In 2017, Latin America's dairy market generated US$63.6bn in revenues – just under 15% of the entire $430bn global dairy market, according to Euromonitor International data. And whilst Brazil performed poorly, seeing declines in drinking milk and yogurt, Argentina, Mexico, Chile and Peru all saw positive sales growth across the board.
Writing in Euromonitor International's recent report Dairy in Latin America, senior research analyst Leonardo Freitas said that whilst dairy products like milk, yogurt, cheese and spreads were widely consumed in Latin America, per capita consumption in value terms remained lower than developed markets and consumption formats were very different.
“While local consumers spend less than half of what their North American and European counterparts in the category spend, much of the consumption still comes from unpackaged artisanal goods,” Freitas wrote.
This, he said, left plenty of opportunity for dairy manufacturers to “sophisticate Latin American dairy consumption” and cheese was a category manufacturers could learn from, given its ongoing success.
In 2017, cheese was the fastest-growing dairy product across Latin America, posting growth in every market, according to Euromonitor International data.
“With strong local production and years of expertise, cheese manufacturers were able to leverage their sales within consumers with more purchasing power, as well as diversifying categories and producing internationally-known cheese types such as brie and parmesan locally, which are sold as inspired types as their certificates of origin are protected,” Freitas wrote.
Value for money versus balanced diets
However, he said to secure growth in Latin America's diverse and highly-fragmented dairy market, it was vital to understand purchase drivers and evolving trends.
Value for money, for example, was a key driver across most of the region due to a high disparity in income and a wide social gap, as well as inflationary movements, he said.
In the coming years, however, as lifestyles became more hectic in larger cities and consumers followed more balanced diets, Freitas said there could be space to develop categories like milk alternatives, soy-based drinks, reduced fat milk and lactose-free cheese.
Where the mid-term economic situation was expected to be more stable, he said a “greater sophistication” in consumption was expected. This, he said provided an even bigger premise for manufacturers to invest in new product lines like new yogurt flavors, elaborated packaging and new cheese types.
Brazil, for example, had seen a change in dairy demand with consumers increasingly interested about the functionality of dairy thanks to more information about alternative products, he said.
As a result, he said free from lactose products were expected to become “more relevant” in the market among more affluent consumers and there would continue to be a shift away from powder milk to fresh/UHT milk, driving up value development in the category.
Freitas said Brazil was the dairy market to watch in Latin America because it was the largest – generating 37% of total dairy revenues in the region.
“Brazil is always a key player and its performance will continue to influence the overall dairy market in Latin America,” he wrote. And whilst the dairy market had struggled in recent years as a result of currency exchange issues and a downturn in purchasing power among lower socioeconomic strata, the market still had “potential for growth”.
Importantly, he said Brazil had one of the largest livestock herds in the world which would give the country a “positive base” for the dairy market to be developed.
Euromonitor International forecasts suggest Brazil should see strong year-on-year growth through to 2022, alongside Argentina and Ecuador.