ICAP CRIF: The dairy industry is facing great challenges

ICAP CRIF: The dairy industry is facing great challenges

A major challenge for the dairy industry in the current period are the strong inflationary pressures, the increases in energy prices and the prices of irreplaceable raw materials that lead to a significant increase in production costs and, consequently, of the final product. This emerges from an ICAP CRIF study of the dairy industry. However, it is noted that based on ICAP CRIF estimates, in 2022 the domestic market of dairy products is estimated to record positive rates of change in most product categories.

According to Stamatina Panteleiou, Director of Economic Sector Studies at ICAP CRIF, the apparent domestic consumption of fresh pasteurized milk showed a downward trend in the period 2020-2021, after two years of positive changes. However, the domestic market of highly pasteurized, long-lasting and condensed milk showed positive rates of change in 2020, with this trend continuing in 2021, according to estimates. These developments are attributed to the changing preferences of consumers who have turned to dairy products that are preserved for a longer period of time.

Regarding the domestic yogurt market, it showed an increase in the period 2016-2018 with an average annual rate of 5%. However, in the following three years (2019-2021), it is estimated that it is moving downwards, recording a cumulative decrease of approximately 6% (2021/19). An important development for the industry is the significant increase in yogurt exports, which accounts for 76% -78% of the total volume of dairy exports in the two years 2020-2021, which makes it the main exportable product of the industry. The domestic market for both butter and sour cream has been fluctuating in recent years. Specifically, in 2021 the apparent consumption of butter marked an upward trend, after the significant reduction of 2020 and is covered almost entirely by imports over time, with their participation rate reaching 92% on average in the last decade (2012- 2021).

A similar course is followed by the domestic market of sour cream, which showed a decrease of 3% in 2020, while in 2021 it is estimated that it returned to positive rates of change. In general, the return of consumers to normal rates – to some extent – in 2021, largely offset the losses of the previous year, as a significant part of the consumption of these products is absorbed by sectors affected by the health crisis (catering sector , catering).

The Covid-19 pandemic that broke out in Greece in March 2020 was the reason for the negative image of certain categories of dairy products in the period 2020-2021. The measures taken by the State in order to limit the spread of the disease have reduced the activities of many companies – customers in the sector. However, the significant increase in household consumption and consequently the increase in sales of supermarket chains, offset the overall losses.

According to Anastasia Kyriakidi, Consultant of the ICAP CRIF Department of Economic and Sectoral Studies, who supervised the study, the nature of dairy products has shown a characteristic “resistance” to the pandemic. As a result, the operation of dairies has had a mild impact on most product categories from the pandemic reduction measures, while, according to market sources, by 2021 it had already entered a recovery trajectory. It is noted that of the total estimated per capita consumption of dairy products in quantitative terms in 2021, about 33% is covered by the consumption of fresh pasteurized milk and beverages, 27% by highly pasteurized milk, while a percentage of 10% by yoghurt.

The degree of concentration in each category of dairy products is high with the largest dairies gaining significant market shares. According to Ms. Panteleiou, in the total market of fresh (white) pasteurized milk, eight companies covered about 70% of total sales in 2020, while in the total market of high pasteurized milk, only three companies are estimated to have covered the same percentage (70%). The presence of private label products in the whole range of dairy products is also remarkable, whose share in the retail market has been increasing in recent years. Based on the current market conditions, industry players estimate that the domestic market of dairy products is expected to follow an upward trend in the coming years.

As part of the preparation of the industry study, a financial analysis of the industry was performed based on selected indicators and a grouped five-year balance sheet was prepared based on a sample of 21 companies. The analysis of the grouped balance sheet of these representative dairy companies, for which data are available for the period 2016-2020, shows the following: The total assets of the sample companies showed a cumulative increase of 7.3% in the period considered (2016-2020) despite the continuous annual fluctuations. Equity amounted to 532.45 million euros in 2020, showing a cumulative increase of 5%. Medium-term liabilities and provisions more than doubled during the five years (2016-2020), while the short-term liabilities of companies in the sector followed a downward trend, recording a cumulative decrease of 32.3% over the same period. The total sales of the examined sample of companies showed a continuous upward trend, which increased by 12.4% in 2020 compared to 2016. A significant cumulative increase (82.0%) was presented by the EBITDA of 21 companies (2020/2016). In the five years under review, the overall final (net) business result was consistently profitable, and in 2020 its price peaked. It is noted that out of the 21 companies in the sample, 17 were profitable in 2020, compared to 16 profitable companies in 2016.

Source: AMPE

Source: Capital