Dairy

Domestic Market
Milk production has been growing in Ireland following the removal of EU milk quotas in 2015. Irish milk supplies were almost 5% higher in 2016 following on from the 13% increase seen in 2015. In Ireland we export over 90% of our dairy products to over 130 countries across the globe.

Drinking milk products grew by 3% in value in 2016, reaching €521 million. Private label accounts for a 33% value share, with this share continuing to grow. It is particularly prevalent in full fat and semi-skimmed cow’s milk. This has resulted in branded suppliers diversifying their product offering, adding products such as fortified or value added milks products.

The value of yogurt sales in Ireland grew by 0.7% on the island of Ireland to €310 million in 2016. Spoonable yogurts are the leading category segment at 67% followed by yogurt drinks and fromage frais, at 18% and 15% respectively. The market is forecast to grow by a further 4.3% in total by 2021. Within the yogurt market there has been an increase in the level of new product development with the main trends and innovations including low/zero fat and protein-added yogurts.

The retail cheese market in Ireland was expected to be worth €262 million in 2016, a marginal increase in sales value from 2015. Cheddar is the most popular cheese, with eight in 10 consumers buying cheddar for themselves or others in the latestthree months, followed by soft cheese/ cream cheese and continental cheese. A key trend within the cheese category is clearer labelling. Cheese is naturally high in protein, a benefit which many consumers do not fully understand.

Butter accounted for the largest share of the butter and spreads market at €101.2 million in 2015. Butter gained a stronger footing in the market as more consumers moved away from using vegetable oil based spreads as consumers see butter as a more natural, healthy and tasty product. Recent reports that the saturated fats in butter have many natural health benefits, is also changing consumer perceptions of butter. Value growth in the butter category is also being driven by the increasing demand for flavoured butter for cooking and the trend towards home baking has led to increased demand for butter. A report by Bord Bia in 2016 found that 53% of bakers in Ireland are baking at least once a week.

Export Markets
Consumer dairy and dairy ingredients exports from Ireland were 2% higher at €3.38 billion in 2016. The UK remains a key market accounting for around a quarter of total Irish dairy exports. Exports to other EU markets were valued at €880 million, accounting for 26% of total trade. The value of exports to International Markets grew by an estimated 19% to €1.66 billion, accounting for 49% of total exports. Asia led the way with a 31% growth in exports to account for over 23% of total dairy exports. Higher trade was also recorded to Africa and North America.

Future Trends
According to Bord Bia’s Periscope study, when consumers were asked what foods should be eaten more if trying to stay more healthy, some 64% of RoI consumers agreed that a high-protein diet should be adopted. Dairy is one of the most prominent categories in protein added products. This has become a global trend and high protein claims are even more common in North America, where nearly 2% of all food and drink launches made this claim.

Cleaner labelling is also an issue for today’s consumer. A clean label focuses on having fewer ingredients that are very clear about their origins and are recognisable to consumers. Consumers are showing a strong desire for increased transparency from companies in food production and given dairy’s main natural attributes including taste and functionality, there is greater interest in the development and usage of cleaner dairy ingredients in the development of a wide range of food products.

The prospects for Irish dairy exports in the early part of 2017 look relatively positive. Steady demand growth aided by recovering oil prices and an anticipated slowdown in dairy production in key exporting regions should continue to help the trade. However as a high proportion of our exports go to markets that trade in sterling and US dollars, exchange rate fluctuations will have a large bearing on returns in the sector.

Sources:
Euromonitor, Mintel, HBR, Bord Bia