The powdered milk market - France

1.2 The global market is growing

  Market size powdered milk World, ****-****, in $US billion Source: alliedmarketresearch The global market for powdered milk is expected to grow at a strong pace (***), motivated by the fact that its usage in baby food remains important, but also that urbanisation is increasing, which increases demand on ready-to-consume products. Since milk is a fresh goods, the milk powder derivative deals with the durability issue. As shown below, the US was the largest producer in the world in ****, with almost a quarter of production. India came in second place with **.**%. The rest of the world accounted for more than **% which confirms that production is relatively dispersed.

Production volumes, by geography World, ****, in % Source: ****

1.3 Domestic market

Market size of manufacturing of other milk production (***) France, ****-****, in € million Source: ****

Milk powder falls under the category "other milk production" (***) as defined by INSEE. 

In ****, the value of production was €*.** billion. This is a very small increase of a CAGR of *.**%.

Meanwhile, the market size has been volatile; in ****, it increased drastically whereby it decreased sharply until ****. Ever since, the market has been expanding. The sharp market contraction between **** and **** was a result of a powdered milk scandal, caused by Chinese manufacturers who falsely included expired milk and hid this in the labelling, which harmed consumer confidence. [***] This effect lasted until **** when confidence begun to be restored. 

1.4 International Trade

In this section we analyse France's trade of butter. In particular, we use UN Comtrade's database and the code ****** - Dairy produce; milk and creme, concentrated, not containing added sugar or other sweetening matter, in powder, granules or other solid forms, of a fat content exceeding *.*% (***). Although it is not an exact metric of powdered milk, it nevertheless serves as a credible proxy.

Trade of powdered milk France, ****-****, in $US million and in value Source: ****

The graph above shows France's imports and exports of powdered milk; in ****, France imported $US ***.** million and exported $US ***.** million. This resulted in a coverage rate (***) of *.**. In other words, France runs a trade surplus for powdered milk.

Since ****, exports have decreased in relation to imports; the coverage rate decreased **%. France has thus seen their imports increase.

Export destinations for powdered milk France, ****, in % Source: ****

In ****, the number one destination for France's powdered milk exports was Belgium, receiving *.**% of total value. In second place we find Germany (***).

Almost three quarters (***) of exports go to the rest of the world, meaning France is not dependant on any single nation for its exports.

Origin of imports of powdered milk France, ****, in % Source: ****

Following the same logic as ...

2.1 Demand drivers: babies and milk

Several demand triggers can be identified based on the consumer. Below, milk consumption related to babies, loyal drinkers of milk, are listed:

Birth rates: babies are avid milk consumers and thus contribute to the demand for powdered milk. Many times, parents find it convenient to purchase powdered milk to permit for longer expiration dates. By looking at birth rates, we get an idea of how many new babies are born, and thus which direction this side of demand takes. Milk consumption amongst children: to obtain a more holistic picture of babies' milk consumption, we can also look at the consumption of milk amongst babies to understand how this might impact demand.

Birth rates 

Number of children born France, ****-****, in '*** Source: ****

Both the number of births and the birth rate (***) is decreasing in France and has been doing so for the last decade. In ****, ***,*** babies were born, with *.** babies per woman on average. Meanwhile, in **** the equivalent figures were ***,*** and *.** respectively.

In other words, the number of babies born has decreased by **,*** or **% in ** years.

This figure is not positive for the powdered milk industry, who thus have a smaller pool of potential consumers to target.

Milk consumption 

Average consumption ...

2.2 Demand drivers: household consumption

Adding to the previous section, although babies consumer more milk in its pure form than adults, it is important to analyse the overall consumption of milk and milk products across all age groups in France to obtain a holistic picture. With this in mind, this section looks at two metrics: Overall milk consumption France: this provides a hint of the general sentiment of milk, and whether it is increasing or decreasing. Household consumption of powdered milk in France: this is a concrete measure of demand for powdered milk in particular.

Overall milk consumption in France

Milk consumption France, ****-****, in million liters Source: ****

Milk consumption in France is declining; in ****, the nation consumed *.** billion liters of milk, a decrease of some ***.* million liters (***) compared to ****. 

The rise of alternatives to milk (***) has led French consumers down this path.

Household consumption of powdered milk in France

Household consumption of powdered milk France, ****-****, in € million and in tons Source: ****

Finally, powdered milk has also seen a decrease in demand from French consumers, both in value and in volume terms.

Value consumption decreased with **.*% and volume consumption with **.*% between **** and ****. In other words, consumers have not only diminished the frequency of purchase but ...

2.3 Powdered products

Another way to look at demand for powdered milk in France is to break it down based on production, which we assume correlates almost perfectly to perceived demand. 

Production value, by category France, ****, in % Source: ****

In ****, powdered milk accounted for **.**% of production of all alternative milk forms, measured through volume, and thus made up the largest share. 

In other words, the penetration rate amongst French consumers can be assumed to be realtively high.

Production of powdered milk France, ****, in % Source: ****

For powdered milk production in general, we find that the largest sub-segment in **** was skimmed powdered milk (***) which accounted for **%.

