Demographic growth, alongside economic recovery, is underpinning demand for drinking milk products in emerging economies, and Brazil is no exception. According to Euromonitor International’s Countries and Consumers database, Brazilian GDP grew by 8% in real terms in 2010, reversing the 0.2% decline registered the previous year. Furthermore, the urban population, accounting for most of the consumption of processed drinking milk in the country, is projected to grow by 11 million people over the 2010-2015 period.
Research shows that drinking milk products in Brazil are not only expanding in volume but also gaining in sophistication and health orientation. Innovation is focusing on functionality as manufacturers seek to meet the health requirements of an increasingly health-oriented middle-class. Cooperativa Central dos Produtores Rurais de Minas Gerais, for instance, recently released a version of long-life/UHT milk enriched with calcium, iron and vitamins, while Cooperativa Central Agropecuária Sudoeste launched similar products under its Frimesa brand.
Good economic prospects and an expanding population in urban areas will drive future growth. By the end of 2015, per capita expenditure on drinking milk products will reach US$67 in Brazil, exceeding the level projected for developed markets such as France (US$52) and Germany (US$45). By then, Brazil will no longer be known as an emerging economy in drinking milk product terms.
Market performance
The sector for drinking milk products experienced further consolidation in 2010. Over the last few years there have been several important acquisitions, such as those by Perdigão Agroindustrial’s moves for Batávia, Eleva Alimentos and Cotochés between 2006 and 2008, and Bertin’s acquisitions of Fábrica de Produtos Alimentícios Vigor and Cia Leco de Produtos Alimentícios in 2007.
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Laticínios Bom Gosto is another company that has invested in strategic acquisitions, including Cedrense in Santa Catarina state in November 2009. In addition, Laticínios Bom Gosto acquired a production facility located in Garanhuns (Pernambuco) from Parmalat and another plant in Barra Mansa (Rio de Janeiro) from Nestlé. In early 2010, Monticiano Participações established a consortium together with Gloria Alimentos and Ibituruna, in which Laep Investments (the owner of Parmalat) will lease the assets of both companies to Monticiano and will also license the Parmalat brand until 2017.
There are rumours that Cooperativa Central dos Produtores Rurais de Minas Gerais will merge with other cooperatives in the state of Minas Gerais, such as Centroleite, Confepar, Cemil and Minas Leite to become one of the largest operators within drinking milk, with revenues of over BRL$4bn per year. This move is intended to strengthen the position of the company’s Itambé brand in the face of growing investments from Brasil Foods (formed from the merger between Perdigão and Sadia), and Nestlé via its Dairy Partners Americas Brasil venture and Laticínios Bom Gosto.
Drinking milk products experienced a 10% current value growth rate in 2010. This was due to the strong performance of long-life/UHT milk, which accounts for the bulk of total sales, and the recovery of unit prices of raw milk, which had previously suffered a steep decline as a result of the economic crisis. Sales of long-life/UHT milk increased by 3% in volume terms in 2010 compared to a review period average of 1%.
Competitive environment
Brasil Foods became the leading company in drinking milk products in 2009 following the merger between Perdigão and Sadia. The company held a 14% share of retail sales value in 2009. Brasil Foods is intensifying its investment in dairy products in order to become one of the largest companies in the near future. Within drinking milk, the company has established partnerships with Emprapa and Cooperideal (Cooperative for Innovation and Development of Milk Activity) to secure better productivity, reduce costs and improve quality. In addition, it has released powder milk under the Pense Light brand, positioned as a health and wellness product, to compete directly with Nestlé’s Molico, which is positioned as a fortified milk.
Future direction
The potential merger between Cooperativa Central dos Produtores Rurais de Minas Gerais, Centroleite, Confepar, Cemil and Minas Leite is expected to intensify the competition within milk, especially for Brasil Foods, Dairy Partners Americas Brasil and Laticínios Bom Gosto. Distribution will become an important issue for these companies in terms of increasing or even maintaining their volume shares. Value-for-money products such as fortified UHT milk will continue to remain a niche, and are not expected to have any impact on the rankings of these companies in the short term.
Drinking milk is expected to achieve a constant value compound annual growth rate (CAGR) of 4% over 2010-2015. Long-life/UHT milk is likely to maintain a comparable sales performance, driven by increasing disposable incomes among lower-income households. Conversely, fresh/pasteurised milk is predicted to show a marginal decline in volume sales over the forecast period.
Dairy only flavoured milk drinks and soy beverages are expected to achieve the strongest growth rates in volume terms over 2010-2015, with CAGRs of 6% and 5%, respectively. Soy beverages will continue to benefit from the growing demand for healthier products, while dairy only flavoured milk drinks will be able to capitalise on their convenience aspect coupled with the appeal of being rich in vitamins and minerals.
