to have higher levels of vitamin E, omega acids and conjugated linoleic acid than conventional milk.
Whilst functional milk and organic milk are increasingly bought because of their health benefits, consumers are increasingly purchasing flavoured milk as soft drinks. Fresh flavoured milk sales are expanding as retailers launch private label products. Flavoured milk has the highest retail penetration with manufacturers now focusing on the catering & foodservice sector.
The new study by Organic Monitor on The UK Market for Value-Added Milk finds that high growth rates are attracting a number of new entrants. British dairies are investing in value-added milk products as they re-align their businesses to move away from commodity products. Large food companies like Nestlé and Unilever are coming into the market because of the growth potential and low barriers to market entry.
The organic milk market is receiving the least interest from new entrants however. Although organic milk comprises most revenues in this emerging market, supply-demand imbalances deter companies to come into the market. The organic milk market is currently experiencing supply shortages after years of oversupply with imports meeting the shortfall.
Research Publication: #1201-55 The UK Market for Value-Added Milk
Publication Date: February 2006
More information can be found on http://www.organicmonitor.com/120155.htm
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