Value of retail milk sales declines despite a 2.4% rise in sales volume

CONSUMER concerns about personal debt and job security resulted in a 3.4% decline in the value of retail milk sales despite a 2.4% increase in sales volume in 2010.

The NDC Annual Review 2010 & 2011 Plan, issued yesterday by the National Dairy Council, showed that consumers are buying more bulk goods and own-label goods in preference to more expensive brands.

With milk, large format pack sizes are showing the strongest increases.

NDC chief executive Helen Brophy said: “The challenges are still there for food producers and grocery retailers. Due to the impact of the economic downturn, consumers are trying to cut back as much as they can.

“That said, our report is quite positive in terms of dairy.

“Sales are up in terms of volume if not overall value, and the price did stabilise towards the end of 2010.

“There is a view that the price can only go down to a certain level, and we are now asking ourselves if we have now seen that level.

“Retailers are battling to get consumers through the door, so it is not going to get any easier for the food producer during 2011,” said Ms Brophy.

The NDC report predicts that the 2010 trend towards home entertainment will continue, stating that a 3.5% increase in sales of cream during 2010 indicates that more people are cooking and baking at home — which is of benefit to the dairy sector.

However, quality is second to price for the consumer.

Health-focused foods are also showing mixed messages. The functional/health sector declined 7% in 2010, reflecting the consumer’s reluctance to spend a small premium for added value.

However, consumption trends within the “yellow fats” food category show the unpredictable nature of consumers, who do not appear to have forsaken taste and authenticity in the interest of cost savings: butter showed growth in 2010 of 2% year-on-year, but in the most recent quarter of 2010 was up 15% in value.

In 2010, milk sales rose 2.4% in volume but declines 3.4% in value.

Whole milk is losing market share to low-fat milk, the value of which has risen 5%, with a strong lift in the last quarter of the year up to 26%.

Reflecting the harsh economic conditions, value-added variants have seen an expenditure drop, with flavoured milk down 22% and fortified milk down 5%.

While the value of the cheese market was static in 2010, it enjoyed sizeable growth in volume of 6%.

Processed and speciality cheeses were down slightly, but more frugal shoppers drove an increase in natural cheese (up 5%) and grated cheese (up 9%)

Faced with the current unprecedented economic challenge, the NDC says its marketing and promotional efforts have delivered surprisingly positive outcomes — at least in volume terms.

NDC chairman Dominic Cronin said that, despite the challenges for farm families and milk processors, there is a growing sense that the dairy industry is beginning to benefit from long-term sustainable opportunities in the world marketplace.