Milk is good for you and is a basic foodstuff for people around the world. Experts predict an average annual growth rate in milk consumption of 2.2 percent by the year 2012. Primary factors in this growth are on the one hand the rapid increase in the markets of emerging nations and on the other hand the basic changes in the way that liquid dairy products are packaged today.

The situation on the international milk market is difficult. While this is not news, the situation has worsened since the summer of 2008 due to the global economic crisis. Sinking sales domestically and abroad have pushed the world market prices for milk and dairy products down to an all-time low. Worldwide, supply and demand determines the price. Price stabilisation and with it an easing of tension can only be expected when less milk is produced than is the case today. For several decades it was common practice in Europe for the EU administration to support the dairy market when prices fall. This support was withdrawn, however, in conjunction with the comprehensive EU agricultural market reform. Generally speaking, the European dairy market is intended to become a free market that regulates itself without support or subsidies. The milk quota is intended to be eliminated by 2015. At that point, each dairy producer can sell an unlimited quantity of milk to the dairies. Until 2015 the milk quota will be increased step by step.

Natural Market Laws

In the summer of 2007, the market experienced a contrary development: The prices for milk and dairy products exploded on the entire world market. The reason for the price increase at the time was a global shortage of raw milk in the face of high demand. Following natural market laws, the current international price collapse is the logical consequence — the higher prices forced consumers to buy fewer dairy products and the processing industry to replace costly cream with more affordable vegetable fat. The high milk production rate continued, leading to bulging inventories, followed by sinking prices. Fueled by the economic crisis, the international purchases of milk and dairy products fell even further than expected.

© Tetra Pak

Growing Milk Consumption

The current issue of TetraPak’s milk index, which is published semi-annually, indicates that global consumption of milk and other liquid dairy products is expected to grow in the next three years at an average annual growth rate of 2.2 percent. In the year 2008, the global consumption of liquid dairy products reached a record height of 258 billion litres; an increase of four billion litres (1.6%) compared to the previous year. In recent years the international demand for milk and other liquid dairy products demonstrated an average annual growth rate of 2.4 percent.


Emerging Nations and Packaged Milk

The expected increase in milk consumption is primarily ascribed to two trends: Continuous growth in the emerging nations and the shift toward more and more packaged milk. In the past four years, emerging nations such as India, Pakistan, China and the Near East have demonstrated the strongest growth in the global dairy industry (95.8%). The reasons for this are the growing population, higher incomes, new dietary trends and improved accessibility of dairy products. In China, for example, the consumption of liquid dairy products grew an average of 14.4 percent annually between 2005 and 2008, reaching the 27-billion-litre mark in 2008.

A further factor that is also stimulating this growth in the emerging nations is the basic changes in the way dairy products are packaged. From 2005 to 2008 the worldwide portion of unpackaged milk sank by 1.8 percent, while the global portion of homogenised milk, which can be transported and stored without refrigeration until opened, grew by 3.2 percent in the same time period. Tetra Pak actually estimates a growth rate of 5.2 percent, to reach more than 70 billion litres. The consumption of packaged milk and other liquid dairy products is growing more quickly than the overall liquid dairy segment and is expected to constitute 72 percent of total global consumption by 2012.