The yoghurt market in Western Europe is not doing well. The top five yoghurt markets in Western Europe – Italy, France, the UK and Spain – are expected to see a decline in volume sales over the forecast period. Germany is swimming against the stream with positive, albeit modest, growth.
Markets by Latest Growth Forecast
Source: Euromonitor Industry Forecast Model
Even if the prospects look bleak, there is at least some potential for the yoghurt market. Unmet market potential effectively shows how much more room each market has left to grow on a retail volume (or value) basis. While Spain and France show complete saturation, the UK and Italy still have considerable room for volume growth in the long term. This means that the size of the prize is potentially bigger in these two markets.
Unmet Market Potential
Source: Euromonitor Industry Forecast Model
The biggest player in yoghurt in Western Europe, Danone, is struggling, with sales declining in its major markets over the review period. Maturity and growing competition from plant-based yoghurt is hurting sales in Danone’s top five markets.
Danone Treemap in Western Europe
Source: Euromonitor Competitor Analytics
Which drivers are hampering growth?
In the UK, soft drivers (qualitative demand drivers – market forces at play that are beyond the scope of the model) and new habits are the main drivers of this decline. Consumers are making healthier lifestyle choices. This is impacting flavoured yoghurt, which represents 70% of the market.
In Italy, demographics (the decline in the number of children and young teenagers) and soft drivers are a major drag on growth. Consumers are switching from plain and flavoured yoghurt to drinking yoghurt, especially drinking yoghurt targeted at an older demographic. Promotions and a growing perception that drinking yoghurt is healthier are helping to support growth.
Growth Decomposition UK and Italy
Germany’s modest growth will be driven by economic stability and the growing switch from chilled dairy desserts and quark to yoghurt. Plain yoghurt, which benefits from the high protein and natural trends, is set to see the highest growth. Source: Euromonitor Industry Forecast Model
Germany's Forecast Drivers
Source: Euromonitor Industry Forecast Model
In France and Spain, the picture is different. Both countries’ negative future performance is due to the maturity of the market. France and Spain, both show complete saturation. To find growth in a saturated market, premiumisation is the only way forward.
How to play to win moving forward
Despite yoghurt’s bleak future, there are pockets of growth. Plant-based variants for example is showing great results. Veganism, the biggest lifestyle movement of the 21st century, as well as the growing number of flexitarians, are driving growth. In Italy for example, 1-in-5 consumers are trying to follow a plant-based diet, according to our new Health and Nutrition Survey 2019.
Also, dairy products with added health benefits to support gut and digestive health, especially naturally occurring higher fibre content or added probiotics show great potential. For example, Kefir (defined as a sour milk product) is rapidly extending out of its home countries in the Caucasus and gaining traction in Western markets because of its high probiotic content and its benefits for gut health.
In France and in Spain, demand for goat’s milk is growing steadily. Habit persistence, literally “I drink goat milk today and I will do so again tomorrow”, (and soft drivers for France) is expected to have the stronger impact on demand, thereby leaving the industry with the opportunity to influence consumption. It is promising for goat milk yoghurt.
Considering the protein craze in the Western world, and given the increasing demand for natural nutrition, yoghurt lends itself well to being advertised as a natural source of protein. This makes it suitable for targeting an older demographic, as well as the growing number of health-conscious and fitness-orientated consumers.
Manufacturers like Danone can reverse market decline by renovating core brands and innovating, ensuring relevance in the minds of consumers. In the UK for example, despite the diminishing growth in yoghurt, some brands are performing very well. This shows that with the right positioning and a clear message, sales of yoghurt can be revived.
To succeed with their renovation and innovation concepts, producers must keep a constant focus on the key drivers and influencers of the business – from the macro environment to consumer trends. The most successful companies simultaneously go deeper in understanding their consumers and wider in seeking inspiration from adjacent industries and categories, to find opportunities for growth – even in areas where growth appears impossible.
If you want to find out more, please download the briefing Revitalising the Yoghurt Market in Western Europe: Case Study – Danone.