The US remains the world’s largest cheese market, pegged at $22.1bn and set to soar to $27bn by 2020 – way ahead of the number two French market worth $9.4bn and set to grow to $10.6bn in the next five years, Euromonitor International data shows.
But by 2020 Brazil will overtake Italy to become the fifth biggest cheese market in the world – almost tripling sales between 2010 and 2020 to a worth of $9.9bn.
“The reason why, is the rising incomes of the middle-class consumers,” said Lianne van den Bos, food analyst at Euromonitor International.
“For example, in Brazil especially, we’re seeing a really massive growth here. Consumers have more to spend and cheese is typically one of the more expensive products that has now become more widely available to the consumer,” she told DairyReporter.
Low base, strong growth promise
Between 2015 and 2020, half of new sales in cheese will come from Latin America and the Middle East & Africa, Euromonitor data shows.
“Both regions have already been identified as some of the growth regions of the future, but it’s interesting now to have a look at the future rankings in cheese,” Van den Bos said.
“…Markets like Egypt, Algeria, Saudi and Mexico are not that high in rankings when it comes to packaged food, but in cheese these are becoming markets to watch.”
However, she said this was helped by growth from lower consumption levels compared to developed markets.
Average yearly cheese consumption in Brazil, Mexico and Egypt, for example, was 4 kg versus 10 kg in markets like Germany, she said.
“I wouldn’t say it’s a low consumption like we see in China where it’s very low. Cheese is already a part of consumers’ diets – you don’t have to convince them to buy cheese – but it hasn’t reached the stage it has in developed markets.”
Van den Bos said the growth set for cheese in Latin America and Middle East & Africa meant more international players would look to gain traction in these regions.
“Mainly we’ll be seeing larger companies, because they have the capital, acquire existing production plants and integrate that into their portfolio, and they’ll be looking to go forward through joint ventures as well. Middle-size companies, in particular, will be looking more to go through joint ventures or agreements,” she said.
M&A would be the main growth strategy, she said, because both regions were very challenging for cheese makers.
“In Middle East & Africa, the distribution network has always been quite tricky for cheese manufacturers. For example, in Iran – 97% of cheese is sold through independent, small grocers. This is quite different if you compare to the UK where if you get a listing of your cheese brand in the ‘big four [retailers]’ you’re pretty much set. It’s the same for Egypt where independent, small grocers make up the majority of distribution.”
She said companies would look to joint ventures to secure distribution in such markets, rather than working from scratch to develop relationships with the local retail network.
For Latin America, she said competition with local players was the biggest challenge.
However, companies had already worked to overcome this: Lactalis, for example, acquired multiple production plants and some local brands in Mexico and Nestlé secured a licensing agreement with Mexican major GrupoLaLa for distribution of its products.
“In Latin America, it’s all about trying to work together with local players… While in Middle East Africa it’s mainly about trying to get the product on shelf in the first place,” Van den Bos said.
NPD to come…
The flurry of M&A activity, she said, would likely work to strengthen new product development efforts in the regions.
Some players had already developed interesting cheese varieties, she said. For example, the Bel Groupe launched labneh (strained yogurt) flavored Kiri cheese in the United Arab Emirates region and Philadelphia had launched round packaging in Brazil, making it easier for consumers to spoon out the cheese.
“I think what companies will do is try to come up with slightly higher value products but also products that all consumers can afford,” she said.