Short-term prices don't reflect dynamics

25 Oct, 2018 12:24 PM
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Benoit Rouyer: Natural and ethical claims on new food and drink product launches are on the rise.
Market opportunities lay largely in the Asia Pacific region, fuelled by population growth.
Benoit Rouyer: Natural and ethical claims on new food and drink product launches are on the rise.

Short-term prices on world food markets did not necessarily reflect the long-term market dynamics, an economist told the World Dairy Summit in Daejon, South Korea, on October 16.

Benoit Rouyer, an economist at Centre National Interprofessionnel de l'Economie Laitière (the French national inter-professional centre for the dairy industry), told the summit short-term market developments were disconnected from the long-term socio-environmental challenges, such as feeding the world.

Mr Rouyer cited the example of China, which after years of steady growth, decreased milk imports in 2015 - something that was unpredictable and impacted global dairy prices.

Likewise in 2014, Russia placed a ban on food imports, which was also difficult to anticipate.

Nevertheless, he said there were positive trends in global markets.

The global market for dairy products had been steadily increasing from about 270 billion euros in 2007 to 427 billion euros in 2017.

Market opportunities lay largely in the Asia Pacific region, fuelled by population growth and increased purchasing power of the middle class. He said other market prospects were in Latin America, Africa and the Middle East.

Mr Rouyer also discussed new marketing trends in the food and beverage sector.

"Natural and ethical claims on new food and drink product launches are on the rise with claims of organic or natural products, with no additives and preservatives, and which are also GMO-free," he said. "Manufacturers are also paying greater attention to ethical and environmental issues, such as environmentally friendly packaging, as well as animal and human welfare."

Mr Rouyer said business growth was propelled by global expansion to capitalise on market opportunities and product segmentation in different countries. "Internationalisation is a key development factor for dairy leaders," said Mr Rouyer, citing the case of Nestle's worldwide investment strategy in the past few years in all corners of the world, with dairy plants in 53 countries, while Lactalis has dairy plants in 47 countries.

Not to be outdone are dairy groups in emerging markets that are expanding their industrial bases abroad.

"Improved living standards in emerging countries have fostered both the internationalisation of Western dairy groups and the appearance of local dairy leaders in emerging economies," Mr Rouyer said.

Mexico's Lala bought Brazilian group Vigor last year, adding nine dairy plants to its industrial assets to expand its reach beyond the United States, Costa Rica, Guatemala and Nicaragua.

In South East Asia, Mr Rouyer said Vietnam's Vinamilk acquired a 51 per cent stake in the Lao-Jagro Development Xiengkhouang Co in July this year to get a foothold into the Lao market through the establishment of an organic dairy farm in a Japanese joint-venture. This move would increase Vinamilk's footprint in the Mekong region, following its earlier inroad into Cambodia in 2016 with a 51pc stake in Angkor Dairy Products Co. which was fully acquired last year by Vinamilk.

Mr Rouyer said there had been rise in investments in cheese production in the US, Russia and Ireland in the past year to meet increasing demands from Asia.

New Zealand and Ireland had announced local multi-million-dollar investments in dry dairy ingredient factories to catch the wave in global demand driven by a surge in consumption.D

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