Farm Ireland

Wednesday 21 February 2018

Milk sales value drops amid rise in own-brands

Darragh McCullough

Darragh McCullough

The value of milk sales continues to decline as the public switches to own-brand and two-litre cartons.

Despite the multi-million euro advertising campaigns designed to promote well-known brands such as Avonmore and Connacht Gold, the swing to private label milk sold in two-litre cartons continues to erode dairy margins, according to the latest report issued by the National Dairy Council (NDC).

Despite the increasing value of dairy products on international commodity markets, the most recent figures show that the total value of milk sales decreased by 3.4pc last year. This comes on the back of an even bigger drop in 2009, when the value of milk sales dropped by 5pc.

The main driver of this fall is the increasing dominance of the multiples, discounters and symbol chains such as Spar and Centra. These have pushed on the sales of their own-brand milk to the point where it now accounts for more than half of all the milk sold here.

The biggest jump was seen in the symbol and forecourt shop groups, where own-brand milk sales increased by 18pc during last year.

Commenting on the trends that were emerging from the figures, NDC chief executive Helen Brophy said that mineral water was emerging as one of the main competitors to milk among younger consumers, especially teenage girls.

"There is a huge fear of weight issues among this group, who in turn often resort to cutting out dairy products completely, despite the option of low-fat dairy alternatives," she said.

There was some consolation for dairy producers in the NDC report, with the news that consumption of dairy products increased marginally last year.

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But recessionary pressures led cost-conscious consumers to buy more promotional and larger pack sizes.

As a result, average prices paid by the public for both milk and cheese fell by 6pc last year.

Recessionary pressures were also evidenced in the decline in sales volumes of flavoured and fortified milks, along with functional foods in general last year. Flavoured milks, in particular, were hit severely, with a reported drop in spend of 22pc.

For this year, the report predicts a modest improvement in the overall dairy market as strong volume gains are cancelled out by decreasing or static disposable incomes.

Meanwhile, co-ops remained tight-lipped this week about the contents of the draft KPMG report.

A provisional copy of the report was delivered to co-op bosses last Wednesday but exact details on the contents have not emerged.

One co-op source said the draft document was far from finished.

"It appears at this stage to be still one report short of a conclusion," the source said.

A key element of the final report will be increasing capacity usage through the peak supply months of April, May and June. Up to 10pc spare capacity is available at peak, the draft report suggested.

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