June 26, 2015

Between 2015 and 2020 over half of all new cheese sales will originate in Latin America, the Middle East and Africa. And as rising middle class incomes spark growth in cheese markets in these emerging regions, Euromonitor International expects a shakeup of mergers and acquisitions to occur.

The U.S. is ranked as the world’s top cheese market by far at a value of $22.1 billion, with second ranked France holding a value of $9.4 billion, but by 2020 the U.S. market is expected to boom to $27 billion and France to $10.6 billion.

Although impressive, it is Brazil that will see truly massive growth as consumers will have more income to spend on more expensive food products. By 2020 Brazil is expected to triple sales, overtaking Italy to become the fifth largest cheese market in the world with a value of $9.9 billion.

Overall, markets in these three key regions are not high ranking growth markets for packaged foods, but are becoming important emerging cheese markets based on growth from lower consumption levels. For instance, the average annual consumption rate of cheese in Brazil, Mexico, and Egypt is 4 kilograms compared to 10 kilograms per year for a developed market such as Germany, leaving ample potential for growth.

This potential will mean more multinational players looking to gain a presence in these markets, with mergers and acquisitions (M&A) being the main path to growth due to the specific challenges faced by cheese makers in these regions.

“In Latin America,” says Lainne van den Bos, food analyst at Eurmonitor International, “it’s all about trying to work together with local players… While in Middle East Africa, it’s mainly about trying to get the product on shelf in the first place.”

“In Middle East and Africa, the distribution network has always been quite tricky for cheese manufacturers,” says Lainne van den Bos, “For example, in Iran – 97% of cheese is sold through independent, small grocers. This is quite different if you compare to the UK where if you get a listing of your cheese brand in the ‘big four’ (retailers) you’re pretty much set. It’s the same for Egypt where independent, small grocers make up the majority of distribution.”

In Latin America this scenario has already played out with Lactalis acquiring multiple production plants and brands in Mexico, and Nestle negotiating a licensing agreement with Mexico’s GrupoLaLa to be distribution agent for its products.

The new capital that a wave of M&As will bring to these emerging markets will likely also drive product development and innovation, with launches of new cheeses and packaging that will serve the specific tastes and needs of these newest global consumers.