Executive Summary

The milk and dairy sector operates within the context of the food industry. The market experienced growth of 15.4% between 1991 and 1996, roughly maintaining its share of overall food market expenditure. By 1996, sales had reached £7bn. Many of the products within the sector are grocery staples regarded as essentials rather than indulgences. However, the market has become increasingly sophisticated in recent years with the introduction of new products. The main segments in the market are: liquid milk, cheese, yellow fats, yoghurts, chilled desserts and cream.

Liquid milk continues to account for the largest proportion of sales, although these are declining in volume terms. Cheese has also experienced a fall in per capita consumption. However, the introduction of premium, low-fat and single-serve products have helped to maintain and increase market value. In the yellow fats sector, spreads continue to gain market share from butter and margarine.

Sales of yoghurts and chilled desserts were considerably boosted by more effective segmentation and the launch of new products in the market. Fromage frais sales have also boomed since its introduction. More recently, the brand extension of the confectionery houses into the chilled desserts sector has resulted in further growth.

Cream has come under increasing competition from other sweet sauces and ready-made custards as a dessert accompaniment. However, product innovation such as non-dairy, aerosol and lower fat creams made positive contributions. The revival of interest in home cooking will also benefit sales for use as an ingredient.

The outlook for the sector remains positive. The shakeout arising from the demise of the Milk Marketing Boards has been absorbed by the industry and it is a case of business as usual. Strong product innovation is constantly revitalising the market, while a full portfolio of traditional foods appeals to other sectors of the market. In the short to medium term new products will tend to focus on two factors; quality and convenience, in line with current consumer eating habits and demands.

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