Fermented Milk Market

Market Overview

The global fermented milk market size was valued at USD 320.60 billion in 2022. It is estimated to reach USD 493.10 billion by 2031, growing at a CAGR of 4.9% during the forecast period (2023–2031).

Fermented dairy products are a major source of probiotic bacteria. Milk products prepared by lactic acid fermentation or a combination of lactic acid and yeast fermentation are called fermented or cultured milk products. This inoculation and fermentation process of milk offers various products such as butter, cheese, yogurt, filmjölk, kefir, cultured buttermilk, and cultured cream. The most common bacterial strains used for fermentation are Lactobacillus and Bifidobacterium. During the conversion process, various substances, such as diacetyl, acetic acid, and acetaldehyde, are released, which help impart characteristic taste and aroma to the products.

During the fermentation process of kefir and koumiss, ethyl alcohol is also produced. These fermented dairy products impart taste and provide texture and consistency to certain products like dips and sauces. In order to achieve high-quality products, milk must have high bacteriological quality, which includes low content of bacteria and substances that may prevent the development of yogurt culture. A dairy must obtain milk for yogurt production from selected and approved producers and carefully analyze the same.

Highlights

• Yogurt dominates the type segment
• Specialty stores dominate the distribution channel segment
• North America is the highest shareholder in the global market

Market Dynamics

Global Fermented Milk Market Drivers:

Growth in Demand for Dairy Beverages

Dairying is considered a major source of income and livelihood for rural farmers. It is the major source of food in rural as well as urban areas throughout the globe. In recent years, governments have had a major thrust to boost milk production by initiating supportive programs for increasing milk productivity, input supplies, and access to the organized milk processing sector. These support programs have resulted in the growth of global milk production at a very high rate in the past few years. Moreover, the increase in population is also a major factor that leads to a rise in demand for dairy products, ultimately driving the market for fermented milk products.

Increased Awareness of Fermented Milk's Health Benefits and a Desire to Lose Weight

Microorganisms involved in the fermentation of bioactive and potentially toxic compounds are proven beneficial for health. Their contribution to the health-promoting properties and safety of traditionally fermented milk promotes the use of these products. It regulates the immune system, metabolism, and gastrointestinal tract and supports mood and brain function.

Furthermore, fermented foods have become an important part of the diet in many cultures, as fermentation has many health benefits. Blood pressure lowering, anti-allergenic, and anti-diabetic are some of the major health benefits of fermented milk products, thus acting as drivers for the growth of the fermented milk market. A balanced microbiome produces crucial vitamins and nutrients that help maintain a healthy weight. Kefir, a fermented milk drink, or yogurt, another type of fermented milk product, is consumed worldwide to aid weight loss, and consumers being aware of the effects of weight loss, prefer these products, propelling the market growth.

Global Fermented Milk Market Restraints:

Harmful Additives and Ingredients in Yogurt

Yogurts, which are labeled fat-free and sugar-free, are sometimes made by adding synthetic ingredients. Artificial sugar is present in all unhealthy foods. These yogurts are overloaded with sugar, preservatives, colorings, and growth hormones. They often include certain preservatives known to be made with chemicals to improve taste and texture, which later cause digestive issues and other ailments. These factors pose a major threat to the growth of the fermented milk market.

Rising Awareness for Vegan Products

Awareness about avoiding artificial products and the wide acceptance of a vegan lifestyle poses a threat to artificially produced dairy products. Consumers do not prefer products made using artificial ingredients; hence, manufacturers are also moving toward manufacturing vegan-based products made from natural ingredients. Hence, these products are becoming major alternatives for artificially fermented products, leading to market growth.

Global Fermented Milk Market Opportunities:

Increasing Demand for Fermented Milk in Developing Nations

Fermented milk has long been misunderstood as milk with low nutritional quality. Hence the development of cultured milk was neglected. The consumption of milk and milk products per capita is greater in developed nations. Demand for milk and other milk products in developing countries is growing with rising incomes, population growth, urbanization, and changes in diet. This trend is pronounced in East and Southeast Asia, particularly in highly populated countries like China, Indonesia, and Vietnam. Hence, the rise in demand for milk and other fermented milk products, including butter, cheese, and yogurts, offers a good opportunity for producers in high-potential, peri-urban areas to improve their livelihoods through increased production.

Regional Analysis

The global fermented milk market is bifurcated based on region into North America, Europe, Asia-Pacific, and LAMEA. 

North America Dominates the Global Market

North America is the most significant global market shareholder and is estimated to exhibit a CAGR of 4.4% during the forecast period. North America mainly consists of well-established economies like the U.S., Mexico, and Canada. These countries show the maximum contribution to the growth of the North American economy. In addition, the market for fermented milk is expected to increase significantly over the future decades due to several fundamental macroeconomic factors, including rising healthcare awareness and per capita income. Consumer attitude toward dairy products is also changing around the world. Some trends help to drive dairy consumption worldwide. For instance, interest in label-friendly products is rising in North America. This demand is providing positive growth opportunities for the market. In countries such as the U.S., Canada, and Mexico, consumers appear to choose products with clean-label ingredients in the dairy products category, owing to the awareness of clean-label ingredients and their benefits. This trend is driving the market of fermented milk in North America.

