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  1. Analysis
May 2, 2002

Chilled desserts: Rich pickings for Western European dairy groups

Volume sales for yoghurt and chilled desserts grew by 18.4% and 19.1% respectively over the review period 1996-2000. Rising health awareness and the consumer trend towards snacking has driven volume sales to an all time high. But who is reaping the benefits and the profits? asks Trudi Griggs.

Volume sales for yoghurt and chilled desserts grew by 18.4% and 19.1% respectively over the review period 1996-2000. Rising health awareness and the consumer trend towards snacking has driven volume sales to an all time high. But who is reaping the benefits and the profits? asks Euromonitor’s Trudi Griggs.

According to the Western European Dairy Products report released by Euromonitor International it’s the usual suspects.

Danone and Nestlé – intense competition

Danone and Nestlé are the only companies active in every sector within the Western European dairy products market, indicative of their wider importance and comprehensive product range in packaged foods overall.

====================================================
Western European company share                   
in dairy products market % breakdown

==================================================== Danone, Groupe  5.8
Nestlé SA  3.3
====================================================
© Copyright and Database Right Euromonitor 2002

Both companies are strongest in branded snack foods, specifically potted desserts and chilled snacks, as opposed to generic staples like cream and butter and it is the sales of such conveniently packaged, low-fat or otherwise healthy yoghurts and chilled desserts that is driving both companies’ market shares.

Value sales of yoghurt totalled US$10,819.5m in 2000, commanding 14.8% of the Western European dairy market. As the most valuable and mature sector it is prone to competition from the comparatively novel fromage frais and chilled desserts, yet growth remained dynamic in a number of markets.

In Ireland volume sales of yoghurt outperformed both fromage frais and chilled desserts, rising by 10.4% in 2000, and also grew strongly in Spain (6.3%) the Netherlands (5.3%), Portugal (4.9%) and the UK (4%).

Growth was spurred by new product developments accentuating distinctive, value-added health benefits, including more functional products, such as Benecol, a yoghurt extension of the successful cholesterol-reducing margarine, and expansion of the underdeveloped probiotic yoghurt category, with key launches in 2000 such as Müller Vitality.

Strong growth also occurred in Turkey (5.2%) and Greece (4.3%), although growth in these countries was due more to the continued traditional popularity of plain yoghurts as a staple feature of national diet, than to product innovation.

Chilled desserts recorded US$ 3,304.2 in value sales with 4.5% of the Western European dairy products market.

Chilled desserts arguably pose the greatest competition to yoghurts, particularly as the launch of fat-free or sugar-free alternatives by leading manufacturers such as Cadbury’s has partially narrowed the competitive advantage of low-fat yoghurt or fromage frais.

Chilled desserts outperformed both fromage frais and yoghurts in the UK, where growth of 4.9% was underpinned by UK consumers’ fondness for leading chocolate confectionery brands, many of which, such as Nestlé’s Aero and Smarties, were extended as potted desserts. Growth in France (4.7%) was even more impressive in actual US dollar terms, as an increasing number of both adults and children warmed to indulgence products such as Nestlé’s Viennois and La Laitière.   

Chilled snacks underdeveloped

Chilled snacks remain a comparatively underdeveloped niche, to the point where sales are negligible in nine national markets. Their relative novelty saw sales increase dramatically in France, rising by 86% in 2000. This growth is largely attributable to successfully capitalising on demand for child-oriented snacks.

Fromage frais and quark are less established than yoghurt throughout Western Europe.The comparative novelty of fromage frais and, to a lesser extent, quark stimulated growth in a number of national markets, notably Italy (6.7%), France (5.8%) and Sweden (4%). While fromage frais is also used in cooking, more dynamic growth stemmed from its positioning as a snack.

Danone is the clear leader in these key sectors. The Danone brand is the best selling yoghurt and chilled dessert in Western Europe and the company also owns the best selling fromage frais product, Jockey, with overall share augmented by many other successful potted desserts. Danone is also the third leading manufacturer of chilled snacks, with the Prince brand.

Nestlé is the second leading manufacturer in yoghurts, chilled desserts and chilled snacks. Nestlé has a wide range of important brands in these sectors, not least La Laitière, otherwise know as Milkmaid or La Lechera, the second best selling chilled desserts brand and also a significant name in yoghurt. Nestlé’s market presence in yoghurt was also substantially increased by the acquisition of the Mis brand in 2000, the best selling yoghurt in Turkey and third most valuable yoghurt brand in Western Europe. Nestlé’s position in yoghurt is also underpinned by LC1, the company’s foray into probiotic drinking yoghurt. In chilled snacks, Nestlé is the second leading manufacturer via its Nesquik brand, second only to Ferrero’s Kinder range. The group is slightly weaker in fromage frais, however, where it is fourth with brands such as Yoco and Sveltesse, vastly overshadowed by companies such as Danone and Union Sodiaal.

Nestlé and Danone compete less directly in chilled desserts, where they are subordinate to other manufacturers.

=====================================================
Western European company share Western Europe 
in dairy products market % breakdown 2000


=====================================================

Chilled desserts 
    Danone, Groupe  21.2
    Nestlé SA  18.2

Chilled snacks 
    Danone, Groupe  2.2
    Nestlé SA  7.5

Fromage frais and quark 
    Danone, Groupe  25.5
    Nestlé SA  4.1

Yoghurt 
    Danone, Groupe  16.5
    Nestlé SA  6.8
=====================================================
© Copyright and Database Right Euromonitor 2002

Growing importance of potted desserts for Union Sodiaal

Union Sodiaal is focused in four key sectors. Like Nestlé and Danone, potted desserts are growing in importance for the company’s overall position in Western Europe. The company is the fourth largest producer of yoghurts, where Yoplait and Yop are renowned throughout the region, and ranked seventh in the production of chilled desserts, similarly underpinned by Yoplait, extended as a chilled dessert.

Arla Foods

Arla Foods was formed in 2000 by a merger between Arla and MD Foods to become the second most valuable manufacturer in the Western European dairy products market. Arla has developed a range of products across most sectors, however, the company’s position in fromage frais and chilled desserts is comparatively underdeveloped.

The Western European dairy products market is expected to experience modest growth of 7% over the 2000-2005 forecast period. Yoghurts and chilled desserts will see faster growth, stemming from, exemplifying the role of potted desserts as a convenient snack food, with the added benefit of healthier/low-fat positioning.

By Trudi Griggs, Euromonitor

Further data from Euromonitor on the ice cream, yoghurt and chilled dessert sectors is available for Germany, France, United Kingdom and United States.

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