CEOs of Dairy Companies Are Seeing Growth

It's a $500 billion market with huge potential for growth. But any leaders thinking they can milk the global dairy industry for all it's worth better do their homework.

Dairy is the largest and fastest-growing category in the food and beverages sector, according to an analysis by Boston Consulting Group. BCG cites analysts who suggest the market could grow by 10% a year for the next five years, with revenues reaching more than $800 billion by 2020.

The growth isn’t occurring so much in mature markets such as the U.S. and Europe where volumes are actually stagnating. It’s happening in emerging markets such as China, where hordes of people have only just started developing a taste for traditional Western diets.

The problem is these markets remain largely undeveloped, with limited transportation, distribution and retail infrastructure, Boston Consulting says. There’s also limited consumer awareness of dairy products in many parts of Asia—and products produced locally must be drawn from a fragmented supply base.

“The market could grow by 10% a year for the next five years, with revenues reaching more than $800 billion by 2020.”

If you ever needed reliable, seamless supply chains, look no further than dairy. Perishable products like milk, cheese and yogurt are highly sensitive to bacterial contamination, so it’s challenging even in the most advanced markets to consistently offer a high-quality product through the so-called “cold supply chain”.

Unreliable supply sources are thought to be behind the 2008 melamine contamination of Chinese milk that killed six people, sickened 300,000 babies and sent the market share of local milk formula providers plummeting.

Competition is also a concern. A host of established companies such as Nestle, Kraft, Dean, Saputo and Fonterra are jostling with niche players for business, while outsiders such as Coca-Cola are starting to dip their toes into dairy.

Boston Consulting advises business leaders to consider offering longer-life milk products, though they’ll need to be wary of new product innovations to gain a competitive edge. One company, for example, won market share by offering milk with a three-week shelf life rather than the two-week industry norm, it says.

CEOs in the dairy sector also will have to apply a ruthless focus on operational efficiencies to adapt to industry margins that are traditionally in the 0%-5% range, and may even want to consider M&A to scale up.

“Partnership has been a common path to penetrating emerging dairy markets, such as China,” it says. “For example, a global company can provide its know-how of fine-tuned innovation process, while the local entity brings its knowledge of the local consumer and its market access—or even its agile innovation practices.”


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    We are in a period of rapid change. Customer needs, technologies, competitors and internal capabilities require companies to review and update their strategies for the new realities. In this workshop, strategy experts Steve Rutan and Denise Harrison will show you a systematic approach to strategic planning to help you refine or redefine your business strategy and approach including:

    • Learn what you need to know to develop an effective strategic plan. Put the right players on the strategic planning team.
    • Develop strategies that leverage your company’s unique position in the marketplace. Lift your management team beyond “business as usual” thought processes and activities.
    • Translate your strategies into action. Achieve your vision for success and generate superior financial results.
    • Identify exactly what you need to do now to position your company for future success.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.