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Recent Study: Dairy Packaging in Canada

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Boston, MA -- (ReleaseWire) -- 07/11/2014 -- Cheese in Canada is expected to increase by 3% in current value terms in 2013 (2% in 2012), supported by demand for fine unpackaged hard cheese and soft cheese. Volume growth is expected to see a negligible decline overall, influenced in no small part by the higher prices for cheese. Milk prices increased by 1% as of July 2013, reflecting higher feed prices for grain. Demand for cheese at the retail level continued to benefit from several factors: convenience, versatility, high nutritional value and great taste. The continued interest in home cooking and the ever-expanding variety of cheeses available to consumers also positively influenced demand.

Competitive Landscape

Four companies (Agropur Cooperative, Saputo, Parmalat Canada and Kraft Canada) are expected to account for an 83% share of value sales in cheese in 2013. Saputo continues to hold the leading share, expected to reach a 28% value share in 2013. The company's key brands, such as Saputo, Stella and Armstrong, are positioned as mainstream rather than premium products. In contrast, the company's fine cheese brands Alexis Du Portneuf and Du Village account for a relatively small share of the company's sales. Accordingly, Saputo is expected to lose share to producers such as Agropur and other producers of fine cheese during the year. The company's support for increased production of fine cheese will require time and increased investment.

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Industry Prospects

Cheese is projected to increase by a CAGR of 1% in the forecast period 2013-2018, reaching C$4.0 billion in 2018. Growth drivers are expected to be similar to those in 2013 - in particular higher demand for unprocessed, higher-quality cheese, and continued high demand for soft cheese. Price increases are likely to be a common factor influencing demand for cheese, and with consumer preferences shifting to higher-quality cheese, this is expected to intensify. Whilst grain and feed prices are expected to be volatile, the general trend for manufacturing inputs and transportation and distribution is likely to be inflationary during the forecast period. Retail volume sales of cheese overall are projected to increase by a negligible CAGR in the forecast period 2013-2018, reaching 191,400 tonnes in 2018.

Drinking Milk Products
The 2% current value increase expected for drinking milk products in 2013 was higher than in 2012, when the category posted a 1% increase. Moderate price increases, coupled with higher demand for flavoured, organic and non-dairy milk alternatives (other than soy milk), were the main reasons for the relatively better performance in 2013. In fresh pasteurised milk, consumers continued to prefer semi-skimmed milk. On the whole, the ageing population and the growing incidence of lactose intolerance, coupled with already nearly universal household penetration, created a challenge to volume growth in fresh/pasteurised milk. While still the largest product type within drinking milk products in terms of value and volume of sales, fresh cow's milk sees 1% increase in current value but 1% drop in volume in 2013 to a total of a little over C$3 billion in retail. Foodsevice volumes follow similar pattern, with the overall volume drop of close to 1% in 2013.

Competitive Landscape

The competitive environment for drinking milk products remains highly concentrated, with Saputo, Agropur Cooperative and Parmalat Canada expected to account for a combined 87% value share in 2013. The category remains difficult to penetrate, particularly within animal-based milk products, which are characterised by controlled production and pricing. The regulatory environment is aimed at protecting local farmers and local production.

Industry Prospects

Drinking milk products is projected to see a negligible negative constant value CAGR in the forecast period 2013-2018, reaching C$3.9 billion. Falling per capita consumption of milk is expected to remain a hurdle for the industry. According to a Maritz Research study in 2012, milk ranked as the third most popular beverage consumed on a daily basis (excluding water), with 44% of respondents stating they consumed milk or milk drinks. One difficulty stems from the lack of follow-on consumption of milk after breakfast. Secondly, the consumer preference for skimmed fresh/pasteurised milk, whilst it is still projected to see a negligible negative constant value CAGR during the forecast period, signals that consumers are shifting towards healthier milk. These themes are echoed in the projected growth of both organic milk and non-dairy milk alternatives during the forecast period.

Yoghurt and Sour Milk Drinks

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