Sectoral Capsule - Dairy Market in Brazil (2009-2018)-Looking for Greener Pastures
The dairy industry in Brazil is at an inflection point with a growing economy, expanding middle class population and increasing disposable income. Consequent to these, the country has a burgeoning demand for dairy products. It presents plethora of exciting opportunities for the dairy product manufacturers to set shop in the country.
The country is a leader in several agricultural industries. It is one of the world’s largest exporters of agricultural, forestry, and fishery products, preceded only by the European Union and the US in agricultural export value.
The country struggles to meet its dairy demands both in terms of volume and quality. It is a significant importer of cheese and milk powders as consumption outpaces domestic production. Further, the country imports significant volumes of fluid milk and packaged UHT milk from Argentina and Uruguay.
The rapid growth of the Brazilian economy, its expanding middle class population, increasing disposable income and consciousness about health has led to higher demand for dairy and convenience foods. Its burgeoning market has attracted significant investment from major dairy players in the country like Nestle, Danone and Lactalis. Even though a number of industry development initiatives are being adopted at the regional level to improve milk production and exports, yet considerable opportunity for consolidation exists in the processing sector.
The per capita milk consumption in Brazil was estimated at 177 litres in 2013, up from 115 litres in 2003. The increase is attributed to rise in industrial use of milk coupled with higher disposable income of the consumers. Moreover, consumption of dairy products is part of the country’s culture and diet. With increasing household income and health consciousness, consumption is predicted to grow.
Food Outlook 2014 anticipates that the country’s pasture condition due to heavy rainfall will increase milk production, which in turn will stimulate investment in new technology and improved animal genetics.
Further, large investment projects with over a 1000 cows have been initiated and more funds are expected to be poured into the country’s milk production. Brazil has initiated a few programmes to Dairy Market in Brazil (2009 – 2018): Looking for Greener Pastures address the problems of low productivity such as ‘Full Bucket’ from the Embrapa Institute, which aims to transfer technology that will help farmers to increase the yield per cow.
On the downside, increasing inflation combined with slowing foreign direct investments and high interest rates have decelerated the country’s economic growth. This may affect the demand for dairy goods. Consequently, a restrained growth may be observed in the near future.