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FIT had the opportunity to open an office in Uruguay (Montevideo). On this occasion, we invite you to discover the Latin American dairy products market.
What are the major trends consumptions ? What are the dominant manufactured dairy products ? What are the imported dairy products ? What is the market share regarding French products ?
South America is a vaste territory with an area of 17, 840,000 km2. This subcontinent of the southern part of America contains 13 countries. No less than 10 languages are spoken. Its population is 410, 013,492 inhabitants. Due to the vastness of its territory, consumer trends are various.
In Latin America, dairy products are well established in food preferences, even if strong flavors are not really appreciate. In general, dairy products with mild flavors will be prefered. The « dulce de leche » is an old tradition of popular sweetness. The Indians, who didn’t know cheese, kept the milk in the form of caramel.
The key players in the Latin American dairy market are: Brazil, Mexico and Argentina.
In Brazil, the consumption trend is for milk drinks (40 L per capita per year) and for cheeses (7 kg per capita per year). 40% of the dairy market in Brazil (excluding milk powders) is represented by liquid milk and milk drinks. Which represents a turnover of 24.8 billion BRL.
Then, there is a very strong demand for cheeses, this sector is growing. In Brazil, cheese is primarily cutural. There is a strong culture for « reiqueijao », a product made from whey. It is obtained by precipitation or coagulation by heat of whey proteins resulting from the manufacture of Serra da Estrela cheese with regard to the corresponding Portuguese PDO1. Creamy and slightly grainy, it is similar to ricotta cheese. It cannot be qualified as cheese from french people! Mozzarella and prato (pasteurized cow’s milk cheese, a hard cheese made with not cooked milk), are also very popular cheeses in Brazil.
While the cultural trend was for sweet flavour cheeses, there is a democratization of strong flavour cheeses consumption which appears in recent years with an interest for speciality cheeses as: « brie », « parmesan », « bleu », « gruyere »…. This sector is growing with +68% growth in value over 5 years (2011-2016). The popularity of these cheeses is pulled up by the few local cheeses that are gaining notoriety. In the big cities, we can see opened the first cheese makers, who generally offer more upscale Brazilian cheeses and also imported cheeses.
In Mexico, industrial production of dairy products has grown faster than the population because of rising standards of living, new products development and export growth. The dairy industry represents for nearly 1/5 of agricultural GDP and is growing significantly (+44% in 10 years for processed dairy products and +15% growth for raw milk production). 58% of milk consumption in Mexico is in liquid or powder form (2013 figures).
Then, in Argentina, the consumption of low calorie products, called « descremados », and the consumption of healthy products which bring a benefit for health (as probiotic or functional products), is burgeoning. More generally, Argentineans consume more than 40 liters of milk, 12kg of cheeses and 9.75 kg of yoghurts per year per capita.
Among the 13th countries in South America, Brazil is the one that produces the most milk. Indeed, Brazil is the 4th largest producer of milk in the world. In the South American market, Brazil is the largest producer of milk with 34.3 billion liters of milk collected in 2017. However, milk yield is low in this part of the world. Comparatively , the average milk yield in Europe is 6500 liters of milk per cow per year whereas in South America the cows are closer to producing 2200 liters of milk per year. As a consequence, Brazil is not self-contained and must import dairy products from Uruguay, Argentina, New Zealand, Chile, and France to meet demand.
The development of the dairy sector in Brazil is mostly linked with the establishment and growth of multinationals through external growth : Nestlé (the leading dairy industry in Brazil), Lactalis, Danone, Lala, Emmi, Arlon Group … thanks to that Brazil the 4th largest producer of milk.
However, major Brazilian brands are well consolidated in this market. This is the case of: Itambé, Bela Vista, Castrolanda, Embaré, Aurora, Jussara, Vigor … That’s why Brazil the leading producer in Latin America.
Today, 70% of sales of dairy products are made in supermarkets. The mass distribution has known a transformation in these methods of acquiring products in recent years, pushing them to import live now to avoid cascading taxes to each intermediary.
Argentina is the world’s 14th largest milk producer and the second largest in Latin America, with almost 11 billion liters per year. Imports of dairy products in Argentina have been increasing for 3 years (68 M USD in 2017 against 38 M USD in 2015). FRANCE is a major supplier of Argentina for this type of product, with 1.8 M USD in 2017 (cheeses account for almost 70% of these imports, and children’s formulas nearly 18%).
