Dairy exports from the European Union to the rest of the world are growing. But the global market is growing faster still, with the result that European dairy companies have lost some of their market share. New Zealand in particular has made strong inroads. Higher labour productivity and more added value have helped to compensate the European industry to some extent.
These are the conclusions reached by LEI Wageningen UR in a report compiled on behalf of the European Commission. The researchers confined their investigations to the dairy industry and did not consider the position of European farmers.
Quota an obstacle; innovation needed
Dairy is playing an increasingly important role within the European food industry, yet the existing EU dairy quota makes it difficult for the sector to grow. Widening the quota would therefore have a positive effect on the position of dairy companies in Europe. The growth in demand for dairy products is due mainly to an increase in the consumption of cheese and yoghurts. Milk consumption by contrast is declining in most countries.
A strong focus on innovation could still enable the European dairy industry to catch up. According to the researchers, product innovation is already receiving considerable attention, with the UK dairy market being the most innovative. The report also found that most innovations made by EU dairy companies take the form of new product variants. Less attention is given to innovations in marketing, commercial operations and processes.
Cheese is important for Europe
With New Zealand now largely dominating the world market for milk powder, the European dairy industry has switched its focus to the production and export of cheese. France, Germany and the Netherlands are the key players in this sector.
Structure of the dairy industry
The researchers concluded that the biggest concentration of large dairy companies is in northwest Europe. Italy has a high proportion of small and medium-sized dairy businesses. France and Germany occupy the middle ground with a mixture of large, medium and smaller dairy companies.