Nairobi, Kenya — Kenya's low-income consumers will be the key drivers for growth in the country's dairy industry, spawning a host of opportunities for dairy producers, according to a Tetra Pak Dairy Index.
Tetra Pak, the world's leading food processing and packaging solutions company, in its annual Global Dairy Index, noted that there is an opportunity to transform lives by making safe and nutritious food available to a new generation of emerging consumers.
Deeper in the pyramid consumers are the next growth opportunity for the dairy sector not only in emerging markets like Kenya but also globally," Helen Too, Tetra Pak Eastern Africa's Marketing Director and Product Development Manager said.
She noted that there is a noticeable opportunity for increased milk consumption volumes, providing Kenyan producers with new marketing prospects especially among the country's low-income earners who constitute around 48 percent of the total population and represent a golden opportunity for dairy processors and packaging companies because today's low-income consumers are tomorrow's middle class.
According to the Dairy Index dubbed The Opportunity Towards the Bottom of the Pyramid, the key challenges facing the dairy industry is making milk products affordable, available and attractive to low-income consumers.
"We think that there is a big opportunity for dairy producers to increase processed milk consumption volumes in Kenya. In particular, with over 48 percent (19.2million) of the country's population living on approximately Sh4,575 a month, there is an opportunity for developing new dairy products which are more affordable for families. This represents a large and relatively untapped market for producers," said Too.
According to the research, Africa will become the world's second fastest growing market behind Asia, with demand set to jump by a compound annual growth rate (CAGR) of 3.5 percent to around 17.3 billion litres in 2011-2014. In North America demand will remain flat with 29.3 billion litres, while in Western Europe it will shrink by a CAGR of 0.3 percent to 33.2 billion litres.
Eastern Europe is forecast to see growth of 0.9 percent (CAGR) in 2011-2014 to around 21.2 billion litres. Africa, Asia, and Latin America are all expected to record higher growth rates in consumption in 2011-2014 than in 2008-2011.
Locally, Tetra Pak is working with various milk processors to open up opportunities for dairy producers with the aim of introducing small milk packages that are affordable to the masses. The company is also looking into ways of boosting market access and creating an efficient value chain which is key for the growth of the industry.
"We are already talking and encouraging our customers in the dairy sector to introduce small milk Tetra Pak cartons that would retail at around Sh10. This will be a sure way of tapping the low-income consumers market which will in turn increase consumption of dairy products in the country," said Too. Kenya's dairy industry has witnessed an increase in production and consumption of milk of around 2 percent from last year. 4.2billion litres were produced in Kenya last year.
The Tetra Pak research found that worldwide consumption of milk and other liquid dairy products (LDP) is expected to rise by a compound annual growth rate of 2.9 percent in 2011-2014, accelerating from 2.5 percent growth in 2008-2011, led by buoyant demand in Africa, Asia, and Latin America.
Lactic Acid Drinks (LAD), baby and toddler milk and flavoured milk are expected to record the fastest growth rate in 2011-2014, Tetra Pak analysis shows. LAD is expected to notch up the highest growth rate, a CAGR of 11.9 percent, followed by baby and toddler milk with a CAGR of 9.0 percent. Flavoured milk is expected to record a CAGR of 4.8 percent.
White milk sales, the biggest category by volume, are expected to post a compound growth rate of 1.6 percent in 2011-2014 with consumption rising from 206.4 billion litres to 216.7 billion litres worldwide.
"These forecasts confirm that emerging markets will drive the industry's growth," said Dennis JÃÂ¶nsson, President and CEO Tetra Pak Group. "We are expecting to see buoyant demand, especially for lactic acid drinks and flavoured milk. These tend to be affordable beverages and a big favourite among deep in the pyramid consumers in developing countries."
The switch from loose to packaged white milk is expected to continue, prompted by growing awareness about the health benefits, urbanization, safety and convenience of packaged milk according to Tetra Pak.
In 2011, packed milk accounted for 49.8 percent of white milk consumption in developing markets, according to Tetra Pak. By 2014 packed milk is forecast to account for 53.1 percent of white milk consumption. Loose milk still accounts for 50.2 percent of white milk consumption in 2011,but is expected to drop by 2014 to 46.9 percent in developing markets.
"The white milk conversion is a sign that consumers understand the benefits and advantages of buying packaged liquid dairy products," said JÃÂ¶nsson. "We expect this to continue and we will support our customers in growing the demand for healthy, nutritious, affordable, convenient and safe packaged milk amongst deep in the pyramid consumers," he said.