Competitiveness of the Dairy Supply Chains – A Comparison of Eight EU Member States around the Baltic Sea

Abstract

This comparative study covers a dozen indicators of dairy chain competitiveness in the field of foreign trade, economic performance and growth. Structural changes of the milk production and dairy industry were reviewed in eight member states around the Baltic Sea: Germany, Poland, Lithuania, Latvia, Estonia, Finland, Sweden and Denmark. As one of the fundamental competitiveness indicators productivity growth was calculated for both milk production and dairy industry of these countries. Total factor productivity has been fast in the milk farming of old member states, but in dairy industry that new member states have been apparently catching up. 

Market structure has changed rapidly with the concentration of both milk farms and dairy manufacturing companies. Ownership is also a structural indicator affecting the functioning of the dairy chain. Several of the largest dairies in Europe are cooperative based companies, some of them have followed a moderate and cautious internationalisation strategy while others have built up a wide international base. There are also new cooperatives emerging especially in the Baltic countries. Foreign ownership has gained a strong foothold.

Foreign trade performance indicates the overall competitiveness of the chain. During the past decade the trade of raw milk has multiplied among the EU members in Northern Europe. Most of the countries in the comparison have had a strong positive and increasing balance in the foreign trade of dairy products, although the pace of development differs among the countries.

Dairy is one of the most significant part of the food supply chains in Europe, and it has long traditions and good competitive positions in many Northern European EU members. Now the sector faces turbulent times.  The study concludes with an assessment on the potential capacity of national dairy supply chains to compete on their domestic and on the export markets in the future, in a time of abolished quotas and volatile world market prices.

Key words: dairy, milk, farm, processing, total factor productivity, competitiveness, foreign trade, ownership, Northern Europe