Cheese suffers from the same problem as the dairy industry in general in Croatia, in particular the number of dairy farmers, which is declining each year and has fallen to the point where local production does not cover the needs of Croatian consumers. The buying price of raw milk is in line with prices across Europe, which is an issue for local milk farmers, which are usually small, when competing with international players.
Although the advance of cheaper imported cheese is evident, a significant portion of the public still seek quality cheese. In fact, this is demonstrated by the prevalence of hard cheese on Croatian tables.
On the other hand, manufacturers are focused on promoting soft and processed cheese. It seems that the global players think that sales of soft and processed cheeses are underrepresented in Croatia.
The leader in overall dairy, Dukat, a part of Groupe Lactalis, is in such a competitive position that it does not need to worry too much about competitors. The history of the company is impressive: immediately after Croatia gained its independence in the 1990s, some companies began to break the local barriers which were imposed on all companies which were initially acting in their own local surroundings.
Now that there is no longer an obligation on manufacturers to declare the origin of the milk used to make their cheese, it has become increasingly difficult to establish the origins of the milk. This is not only a concern among customers, but also professionals.
Some of the strongest players in the recent penetration of cheaper imported cheese are in effect retailers, which are promoting their own private label products which are overwhelmingly produced abroad. This is because Croatia is too small to achieve numbers which would lower the prices to the point where they would be competitive; therefore, cheese is mostly produced in major European dairy producing countries.
Despite the fact that local farmers have been complaining and warning about their intolerable situation, the situation is not improving. Over the past two decades the number of domestic dairy farmers has fallen from about 50,000 to just about 5,000 in 2018, while the production of raw milk has almost been halved.
A significant shift in consumer preferences was observed over the review period: with the advance of microfiltered variants of fresh milk, consumers embraced the new format, which recorded extraordinary growth and is increasingly replacing shelf stable milk. As the new technology has extended the shelf life of fresh milk to almost three weeks, consumers are now more prone to use this type of milk.
In spite of the global trends, milk alternatives have not been particularly successful in Croatia. Unless there is a clear reason, non-dairy milk alternatives are rarely used, with the prevalent reason to use non-dairy milk products being lactose intolerance.
The domestic player, Dukat, is in such a favourable position that it can allow itself to dictate trends and set up terms for negotiating with milk suppliers. Despite fierce pricing wars, brand loyalty remains high in milk, and the major producers can rely on their consumer base.
Dukat’s main competitor, Vindija, represents a particularly interesting case in Croatia: the company relies traditionally on the quality of its products and has completely withdrawn from electronic media and only implements advertising in the printed press. Apparently, the quality of the product is well appreciated and helps the player to maintain its ranking.
Traditionally, in Croatia, bread and milk are the most socially sensitive categories and the government is ready to intervene in any possible way to ensure that both are sold at reasonable prices. After Croatia joined the European Union its options became rather limited.
Traditionally flavoured yoghurt was by far the most popular format. It is only during recent years that drinking and plain yogurt have gained popularity, with drinking yoghurt expected to become the most important format over the forecast period.
In the past yogurt was exclusively available in 200ml thin wall containers in both flavoured and spoonable variants. Drinking yoghurt was not available at the time.
After the ban on yoghurt and sour milk products claiming “probiotic” features, the situation seemed to calm down somewhat, albeit only in terms of advertising and outrageous claims by manufacturers. The fact that the European Food Agency did not find any correlation between using probiotic cultures and health benefits did not deter consumers from thinking about yoghurt and sour milk products as more beneficial to their health and digestion than milk.
The competitive landscape of yoghurt and sour milk products is different to other dairy categories with the presence of a major international player in the top three rankings. Danone owes its strength to its globally acclaimed brands, Activia and Actimel.
Despite the disruption from Danone, yoghurt and sour milk products remains quite similar to other dairy categories. The leading companies, Dukat and Vindija, lead overall dairy.
It is difficult to find a place in the fridge alongside the known leaders; brand loyalty and recognition are quite high in yoghurt and sour milk products. Smaller players must work out which retailers are willing to let them try their luck.
The widespread dish, sir i vrhnje (cheese and cream), supports sales of fromage frais and quark. This popular national meal, a mix of cottage cheese and sour cream, is rooted deep in Croatian culture and remains popular with a strong outlook for the future.
Although retail value growth was only slightly stronger in 2018 than the average of the review period, it should be mentioned that some of the growth was a result of price hikes, and retail volume growth remained steady over the review period. Other dairy products are recognised as healthy, acceptable sources of protein and meal alternatives.
While the two main products, cream and fromage frais and quark, represent the majority of value sales, the remaining categories have to content themselves with the rest. With condensed milk not present in the country and coffee whitener registering marginal sales, chilled and shelf stable desserts represent most of the remaining sales.
As in the rest of the dairy, the French Groupe Lactalis, through its Croatian subsidiary, Dukat, has a strong lead in other dairy. Dukat achieved its position long before it was acquired by the French company, and becoming a part of a larger group has only benefited the company in the forms of elaborate distribution and larger marketing budgets.
The competitive landscape in other dairy is quite similar to many other dairy categories; in fact, the public perception is that any given dairy company is a dairy company and nothing more. All the major companies are present in almost every category, with very few specialists active in single categories.
Lesser known brands find it difficult to penetrate other dairy and compete against the high brand recognition and consumer loyalty enjoyed by the leaders. It is difficult to achieve shelf space within the major retailers.
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This industry report originates from Passport, our Packaged Food market research database.