About 2.7 billion low-income consumers in developing countries are the dairy industry’s next big growth opportunity, according to a Tetra Pak research.

The world’s leading food processing and packaging company said the opportunity arises from an expected rise in prosperity, purchasing power and desire for packaged liquid dairy products (LDP).

Consumption by low-income consumers in developing markets is forecast to increase from about 70 billion litres in 2011 to almost 80 billion litres in 2014, according to the Dairy Index, which tracks worldwide facts, figures and trends in the global dairy industry. Many of these consumers are expected to switch in coming years from drinking loose milk to packaged milk, it said.

“Low-income consumers represent one of the biggest growth opportunities for the dairy industry. The key to tomorrow’s success is reaching these consumers today,” said Tetra Pak president and CEO Dennis Jönsson. “They make up almost 40 per cent of the world’s population and live in economies driving our industry’s growth and they are growing more affluent.”

These low-income consumers live on $2-$8 a day and are virtually untapped by today’s dairy processors. Called Deeper in the Pyramid (DiP) consumers by Tetra Pak, they make up about 50 per cent of developing countries’ population and consume 38 per cent of LDP in developing countries.

Half of these DiP consumers live in India and China.  The Tetra Pak research focused on six countries which account for more than 76 per cent of LDP consumption by DiP consumers in developing countries:  India, China, Indonesia, Brazil, Pakistan and Kenya.

Many DiP consumers are expected to grow in affluence, shifting from low to middle incomes by the end of the decade, boosting their purchasing power and the range of products they buy.  As they gain an increase in spending power along with greater awareness of food safety and a need for convenient, ready-to- drink solutions are expected to increase the demand for packaged products, it said.

The global DiP population is forecast to fall by a compound annual growth rate (CAGR) of 3 per cent a year from 2009-2020. The population living on more than $8 a day is set to rise by 4 per cent (CAGR) annually, according to Boston Consulting Group, which helped Tetra Pak to develop the DiP classification. 

“Today’s low-income consumers are tomorrow’s middle class,” said Jönsson, noting “this is a golden opportunity for dairy processors to cultivate consumer loyalty among a new generation of dairy consumers in developing countries.”

Tapping into this market is not without its challenges, according to the report. Tetra Pak has identified three key challenges for dairy processors seeking to reach consumers in this growth market. They need to make products which are affordable, available and attractive to consumers on limited incomes. That means dairy processors must produce healthy, safe and nutritious packaged dairy products without adding unsustainable costs. They must also make them available in small traditional stores in remote rural areas or congested cities where DiP consumers shop.

Innovation and efficiency will be vital in helping the industry to develop products, packaging and processing to meet the needs of these low-income consumers, according to the report.
“We must develop products differently, distribute them differently and sell them differently to extend the availability of good nutrition in developing countries,” said Jönsson.

Tetra Pak has identified a number of ways to make products more affordable. Among them is changing the way both milk products and packages are developed – with the price of the product driving development. By using alternatives to whole milk – such as whey or lactic acid – it is also possible to produce nutritious and healthy dairy products at lower cost. Another way is to reduce package sizes or opt for more basic packaging.

 “Providing affordable, healthy and nutritious packaged LDP to DiP consumers is not just a business opportunity. It is an opportunity to transform lives by making safe and nutritious food available to a new generation of emerging consumers,” said Jönsson. – TradeArabia News Service