By 2012, the region's dairy sector is expected to grow by 20 to 25 per cent from the levels of 2007, though it will be increasingly reliant on imports to meet this demand, according to market analysts 3A. By comparison, the dairy markets of Western Europe will have grown by 10 to 12 per cent over the same period, albeit from a much higher level, the report said.
However, in order to meet Eastern Europe's growing dairy demand, the industry will require an additional 3m metric tonnes of liquid milk equivalent by 2012 to meet demand compared to just 7m metric tonnes last year, the report says.
Dairy culture Despite this challenge, 3A's Tage Affertsholt said the there were a number of social and economic factors within Eastern Europe that were acting in the industry's favour.
"Unlike many other emerging dairy markets, this region has a cultural and historical connection with the consumption of dairy products," he stated. "
Consequently, a simple comparison of per capita consumption between Eastern Europe and Western Europe clearly illustrates the enormous market potential."
According to 3A, current growth in the region has been driven primarily by cheese and yoghurts, but rapid developments in food processing and the food service industry are also expected to push demand for higher quality value added goods.
Major Players Another key element to this growth is the increased presence of multinational companies in the region that are driving competition alongside larger national processors, according to the report.
Within the dairy market alone, 3A says that there are thirty foreign firms operating in throughout the nine markets it studied for the report, many of which are working with local processors.
Multinationals like Campina, Friesland Foods, Hochland, Ehrmann, Müller and Lactalis have also moved in recent years to set up manufacturing plants in the area, the report said.
The emergence of these manufacturers into the region has served in particular to help develop the dairy sector domestically through the use of new technologies, product developments and marketing capabilities, 3A added.
"Vertical integration is a key area where the foreign and domestic dairy companies invest in improving the milk quality and the cooling chain to secure dairy products of high quality," the report stated.
One of the key players currently operating in Eastern Europe's dairy markets is Russia-based Wimm-Bill-Dann, which is becoming increasingly active outside of its domestic market.