Healthy eating may be a burgeoning market but consumers still need, and will pay for, a treat, reveals a new report on the UK dairy market from Datamonitor. The report finds that although the consumption of fats and spreads will decrease, the UK ice-cream market is set to surge.
According to Datamonitor, the future of the UK dairy industry looks bright with the market value growing from £7.5 billion (€11.8bn) in 2001 to £8 billion in 2006. Competition from alternative breakfast and cereal bars, and the increasing availability of dairy-free milk products, will lead to natural cheese overtaking liquid milk as the leading dairy sector by 2006.
The liquid milk market has suffered a recent decline, falling to a value of £2.1 billion in 2001. The predicted value of the market in 2006 is £1.7 billion. In value terms, fresh milk is the leading category in the liquid milk market, although volume figures are declining for both fresh and long life milk. In 2001, the market reached a volume of 4.3 billion litres. This is set to decline further to reach a volume of 3.9 billion litres in 2006.
The decline in the consumption of milk, highlights the report, is due to several factors including increased awareness of healthy eating and the shift towards alternative breakfast products such as cereal bars. In addition the increasing number of dairy-free milk products now available, such as soya milk, are affecting the market. As a result, predicts Datamonitor, natural cheese will overtake liquid milk as the leading sector in the UK dairy market by 2006.
As in most other Western European countries, the market for fats and spreadsin the United Kingdom has contracted steadily in recent years. This is atypical symptom of a mature market, where competition between incumbents isintense, leading to significant price reductions, claims Datamonitor.
The growing popularity of supermarket own brands - particularly in 'basic' or 'staple' food sectors has led to an erosion of the share held by branded goods. In volume terms, the market declined to a volume of 298.8 million kg in 2001, with a compound annual growth rate (CAGR) of -1.9 per cent over the 1996-2001 period.
Both expenditure and consumption in the fats and spreads market are decreasing as a trend towards healthy eating continues. Expenditure will decrease further from £11.20 per head in 2001 to £9.30 per head in 2006.
Consumption follows the same pattern, decreasing from 5.0Kg per person in 2001 to 4.5Kg in 2006. Butter currently accounts for half the fats and spreads market, followed by dairy spreads and margarine. Low fat spreads occupy the smallest sector of the market. According to the report, negative publicity surrounding the low fat sector may have reduced their current appeal.
But turning to ice-cream we see a totally different picture that reveals its popularity is far from waning. Over 9 litres of ice-cream per head is consumed in the UK each year and this figure is growing. It is a paradox that despite the weather, the UK ice-cream market is one of the largest in Europe, and in 2001 grew to reach a value of £1.4 billion.
Furthermore, the market is expected to expand over the next five years, forecast to reach a value of £1.7 billion in 2006. Volume sales of ice cream are set to rise steadily through to 2006, reaching a volume of 673.3 million litres, up from 549.3 million litres in 2001. This represents a CAGR of 4.1 per cent over the 2002-2006 period. Consumption is also set increase from 9.2 litres per person in 2001 to 11.3 litres by 2006.
And it would seem that when people indulge in ice-cream, they clearly want luxury. Attempts by manufacturers to introduce healthier water- and yoghurt-based varieties of ice-cream have, as yet, been unsuccessful. Datamonitor reports that British consumers have built up a preference for the taste and texture of dairy ice-cream and healthier versions have so far failed to appeal to the British palate. The new low-fat varieties have not been on the market for long and consumers' tastes have not had a chance to change significantly towards these new varieties of ice-cream.
This may change in time as consumers place more emphasis on their health. One sector of the market that has increased substantially in recent years are products designed for indoor consumption, such as luxury brands like Haagen-Dazs, and other brands that come in a tub. Supermarket purchases of multiple, pre-packed ice-creams such as Mars Bar ice-creams, are also proving to be popular with consumers.
Yoghurt remains ever popular. The yoghurt market has risen in recent years to a 2001 value of £700 million. This increase is predicted to continue though the rate of growth will decline.
Lawrence Gould, consumer analyst at Datamonitor, commented: "Faced by a verymature market, dairy producers have to concentrate their efforts on higheradded-value products. Indulgent products such as luxury ice-creams orproducts that appeal to the increasing number of health-conscious consumers,for instance low-fat yoghurts, offer the greatest opportunities for growth."