There are nearly 1000 dairy industries in Argentina, and the top 20 are responsible for 60% of the country’s milk processing and 95% of exports. The main local producers are: Mastellone Hermanos (in joint venture with Arcor and Danone), Sancor, Sucesores of Alfredo Williner, Veronica. The main foreign producers are the Canadian Saputo (Molfino), the Swiss Nestlé and the American Mead Johnson….
In Mexico, the dairy industry employs more than 80,000 people directly and 400,000 indirectly. The country produced in 2014 nearly 190,000 tons of butter and 275,000 tons of cheese. 79% of the liquid milk supply is dominated by 3 groups: Lala, Alpura and Sello Rojo, which represents around 11 billion euros. Lala and Alpura also dominate the dairy market with respectively 34% and 22% of market shares (production of cheeses, creams and yogurts). International groups, generally specialized in niche markets, are also present, such as Nestlé, Yoplait or Danone, the leader in yogurt with more than 40% of market share.
Latin America is above all the most western emerging zone, with an urbanization rate of 85%. It’s therefore easier for the French to implant their products in this area. Argentina is the Latin American country in which European culture is most assertive. After very difficult years to consider exporting European products to Argentina, the election of President Mauricio Macri at the end of 2015 promise a reopening of imports. The Argentinian market has reopened, and the government introducing a series of measures to simplify import procedures. The Argentineans are eager for foreign gourmet products and wish to be able to find on the supermarket the products they discovered during travels (in France…) and to which they could not have access locally.
In Argentina, French products are popular because they have an image of gourmet products. In addition, French products have no real equivalent on the local market. Consequently, cheeses such as Camembert, Brie or Blues made locally are very different from products imported from France. FRANCE is an important supplier for this type of products. It represent 6% of Argentine cheese imports (behind Uruguay (67%) and Brazil (18%)). The main varieties of imported cheese are Camembert, Roquefort & Brie. Argentines prefer unrifened cheeses.
Then, Latin Americans are first and foremost consumers eager for new things. Hence the success story of French cheese! Yet not used to eating strong products (taste), French cheese is a real opportunity for the South American market. There is a real growing demand in Brazil for French cheeses. Nearly 50% of imports into Brazil of dairy products from FRANCE are cheeses. The reputation of French cheeses in Brazil is no longer to prove. In the same way, there is a real hegemony for high-end butters. FRANCE stands out as the only reference in this niche market 33% of imports of French dairy products in Brazil are butters. Local French brands or imported brands for Butter President, Isigny, Elle & Vire and Paysan Breton are very popular with Brazilians.
Mercosur (Brazil, Argentina, Paraguay, Uruguay and Venezuela) has not yet concluded a free trade agreement with the European Union. The negociations that had begun in 1995, were suspended in 2004. As a result, agri-food products do not represent today than 5% of European exports to Mercosur. These are essentially products with high value-added. Dairy products are among the most taxed products on import. Indeed, tariffs are up to 28% for dairy products. France is the leading exporter of dairy products (especially cheese) in Mercosur. The negotiations are ongoing. An agreement would significantly reduce or even eliminate existing tariff and non-tariff restrictions on these exports, bringing tangible benefits to the European agricultural and food sector. The free trade agreement in prospect would be a first for Mercosur. It goes to exporters, investors and providers of EU services to access this market better than ever should result in substantial economic benefits. On a market of 260 million consumers, growth potential is considerable!
Biographic sources: Business France, clal.it, eucolait, ec.europa.eu
The sector is experiencing a steady decline in the sale of dairy products, particularly in milk sales. Between July 2017 and July 2018, the only product that manages to maintain positive growth is « dulce de leche » (+5%). Milk powder represents the product with the largest drop (-49%), followed by yoghurt (-9%), liquid milk (-4%) and cottage cheese « fromage blanc » (-2.50%). On average, we therefore observe a drop of 10% in sales for July (all dairy products combined), compared to the same month of the previous year.
The dairy products consumption increased significantly between 2003 and 2007, which reached its peak (80 liters per capita) over 2003-2016. The following years resulted in a slight stagnation (about 77 liters of dairy products consumed per capita). The sale of dairy products again rose sharply between 2013 and 2014, returning to its 2007 levels (80 liters per capita), an increase that will not last long, since the sector records a significant decrease until the year 2016 (70 liters per capita), a value equal to 2005. The sector has been recording a decline in sales since 2015. Sales volume decreased by 3.44% between 2015 and 2016, by 0.8% between 2016 and 2017, and finally by 2.7% between 2017 and 2018.
Biographic source: Business France