Europe is estimated to exhibit a CAGR of 3.9% over the forecast period. The market of fermented milk in Europe primarily includes the UK, France, the Netherlands, Germany, and Spain. According to a report published by the European Parliament in 2016, the European Union's dairy industry is the region's second-largest agricultural sector, accounting for more than 12 percent of the total agricultural output. In addition, milk is produced in its member countries and processed into fresh products such as cheese and butter. Due to their use as a main ingredient in numerous food products, including bakery goods and fast meals, as well as an ingredient in many Italian cuisines, breakfast foods, and other foods, cheese products have a substantial market share.

Furthermore, the EU's dairy policy consists of promoting a range of instruments designed to support farmers and address market imbalances. It also designs policies that benefit every product development life cycle aspect. For instance, it includes common market organization, public intervention and private storage provisions, direct payments, and rural development measures. Such motivated efforts from the EU are anticipated to boost the market growth of fermented milk in the region.

The countries in the Asia-Pacific region include China, Japan, India, South Korea, and Australia. These countries are developing markets and emerging economies. The sales in Asia-Pacific is primarily concentrated in economies with high population, such as China, and markets with emerging economies, such as India and Indonesia. Growth in this region is driven by modern trade development, dynamic product development, and changing consumer habits, which makes this a key region for potential growth of the global market. In addition, the expanding demand for therapeutic products containing probiotic bacteria is driving market expansion. Asia-Pacific is an attractive region for the expansion of the market for fermented dairy products. Consumers gravitate toward commercially fermented dairy products due to newer technologies and innovations. Additionally, the region has experienced a massive migration of millennials, who are the primary consumers of fermented milk products. Therefore, the expanding millennial population is anticipated to create lucrative market opportunities for fermented milk.

In LAMEA, the fermented milk market is studied for Latin America, the Middle East, and South Africa, as these countries have the highest penetration of dairy products. Milk and cheese are a part of the diet lifestyle in most Latin American countries, specifically in rural areas, where dairy is unpackaged or conventional. This presents challenges and opportunities for the industry as the manufacturers can focus on diet-based fermented products. In addition, the convenience and longer shelf life of industrialized dairy products are attracting more consumers toward dairy products. However, macroeconomic challenges such as livestock feeding and related small industries are putting pressure on costs, challenging packaged variants' growth. Manufacturers have the potential opportunity to make products available in rural areas at affordable prices, which is also anticipated to boost the market in the future.

Segmental Analysis

The global fermented milk market is segmented by type and distribution channel.

Based on type, the global market is bifurcated into cheese, yogurt, butter, sour cream, and others. 

The yogurt segment dominates the global market and is projected to exhibit a CAGR of 5.31% over the forecast period. Yogurt is a dairy food produced by the bacterial fermentation of milk. Lactic acid is created during lactose fermentation by bacteria, and it interacts with milk protein to give yogurt its distinctive flavor and texture. Over the past few years, yogurt manufacturing brands have focused their inventions on removing artificial preservatives and additives from yogurts. Moreover, manufacturers are launching yogurts with less sugar, which health-conscious consumers prefer. Specialized yogurt manufacturers are focused on introducing fruits and nuts in their products; such developments are expected to generate lucrative opportunities for market growth.

Butter is a pale-yellow edible fatty substance made by the churning of cream and is generally used as a spread or for cooking. It is produced by fermented cream or milk by separating fat from churned buttermilk. It is generally used as a spread on bread or as a condiment in cooked vegetables. The growth in the rate of world population and the emergence of new lifestyles among middle-class families is expected to boost the butter industry. In addition, Asia, Latin America, and Africa are expected to drive the market in the coming years, which offers potential opportunities for business expansion to butter producers in these regions, which is anticipated to help positively in the growth of the global butter industry. Moreover, the growth and increased penetration of retail chains, supermarkets, and online sales channels in emerging economies also drive the butter market, which is expected to remain the same during the forecast period.

Based on the distribution channel, the global market is segmented by specialty stores, supermarkets and hypermarkets, and online stores. 

The specialty stores segment owns the market and is estimated to exhibit a CAGR of 4.1% during the forecast period. Specialty stores offer interesting products, which may attract buyers by providing a wide range of differentiated products. Consumers purchase fermented milk products from specialty stores to benefit from recommendations from its knowledgeable staff. The market for specialty stores is driven by a rise in affluent populations in emerging countries such as China, Japan, Australia, and Gulf. The ability to physically choose and compare products attracts consumers to specialty stores.

Online sales channels are e-commerce platforms operated through the Internet. It includes electronic buying or selling of products over the Internet. E-commerce uses mobile commerce, electronic funds transfer, supply chain management, and Internet marketing. Online distribution has emerged as a key sales channel for the marketof fermented milk, as leading players in the industry are expanding into e-commerce, owing to the rise in internet penetration across the globe. Moreover, an online sales channel is widely accepted by consumers in developed regions such as North America and Europe, owing to the rise in the adoption of mobile phones. This factor is expected to boost the market in the future.

Recent Developments

• August 2022- Fonterra and Royal DSM announced that they are introducing a start-up to commercialize fermentation-derived proteins with dairy-like properties as part of a "complementary nutrition partnership." Since 2019, the two companies have collaborated to develop an in-depth comprehension of how to use precision fermentation science and technology to create proteins comparable to those found in dairy.

• November 2022- Phyx44, India's First Full-Stack Precision Fermentation Business, raised USD 1.2 million in seed funding. The Bangalore-based company Phyx44 claims to produce whey and casein proteins and fatty acids present in dairy without the lactose or environmental impact of conventional dairy.