Mark Voorbergen presentation


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Mark Voorbergen, from Rabobank International, presented to the Dairy2020 project the global developments in the dairy industry and implications for the UK.

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Mark Voorbergen presentation

  1. 1. Global developments in dairy - Implications for the UK dairy value chain Mark Voorbergen Food & Agribusiness Research and AdvisoryLondon 27 June 2011 Rabobank International
  2. 2. Contents Section 1: Global dairy market developments Section 2: Considerations for the UK dairy chain
  3. 3. Global demand growth is not driven by theWestern world • World market returns to an annual growth rate of 2.5% • Mostly driven by demand growth in net importing regions • Growth in the Western world is mainly about value growth: – Product innovations targeting health and wellness – Convenience, snacking3
  4. 4. Supply security has become an issue• In 2010, China became the nr 1 importer of dairy in the world. Majority of imports originate from New Zealand. Supply concentration is a risk• Large dairy buyers are changing their sourcing strategies (value chain investments, jv’s with suppliers, less spot market buying)• Entire value chain is looking for stable long term pricing structures4
  5. 5. Returns on the global market are becomingmore appealing Global market moves to higher trading range Traditional price premium for EU and US milk is declining 0.40 0.30 USD/litre equivalent 0.20 0.10 0.00 -0.10 -0.20 Premium for US milk over NZ milk Premium for EU milk over NZ milk5
  6. 6. Market has become very volatile• International prices pushed back to extreme highs in 2011• Supply issues created the first spike in 2007/08• The 2011 price developments are mainly caused by very strong import demand
  7. 7. Non dairy players creeping in London Utrecht New York Shanghai New Delhi Mexico Mumbai City Singapore Sao Paulo Sydney Melbourne Buenos Aires Christchurch
  8. 8. Non dairy players creeping in
  9. 9. What’s driving new entrants? • Dairy growth potentialPull • Nature of growth: health, convenience • Health trends/risks of current product portfoliosPush • Rising retail power • Anti-trust limitationsSynergies / • Processing, packaging, distribution • Overlap with juices, functional foodsSynchronicity • Desire to expand in developing markets
  10. 10. Contents Section 1: Global dairy market developments Section 2: Considerations for the UK dairy chain
  11. 11. Strategic implications for the UK dairy chain• Revenues on the global market are increasingly interesting, but none of the UK processors seems positioned to benefit directly• Convergence with European/global prices is increasing o Removal of the quota system in 2015 might cause a stronger push of products into the UK market o Reduced importance of liquid milk as the primary milk price driver• Milk prices generally benefit from a milk deficit situation, but in the UK they don’t• UK dairy sector lacks a dominant multi product multinational co-op that is capable of absorbing the impacts of volatility, or even benefit from it• UK is seen as an attractive target market for new entrants, for domestic market reasons as well as for export ambitions