Increasing competition and declining profitability are prompting 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 cent annually.
According to new findings by market researcher Organic Monitor, sales of value-added milk expanded by 39 per cent in 2005. Value-added milk now comprises more than 6 per cent of drinking milk sales in the UK. High growth rates are projected to raise the market share to more than 10 per cent in coming years with British dairies investing in value-added milk products as they shift away from commodity offerings. Food giants like Nestlé and Unilever are being enticed into the market by growth potential and low barriers to market entry.
Organic milk and functional milk segments are the fastest growing, with products like UK dairy St Ivel's Advance recording buoyant sales. Fortified with marine sourced omega-3 fatty acids, Advance is marketed as "clever milk" and promotes its ability to assist learning and concentration. Similar product launches are expected to drive growth in the functional milk market.
The organic milk market is showing even stronger growth with many retailers reporting 50 per cent sales increases in 2005. The market has been boosted by studies highlighting organic milk's nutritional superiority over regular milk, including higher levels of vitamin E, omega acids and conjugated linoleic acid. The surge in demand has led to local organic milk supply shortages after years of oversupply. Increasingly, imports are meeting the shortfall.