Jul 22, 2020
- Food & Beverage
- Jul 22, 2020
The coronavirus disease (COVID-19) pandemic outbreak has created extreme uncertainty in market growth globally. The pandemic outbreak has affected factors and changes the complete dynamics of the market in ways that are hard to believe. The efficacy and intensity of containment efforts to the extent of supply disruptions, shifts in spending patterns, behavioral changes (such as avoiding purchasing), the repercussions of the dramatic tightening in global market conditions, confidence effects, volatile commodity prices and increasing debt burdens are the factors which have affected the market negatively.
The COVID-19 has led the lockdown in Europe and internationally has impacted the dairy industry tremendously. The stream of dairy-based products is stable whereas due to the disruption in the production of dairy products have faced crises. Longer lockdown in the dairy industry in the different countries has disrupted the supply chain of dairy milk by the farmers.
The sales of dairy-based products such as ice cream, cheese, flavored milk, yogurt, and frozen desserts comprised the highest market revenue in the overall dairy sector which is approximately more than a third of the organized dairy sector’s revenue which has declined up-to 2 to 3% CAGR in the first quarter of 2020, whereas, the reduction in the prices and lockdown of the foodservice sector has drastically impacted the local dairy farmers and have stalled overall dairy industry up to 10%.
Due to the apprehension about consuming cold products such as ice cream, flavored milk and yogurt have shown a drastic declination in their consumption pattern.
To support the local farmers various government authorities have taken strict actions to recovers the crises happened in the dairy sector, for instance,
Table: Action taken by Government Authorities in Dairy Industry
|U.K.||Department for Environment, Food and Rural Affairs||• Government sets up dairy response fund for local dairy farmers|
|• Fund to farmers aimed to recover the demand|
|• Farmers can apply for the fund if they supply milk to a wholesale purchaser and have had a reduction in the average price paid for milk of 25% or more in April 2020 compared to that paid in February 2020.|
|• Working with processors to ensure any adverse impacts on producers are minimized and returns to farm businesses are maximized.|
|Ireland||Irish Creamery Milk Suppliers Association's (ICMSA)||• The prices of the milk need to be declared only by the processors to upsurge the index of dairy farmers in surging recovery|
|U.S.||Wisconsin Dairy Alliance (WDA)||• U.S. government to use disaster funds to buy cheese inventory that is in storage and package it into consumer-sized portions|
Source: Press Release, News, Articles, Journals
Various giant dairy products processors have participated in the scale on the basis of high risk, low risk, medium risk and ranked out of 60 which shows their potency, for instance,
|Fonterra Co-operative Group Ltd||56（风险低）|
|China Mengniu Dairy Company Ltd||26.( High Risk)|
|Almarai Co JSC's s||16（高风险）|
|Inner Mongolia Yili Industrial Group Ltd||15( High Risk)|
|三元集团||13.( High Risk)|
|China Modern Dairy Holdings Limited||11（高风险）|
Most of the companies have come under the scale of high risk which have ensured in the reduction of total volume of sales of dairy products due to the disruption in consumption, production and supply chain of raw milk.
罗cal initiatives make the dairy sector stronger. The uncertainty of COVID-19 makes it even more important to follow the developments in the dairy based products such as cheese, cream, flavoured milk market. The affected demand of the dairy products is temporary in region such as Europe, USA and others. The economic impact of chocolate industry was estimated timelines of three months while it will take approximately six months.
- Arla Foods
“With job losses, food insecurity and the need for additional supplies at food banks at all-time high, we’re grateful for our family farmers, employees, industry partners and friends in the community for all they are doing in the midst of this pandemic to get dairy from the farm to the tables of those in need.”
Dutch multinational dairy cooperative FrieslandCampina has announced that it is taking all the safety and precautionary measures to slow down the spread of coronavirus (Covid-19).
“I would like to briefly set out how we are working on making sure that you as our customers and business connections can keep relying on us for your daily high-quality nutrition.”
- Hein Schumacher CEO, FrieslandCampina
“Cheese maker Saputo Inc. is eyeing takeover opportunities amid the current market carnage as it works through a “massive shift” in demand away from restaurants and other food service customers to retailers such as supermarkets.”
The company also said:“萨普托工厂送达零售商”艰难，“在某些情况下有超过全部容量。”
From the wrath of COVID-19 across all industries, its impact has not remained unscathed in the dairy industry as well. Though milk production across the world has been rising, but the demand for dairy products has been varying across the various regions. Being one of the daily essentials, the demand in developing countries have been on a rise, while in the developed countries, a significant shift can be observed towards plant-based dairy products.
The pandemic has taxed dairy farmers in a number of ways, the first being management of dairy animals and second the marketing and sale of milk and other by-products. There has been a drastic fall in milk prices across Asian and European countries, which has been further affecting the industry. However, national governments have been taking measures to mitigate the negative impact of the pandemic, for instance, the Canadian government has amended the Canadian Dairy Commission Act to support dairy producers and processors and ensure Canadians maintain access to affordable food.
The performance of the national farm gate milk price can be used as an indicator for the impact of dairy crisis, and across the globe, the U.S. and India are the major epicenters for dairy crisis, wherein large drops of -29% and -19% were observed respectively.
The dairy industry, which experienced a stable growth across all the regions since the past few years, has been experiencing a slower growth in 2020. However, the industry experts forecast a possible growth in the coming years, owing to the consumer’s potential shift from meat protein to diary protein. However, the major threat for growth of the industry lies in the growing demand for plant-based substitutes across the developed nations. In addition, government has been investing huge funds to support increase in consumption of dairy industry. For instance, USD 1 million campaigns were launched in the UK to promote milk and other dairy products in a bid to increase consumption.
Considering these developments and also the impact of COVID on dairy sector, industry experts have been foreseeing a U-shaped growth curve for the industry, wherein the growth of dairy sector is expected to regain its stable growth by second half of 2021.