Focus: Drinking milk sales in Germany set to recover
In 2010, sales of drinking milk products in Germany declined by less than 1% to reach EUR2.6bn (US$3.65bn), according to Euromonitor International. Research suggests that sales continue to suffer from declining unit prices across the market. However, Euromonitor's Francisco Redruello sees a recovery in sales, albiet a small one, in the years ahead.
The sales volume sales of drinking milk products in Germany rose by over 1% in 2010 but revenues dipped mainly due to declining unit prices, Unit prices of dairy products continued to decline despite attempts by dairies to stabilise prices. The unit price of milk, in particular, declined during 2010 to an average of EUR0.59 per litre, down from EUR0.61 the previous year. Only soy beverages saw an increase in average unit price from EUR1.32 in 2009 to EUR1.35 per litre in 2010.
In response to falling milk prices, January 2010 saw the launch of the "Die Faire Milch" (Fair Milk) brand from a number of independent dairies in southern Germany in order to guarantee fair and sustainable milk prices for manufacturers and consumers. The milk was available through some 1,200 Rewe and 300 Tegut outlets across the states of Hesse, Bavaria and Baden-Württemberg.
The dairies said the brand allows for the just treatment of manufacturers as well as the environment, enabling farmers to produce milk without making a loss as the extra income from the additional price is directly forwarded to farmers. The product is also subject to strict environmental controls by the Gesunde Nahrung - Erhaltung und Pflege des ländlichen Raumes foundation (which translates as Healthy Food - Conservation and Care of the Rural Space).
Overall, drinking milk products continue to be dominated by ambient milk drinks, rather than chilled ones. The importance of long-life/UHT milk, as well as more recently the introduction of ESL (extended shelf life) milk, means that this trend is unlikely to change. However, some two thirds of all flavoured milk drinks sold in Germanya re based on fresh milk, mainly meant for immediate consumption.
According to Euromonitor International, long-life/UHT milk continues to dominate sales, in addition to the new ESL milk, which introduced during the second half of the review period. While fresh milk accounted for around 39% of retail value in 2010, ESL milk in particular is becoming increasingly popular with younger consumers, mainly because it is regarded as combining the taste of fresh milk with the longevity of UHT.
Interestingly, soy beverages are mainly consumed by individuals who do not want to purchase milk products. This consumer group contains a wide range of individuals, including non-mainstream consumers such as vegans, as well as people suffering from lactose intolerance or allergies, and those who generally consider soy milk as being healthier than traditional dairy. Interestingly, flavoured milk drinks with fruit juice outperformed drinking milk products as a whole, albeit growing from a still very small base. Sales rose by over 5% in 2010 to EUR1.1m, which was mainly helped by increasing demand for smoothies and smoothie-like products.
Sales of drinking milk products continue to be dominated by private label, as well as smaller regional brands. Private-label products accounted for approximately 63% of retail value sales in 2009.
The nearest branded rivals - Müller, Campina and Staatliche Molkerei Weihenstephan - accounted for shares of less than 5% due to the fragmented nature of drinking milk products. As most brands tend to have a strong regional presence, the simple fact that these manufacturers tend to enjoy nationwide coverage makes them stand out from the large number of smaller regional brands.
However, research suggests that they still tend to have a hard time competing against private label for basic products such as long-life/UHT milk. According to Euromonitor International's findings, the main trends besides increasing price competition and at times drastic price promotions across drinking milk products have been an increasing focus on regional identity, as well as offering consumers dairy products with an organic dimension, notably in connection with the government’s Bio seal of approval.
Sales of drinking milk products in Germany are expected to grow after the fall in 2010. However, Euromonitor forecasts that sales will increase by an average of less than 1% per year over the 2010-2015 period. The main trend anticipated during this period is likely to be the ongoing regionalisation of brands spilling over into private label, whereby milk will be increasingly identified as "North German Milk", "South German Milk", "East German Milk", "Bavarian Milk" and so on.
According to Euromonitor International's projections, average volume growth of almost 2% clearly indicates a certain recovery in milk consumption across Germany. However, this change should not necessarily be seen in connection with declining unit prices for drinking milk products but rather in terms of milk consumption having reached a certain minimum level from which per capita consumption could only recover.
Distribution of drinking milk products is expected to change little over the 2010-2015 period, although, in particular, sales through independent small grocers are expected to continue to decline. This type of outlet is increasingly suffering from the growing competition from chained supermarkets and discounters, as well as the emerging convenience store format.
Finally, little further potential activity is expected across drinking milk in Germany over the next few years. The main trend anticipated is further co-operation between smaller dairies and other small manufacturers due to the experience gained during their first attempt at joint marketing during 2010 in order to achieve stable and sustainable prices for their products.
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