A comprehensive examination of European inflation and its effects on dairy goods such as milk, cheese, and butter. In addition, the Idele conference in Paris last June examined record food inflation, consumption, and dairy commerce.
Christine Goscianski of the Idele economics service reminded the audience in her presentation that 2022 saw unprecedented food inflation. Food consumption prices in the EU-27 increased by over 12% in 2022 compared to 2021. This rise was smaller in some countries, such as Ireland (+6.9%) and France (+7%), while it was larger in others (+12.6% in Germany, +13% in Portugal, and +14.5% in Poland). This rise in food costs was matched by an increase in distributor brand market share (+2.3% in Spain, +1.4% in Germany, and +0.5% in France).
“The beginning of 2023 was marked by a sharp acceleration in the rise of food prices in Europe, with an increase in sales of consumer products at discount (+1 point between January 2022 and January 2023),” Goscianski said, adding that consumption of dairy products held up rather well in the EU-27 in 2022, but should fall in 2023 as a result of high food inflation.
Germany has seen unprecedented food inflation.
In 2022, the price of dairy goods in Germany increased by 20-40% compared to 2021: +21% for Emmental and UHT milk, +22% for Gouda, and +41% for butter. This resulted in a decrease in dairy product purchases, which was most noticeable in liquid milk (-6% over the past 12 months, -9% in March 2023) and fresh cheeses (-7% over the last 12 months, -9% in March 2023).
Organic milk is losing market share to vegetable juices and pasture milk as costs climb sharply, affecting the organic sector. Finally, rising food prices in Germany increased trade in dairy goods, impacting both exports and imports.
France: Trade balance decline
In France, there are four factors to consider when it comes to inflation:
a +7.9% increase in dairy product prices in 2022 in stores, with the highest increase for dairy fat (+11.7%) and even higher in-store prices in early 2023; a -2.5% decrease in dairy product sales in 2022 in stores, with the largest drop being for butter (-6.8% over 12 months); consumer arbitrage: buy less and downscale (increasing use of private label ranges, fewer organic products purchased, success of discounters);
Italy has one of the lowest rates of inflation.
Despite having one of the lowest rates of food inflation in Europe, Italy had a 10-20% increase in food costs in 2022, depending on the product: +9.8% for UHT milk, +20.8% for butter.
“However, the beginning of 2023 is marked by a slowing in this rise in food prices, particularly those of dairy products,” said the speaker, who noted that the discount market share has increased from 17.5% of sales in value in 2019 to 20.6% in 2022, despite a very high rise in prices in this channel.
Organic purchases in Italian households declined from 3.9% in 2021 to 3.6% in 2022. In 2022, trade in value increased with inflation (both for imports and exports), but the balance contracted.
Strong inflation in the United Kingdom
Food costs increased by 16.9% in 2022 and then skyrocketed in early 2023 (+33% for milk and 39% for cheddar cheese in April 2023). While dairy product sales are down, cheese sales are holding up better.
“We also see a decrease in the range of dairy product consumption, and branded milk volumes are declining faster than private-label products,” Goscianski added.
Organic milk volume sales are falling considerably (-13.5% in 2022/2021 against -5.6% for non-organic milk). Organic dairy products accounted for 2.9% of total dairy retail volume in 2022. Finally, like with the other European nations, volume exports are increasing, but the value balance is worsening.
Conclusion
Inflation currently affects food goods more than other things:
In the EU-27, consumer prices increased by 9.1%.
Food costs increased by 18.2% in the EU-27.
Eurostat data: January-April 2023/January-April 2022
Inflation has a particularly large influence for dairy goods.
Consumer inflation arbitrage: less amounts bought, more private label, less organic, discount success. Store sales of dairy goods seem to be improving.
In-store purchases in France in 2022 (in volume):
Beef: -6.4% Eggs: -1.6% Dairy products: -6.4% -2.5% Fruits and vegetables: -5% Fish: -12%
For a few weeks, general inflation has been lower, with food inflation falling marginally in May.
