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Thursday, December 14, 2017
 European Dairy Industry Loses Market Share But Stays Competitive  

By Guy Montague-Jones

The EU dairy industry is losing market share but added value gains and improvements in labor productivity are compensating for the retreat, according a new report carried out for the Commission.

Europe is still the largest exporter of dairy products in the world, even when trade within the EU is excluded. And although exports from Europe continue to grow, increased international competition from countries like New Zealand is eating into the European share of the world market.

In a report prepared for the dairy industry and the Commission, research institute LEI Wageningen said the CAP quota is also restricting the ability of the industry to recover share.


Compensation

But despite the losses LEI Wageningen said the EU dairy sector performs only just below average.

Improvements in labor productivity and growth in value added has compensated for the declines, according to the researchers. Within the EU, LEI Wageningen said the UK in particular has made superb improvements in labour productivity.

Innovation

The report also praised the rate of product innovation in Europe, picking out the UK, France and Denmark as the leading innovators. LEI Wageningen said an open innovation model whereby companies work with research institutes and partners in the supply chain has boosted ingredient, packaging and product innovations.

But the researchers said innovation is slower in marketing, organization and process.

Importantly, LEI Wageningen also concluded that there is no evidence that innovative firms have higher profit margins.

The researchers said this could be due to data problems but could also suggest that profits from innovations are quickly transferred down the supply chain of competitive markets so that consumers end up being the main beneficiaries.


Size matters

So where are gains in profitability coming from? LEI Wageningen said dairy firms are getting larger and the resulting gains in economies of scale have increased profit margins.

Between 2000 and 2003 the average size of large businesses dropped but in the last five years the trend has reversed and large EU dairy firms have grown year on year driven by merger and acquisition activity.

Facing increasing competition from outside the EU, LEI Wageningen said European firms have also changed their areas of focus. Responding to increased milk powder production in New Zealand, which now approaches EU levels, the researchers said European firms have specialised in cheese. A total of 45 percent of world trade in cheese now comes from France, Germany and the Netherlands.

Source: LEI Wageningen

The Hague, LEI, 2009, Report 2009-011; ISBN /EAN: 978-90-8615-344-2;

"Competitiveness of the EU dairy industry"

Authors: Tacken, G.M.L., A. Batowska, C. Gardebroek, K. Nesha Turi, M. Banse, J.H.M. Wijnands and K.J. Poppe
 

Source: Food Navigator

http://www.foodnavigator.com/Publications/Food-Beverage-Nutrition/DairyReporter.com/Industry-markets/European-dairy-industry-loses-market-share-but-stays-competitive-says-report/?c=dDfK5Z8gzn6SD%2BlPRMCe8A%3D%3D&utm_source=newsletter_daily&utm_medium=email&utm_campaign=Newsletter%2BDaily

 


Posted on Wednesday, August 26, 2009 (Archive on Wednesday, September 02, 2009)
Posted by bsutton@adpi.org  Contributed by bsutton@adpi.org
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