Category Intelligence on Butter covers the following
The market complexity is high, due to standardization and multiple (38) co-products in the value in tier 2 and 3, with majority of the products finding applications in the food & beverage industry. The dairy derivatives (tier 3) products namely the cheese and butter along with whey yield higher profits (15-30 percent) compared to tier 2 products (less than 15 percent).
The export of butter has been increasing since 2011, however fell at 2017 with weak export demand. The export share of three major regions increased by around 6 percent, while that of Australia decreased, due to unfavorable climatic conditions impacting the feedstock. The U.S. has lost 6 percent on export share and has increased its import share by 14 percent over last five years, due to international price differences.
Barriers to New Entrants
Economies of scale is a significant barrier
Global entrants are most likely to be from low-cost supplier nations, with a strategy of increasing export share or highly targeted high- value niche producers
Countries, like New Zealand, with deregulated market structure and relatively low cost might attract entrants (e.g., Chinese manufacturers) as a base for export-oriented supply and processing
Threat of Substitutes
The dairy derivatives are unique natural products, however, substitutes do exist in the form of vegetable oils
The shift in consumers from milk fat product to vegetable oils in the emerging and few developed countries.
Substitution is possible, but with consumer preference for cheesy snacks in the U.S. & EU; butter considered a tradition in countries like India; and growing inputs of whey protein in infant formulae, the threat is low - medium
Intensity of Rivalry
Continued consolidation of industry could see competing dairy resources being merged into larger, more efficient competitors
Competitors may respond to trade liberalization through increasing global growth strategies
With increasing consolidation, rivalry among large competitors is expected to increase significantly, after they achieve saturation in their own markets
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