Product innovation has spurred growth in the Spanish dairy sector in recent years, with consumer demand for healthier and more convenient products being met by increasingly innovative producers. Francisco Redruello of Euromonitor International analyses the current market trends and assesses the potential for further growth.
The market for dairy products in Spain is continuing to grow according to the latest research from Euromonitor International, spurred by innovation and consumer demand functional products. Retail sales grew by 4% from 2005 to 2006, a moderate increase in line with the performance of previous years, with drinking milk products, cheese and yoghurt the most important categories, accounting for 44%, 24% and 22% respectively of total retail sales.
Health concerns, innovation through the launch of products such as probiotic variants and more convenient packaging, are all becoming priorities in the Spanish dairy market. Innovation is focused on meeting new consumer demands and the need to increase differentiation from private label products.
Sales of liquid milk in the Spanish market did not record a strong performance in 2006, growing by less than 2% in retail value terms, according to Euromonitor International. But the story for functional liquid milk is quite different.
There is a consensus in the industry that the Spanish market is undergoing a significant transformation. On one hand, traditional liquid milk is suffering from maturing demand, while on the other hand functional liquid milk recorded double-digit value growth in 2006. The development of functional products is a response to growing concerns among Spaniards regarding their health, which is driving demand for products which claim to enhance wellbeing.
Reduced-fat products are gaining ground over full-fat products in the Spanish market. Continuing a trend seen over the last few years, semi-skimmed and fat-free variants maintained positive growth in 2006, with retail value sales increasing by nearly 3% and 2% respectively that year. Both types of milk have benefited from high investment in innovation by large domestic manufacturers. Semi-skimmed and fat-free products accounted for nearly 61% of volume sales of milk in 2006, up from around 50% in 2000.
Health is also the key driving factor behind the 6% value growth in the yoghurt sector in 2006. Growth was driven by the popularity of probiotic and functional lines among health-conscious, middle-class consumers. Furthermore, probiotic lines benefited from the increasing investment that yoghurt producers are dedicating to this type of product, with Danone and CAPSA undertaking a number of significant launches since 2004. Moreover, Danone’s decision to change the name of Bio to Activia by Danone in 2006, and the ensuing heavy TV advertising support, has also helped to enhance the performance of these products.
Another key trend driving the growth of the yoghurt sector in Spain is convenience. The increasing time that Spaniards spend outside their homes has resulted in the growing popularity of drinking yoghurt. Drinking yoghurt recorded one of the best performances of 2006, growing by over 8% in value terms, according to Euromonitor International data.
Similarly, convenience is an important source of growth in the Spanish cheese sector. Sales of cheese are benefiting from heavy investment in the development of smaller and more convenient containers, being launched to satisfy the growing demand for single portions and ready sliced products.
Convenience is the driving force behind Spanish consumers’ increasing preference for purchasing cheese in self-service outlets rather than from traditional outlets or delicatessen counters. It must also be noted that packaged hard cheese is benefiting from the growing number of Spanish Denominación de Origen (DO) products being launched in this format. Traditionally, hard cheese was mainly bought unpackaged over the counter, but busier lifestyles have resulted in producers launching easy-to-buy packaged offerings.
Looking ahead, the growth of yoghurt until 2011 is set to be driven by a rapid rise in sales of probiotic lines, in both traditional and liquid formats. However, this niche appears to be maturing slowly and is expected to record slower growth rates in the future, according Euromonitor International forecasts.
Soy beverages are also tipped for growth over the next four years, as Spanish consumers increasingly regard soya drinks as a healthier option than standard UHT milk. Producers of dairy milk products will try to address this trend by fortifying their products with calcium, vitamins, minerals and other popular ingredients. However, as demand reached almost saturation point in 2006, sales of milk are expected to decline by 4% in constant value terms between 2006 and 2011, according to Euromonitor International.
Finally, packaging developments are expected to be a key driver of growth in dairy products over the forecast period. With more than a third of households comprising a single, young person, the need for conveniently packaged products will continue to grow to fit in with their increasingly hectic lifestyles.
(Dairy Products in Spain)