Fat milk powders (***) was also popular, holding **.**% of total production.

3.1 The value chain of powdered milk

Source: ****

Powdered milk stems from the milk's cow. For durability and packaging reasons primarily, traditional milk is evaporated into a powder through the process described above. After this, the milk is sold in steel cans or plastic bags both on the B*B market or on the B*C market.

B*B: includes restaurants for example, who need to worry less about transportation costs and lifespan of the milk. Can also include companies that produce and sell confectionary. B*C: popular amongst families with babies or people living in areas where the access to milk is scarce. Powdered milk is also popular amongst athelets such as hikers who need to maximize nutritional intake and minizime storage space.

3.2 Production volumes in decline

Production of powdered milk France, ****-****, in € million Source: ****

Production of powdered milk in France is decreasing; in ****, France produced and sold goods valued at €*.** billion. This is a decrease of some *.*% compared to ****. 

The largest share of that sales in **** was devoted to skimmed milk powder (***).

Usage of milk for the production of dairy products France, ****, in % Source: ****

The chart above shows which dairy and milk derivative products required the largest share of milk in the production process. Cheese is the most milk-intensive, with **.*% of usage. 

Powdered milk was the third most intensive, with **.*% of usage. 

3.3 An increasingly competitive market

Employees and companies in the other milk products sector (***) France, ****-****, in units Source: ****

The number of firms registered under NAF code **.**D was ** in ****. This is an increase of some **.*% compared to ****, meaning the market for powdered milk in France has become more fragmented. 

The number of employees in the sector has also increased to reach *,*** in ****. That year, the average company size was **. In ****, the equivalent figure was **.

4.1 Product Overview

Milk powder is a solid product obtained by removing the water from milk, milk entirely or in part. partly skimmed, cream or a mixture of these products, and whose moisture content does not exceed not *% by weight of the finished product.

A distinction is made between the following powdered milks:- High-fat milk powder milk  dehydrated containing, by weight, at least **% fat.- Whole milk powder: dehydrated milk containing, by weight, at least **%. and less than **% fat.- Partly skimmed milk powder: dehydrated milk of which the fat content is, by weight, more than *,* % and less than ** %.- Skimmed milk powder: dehydrated milk containing, by weight, not more than *.*% fat content. 

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Moreover, the powder extraction process of powdered milk uses two types of dryers:

Drum dryers: consists of two large cylinders where the liquid is heated with steam. The powder is scraped off the drum with a steel blade. This process is cheaper, but the powder dissolves poorly in water, so end users include animals or sometimes bakeries.  Spray dryers: concentrated dairy liquid is sprayed into a stream of hot air. Once it has dried in its drying chamber, it is placed in plastic-lined paper bags. In its intrinsic form, ...

4.2 Price analysis

Price overview, skimmed milk for human consumption (***) France, ****-****, in €/tons Source: ****

The graph above compares prices for powdered milk, and looks at two sub-categories: skimmed milk and whole milk (***). 

For both products, prices have increased. In ****, whole milk was priced at €*,***/ton and whole milk at €*,***/ton. This is an increase of some **% and **% respectively.

4.3 An industry grappling with scandals

For many, powder as a derivative of milk is already controversial, and many clients prefer the natural product over its alternative form. One reason for this is the fact that the powdered milk industry has been subject to a number of scandals in the recent years.

**** saw the largest scandal yet, when in China it was discovered that melamine was included in the powdered milk sold to infants to increase the perception of protein contents. As a result, there were ***,*** baby victims, **,*** babies were hospitalised and * babies died. [***]

Moreover, in ****, the Chinese company Xile Lier was mixing imported powdered milk with expired milk. The company changed the expiry date on cans and thus sold cheaper milk for older children which instead was intended for infants, due to the fact that the former is more expensive. [***]

In ****, the French group of Lactalis was accused of selling *,*** tonnes of powdered milk despite of a Salmonella contamination. [***] 

In ****, [***], sixteen cans of infant milk powder bought in France, Germany and the Netherlands was tested, where eight had a worrying quantity of mineral oil aromatic hydrocarbons (***). Already in ****, ** French products had been tested, where **% included MOAH.

In conclusion, such scandals raise questions among consumers everywhere, ...

5.1 Current Regulation

The framework for dairy (***) regulation in the EU is vast and continues to be dynamic. An overview of all updates, the lastest changes and an overview of all the laws can be found here.

Regulation on milk powder is also strict.

For EU members, the following rules apply:

Commission Regulation (***) No ****/**** as regards methods for the analysis and quality evaluation of milk and milk products Council Directive ****/***/EC of ** December **** relating to certain partly or wholly dehydrated preserved milk for human consumption

The norm's on milk powders is communcated by FAO. The following points are included and commented on:

Content Composition Additives Hygiene Labelling

6.1 Segmentation

• Arla Foods
• Laïta Regilait
• Even Groupe
• Lactalis Groupe
• Sodiaal Groupe (Coopérative)
• Sill Entreprises
• Nümi