Switzerland-based food and nutrition company Nestle SA(OTC: OTCPK:NSRGY) is the world’s top dairy company based on sales. In the “Global Dairy Top-20″ list published by the Dutch financial services provider Rabobank Group, European and US players dominate the top 10 ranks:
Global Dairy Top-20
|Rank||Name||Ticker||Country||Dairy Sales in US $ Billions, 2009|
|8||Dairy Farmers of America||USA||8.10|
|14||Morinaga Milk Industry||Japan||4.81|
From the research report:
Changing diets and strength in numbers are key to understanding the growth of demand in the Asian markets, according to Mark Voorbergen of Rabobank’s Food & Agribusiness Research and Advisory. “The Chinese government is helping create a whole new generation of dairy consumers by promoting a school milk programme. So Chinese dairy companies will have ample opportunity to increase sales simply by keeping up with domestic market growth.
Supply and demand
Putting consumption into perspective, Mark contrasts the 300 litres of dairy products consumed per person per year in the Netherlands with the current 20 litres per person per year in China. “We expect the Chinese market to grow along the same lines as Japan or South Korea, from zero levels five years ago to a maximum of 50 litres per person per year.
But volume growth is only happening in developing regions like China, South East Asia and selected markets in the Middle East, Africa and Latin America. For the developed markets of Europe, the USA and New Zealand, the main growth challenge is to introduce new characteristics – often related to health and convenience - to standard dairy products that the consumer is willing to pay for.
It is interesting to note that emerging markets are represented by just two companies from China. As the report notes above, focusing on health benefits of dairy products is a major selling point in developed countries. For example, French company Danone (OTC: OTCQX:DANOY) is the world’s leading producer of fresh dairy products accounting for about 28% of the world market share. Growth of Danone’s products is mainly driven by innovation and the marketing of dairy products emphasizing the health benefits to consumers. The success of Activia brand of yogurts in the U.S. and other developed markets is a proof of this strategy.