Magazines Archives - 2009 May

Melamine scare, global recession put a dent on world dairy market
Story 12 - Food Business Asia

THE global dairy market stagnated in 2008 as a result of the slowing world economy and the melamine controversy that started in China, research company Canadean Limited stated.

The UK-based beverage industry specialist said that the global dairy drinks market barely grew in 2008, posting a measly 0.5% rise from 2.4% in 2007.

“Deteriorating economic conditions coupled with the impact and after-effects of the melamine scandal in Asia, which now accounts for 45.2% of entire global demand, have been the primary reasons for the slowdown in growth,” it said.

The melamine scare spread after reports emerged that babies had died and fallen sick in China after consuming infant formula that was tainted with melamine, a toxic chemical used in plastics that makes the protein content of dairy products appear higher than they are.

Contaminated products were later found in various parts of the world, battering China’s nascent dairy sector.

Canadean said that Asia saw dairy milk volumes expanding at only 0.5% last year from 5.1% in 2007. North America and West Europe also contributed to the deterioration, posting absolute declines in demand for the first time since 2004.

The research company noted that white milk was still the biggest category in 2008, accounting for 79.4% of the total dairy drinks demand at just under 200 billion litres. But it indicated that growth in this category was halved to 0.3% in 2008 from 0.6% the previous year.

Value-added products such as yoghurt drinks, flavoured milk and fermented milk, traditionally the fastest -expanding sectors, also experienced their sharpest slowdown last year, Canadean observed.

Demand for flavoured milk, it said, fell 2.9% due to melamine concerns. “Local analysts expect it will take at least five years for this category to fully recover in the region,” the research company stated.

Canadean, however, noted that soyabased drinks as well as condensed and evaporated milk have rallied despite the overall weakening of the dairy sector.

“Some specific niches, such as lowfat milk, probiotic drinks, ESL milk, organic and fortified milks”, also showed resilience.

The research company said that 2009 remains challenging for the sector, as it would be marked by more intense competition as well as more frugal and cost-conscious customers.

“But while the short-term outlook for 2009 looks fairly bleak, some of the fundamental drivers for longer-term growth remain in place. These include growing world population and per capita consumption, rising long-term disposable income levels, a steady shift to packaged from unpackaged consumption … and greater consumer interest in more sophisticated value-added functional and healthier products,” it added.

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