The domestic dairy market continues to be dominated by self-consumption, with only 50 litres of the 260 litres that each inhabitant drinks on average being produced in an industrialised system.
Processed milk quantities are very small in Romania, despite the domestic market surpassing the European average in terms of consumption. Thus, the volume of milk produced and consumed in Romania last year hit 298 litres/capita, above 260 litres/capita, the EU average, but the volume of milk collected for industrial processing by milk plants was extremely low, namely 49.7 litres/capita, according to an analysis report put together by Alpha Finance Romania brokerage.
The data presented point to a significant potential for players on this market, which will have a competitive position both on the supply, and the marketing/distribution segments, Alpha Finance analysts say.
Dairy companies that will move fast and industrialise the entire production chain, from the expansion of the collection network to entering new market segments, will be the ones to benefit the most from the imminent shift to EU standards, Alpha Finance report shows.
The dairy market potential also caught the attention of investors on the Stock Exchange, particularly after the shares of the most dynamic firms on the market, Albalact Alba-Iulia, have posted strong growth in recent years.
Analysts consider all the product segments on the dairy market have a high growth potential, considering all of them are at a very low level currently.
The domestic market's potential is primarily tied to Romania's having to get in line with EU norms by late 2009, meaning that the black market will disappear, considers Alpha Finance. Romania was granted a transition period until the end of 2009 for the milk processing facilities developing restructuring and retooling programmes.
Until market liberalisation, Romania's annual production quota is limited at 3.25bn litres, but production capacity stands at around 6.4bn litres. So far, from the 6.4m tonnes of milk produced annually, only 17% have been directed to processors' plants. In Romania, dairy product consumption is one of the lowest among European countries. Major multinational and regional firms, as well as dynamic domestic firms have tried to profit from this. The dairy market is expected to reach 1bn euros this year, up 25% year-on-year.
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