3 EXECUTIVE SUMMARY DAIRY PROCESSING EQUIPMENT MARKET - GLOBAL FORECAST TO 2020

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1 3 EXECUTIVE SUMMARY The global dairy processing equipment market was valued at USD 7.99 billion in 2014 and is projected to reach USD billion by 2020, at a CAGR of 5.4% from The growth of this market is attributed to the increasing demand for dairy products and technological advancements in dairy processing equipment. The processes involved in dairy product manufacturing include pasteurization, homogenization, filtration, evaporation, and separation. To enable these processes, dairy processors use equipment such as pasteurizers, homogenizers, filters, separators, evaporators, and other equipment such as churning equipment, crystallizers, and cheese vats. There have been various factors which have played a major role in driving the growth of the dairy processing equipment market. The major drivers are the rising global consumer demand for dairy products, increasing dairy production, changing needs, taste & preferences among consumers, and growing demand for healthier and palatable dairy products. The rising health consciousness among people has fueled the consumption of processed dairy products such as skimmed milk. Manufacturers are producing low fat, organic, and nutrient-fortified dairy products to cater to changing consumer preferences. This requires manufacturers to acquire advanced dairy processing equipment. The abolition of milk quota in the EU in 2015 has also been a driver for market growth. This abolition has upsurged milk production and has encouraged leading dairy food manufacturers to install advanced machinery to enhance their processing capacity. The dairy processing equipment market, by type, is segmented into pasteurizers, homogenizers, separators, evaporators & drying equipment, membrane filtration equipment, and others. Pasteurizers dominate the dairy processing equipment market. This segment is estimated at USD 1.76 billion in 2015, and is projected to reach USD 2.26 billion by 2020, at a CAGR of 5.1% during the forecast period. Pasteurizers are closely followed by homogenizers, which held a share of 20.3% of the overall dairy processing equipment market in In terms of application, the dairy processing equipment market is divided into six segments, namely, processed milk, cream, milk powders, cheese, protein ingredients, and others. The processed milk segment held the largest share of 21.7% of the dairy processing equipment market in 2014, closely followed by cream, which held a share of 20.9% in the same year. The global dairy processing equipment market is highly competitive, with a large number of global and local market players. Players in this market have adopted various strategies to expand their global footprint and increase their market share. Agreements & contracts, partnerships, new product launches, expansions & investments, and mergers & acquisitions are some of the key strategies adopted by players to achieve growth in the dairy processing equipment market. The global market for dairy processing equipment is dominated by top players such as GEA Group (Germany), The Krones Group (Germany), SPX Corporation (U.S.), Tetra Laval (Switzerland), and Alfa Laval (Sweden). 33

2 FIGURE 10 DAIRY PROCESSING EQUIPMENT MARKET SNAPSHOT (2015 VS. 2020): EVAPORATORS & DRYING EQUIPMENT SEGMENT TO EXHIBIT FASTEST GROWTH FROM 2015 TO 2020 (USD MILLION) 2015-e 2020-p CAGR Pasteurizers 1, , % Homogenizers 1, , % Separators 1, , % Evaporators & drying equipment 1, , % Membrane filtration equipment 1, , % Others* % E: Estimated; p: Projected *Others include churning equipment and crystallizers Source: National Greenhouse Manufacturers Association, U.S. Department of Agriculture, Company Websites, Investor Presentations, Expert Interviews, Industry Journals, Magazines, and MarketsandMarkets Analysis In 2015, the use of pasteurizers is estimated to be the largest in the market for dairy products, in terms of value. The evaporators & dryers segment is projected to grow at the highest CAGR of 6.3% during the forecast period. It is estimated to be valued at USD 1,446.3 million in 2015 and projected to reach USD 1,961.2 million by The demand for evaporator & dryer from dairy processors is increasing in Europe, Asia-Pacific, Latin America, and RoW, whereas in North America, the demand for membrane filtration is on the rise. In developed markets, consumer demand for fortified dairy products such as whey-based products & milk protein dairy products is on the rise. Protein concentrates and milk powders are used as fortifiers in these products and are processed through membrane filters and evaporators & dryers. Hence, the market for these equipment is growing at a higher CAGR. 34

3 FIGURE 11 MILK POWDER IS PROJECTED TO BE THE BEST MARKET FOR INVESTMENT DURING THE FORECAST PERIOD 7.0% CAGR ( ) 6.0% 5.0% 4.0% 3.0% 2.0% 5.7% 5.5% 5.3% 5.2% 4.4% 1.0% 0.0% Milk Powders Protein Ingredients Cream Cheese Processed Milk Others *Others include yogurt and buttermilk Source: Research Journals, Related Publications, Food Magazines, Expert Interviews, and MarketsandMarkets Analysis The above figure represents the relative growth rates of the different applications of dairy processing equipment. The milk powder segment is projected to grow at the highest CAGR of, in the dairy processing equipment market during the forecast period. Milk powder was closely followed by the protein ingredients segment, which is projected to grow at a CAGR of 5.7% during the forecast period. Key demand growth within the dairy industry will be in the milk powder segment, especially skimmed milk powder for infant nutrition, in Thailand, China, and Singapore. The demand for cheese is also projected to grow globally, at a CAGR of 5.3% from 2015 to

4 FIGURE 12 DAIRY PROCESSING EQUIPMENT FOR PROCESSED MILK HELD THE MAJOR SHARE IN , ,600.0 USD Million 1, Processed Milk Cream Milk Powders Cheese Protein Ingredients Others* , , , , , *Others include yogurt and buttermilk Source: Research Journals, Related Publications, Food Magazines, Expert Interviews, and MarketsandMarkets Analysis In terms of application, the processed milk segment dominated the dairy processing equipment market and was valued at USD 1,733.7 million. The processed milk segment was closely followed by the cream segment, which was valued at USD 1,674.8 million in

5 FIGURE 13 DAIRY PROCESSING EQUIPMENT MARKET SHARE (VALUE), BY REGION, 2015: ASIA-PACIFIC IS PROJECTED TO BE THE FASTEST-GROWING MARKET NORTH AMERICA 20.3% 5.3% EUROPE 29.4% 5.5% ASIA-PACIFIC 32.6% LATIN AMERICA 5.4% RoW 11.6% 3.4% Market Share % CAGR% Note: CAGR is for the period from 2015 to 2020 Source: National Greenhouse Manufacturers Association, U.S. Department of Agriculture, Company Websites, Investor Presentations, Expert Interviews, Industry Journals, Magazines, and MarketsandMarkets Analysis The Asia-Pacific region accounted for the largest share of 32.6% of the global dairy processing equipment market in This region is also one of the largest markets for dairy production and processing, making it the largest market for dairy processing equipment, followed by Europe. The dairy industry in the Asia- Pacific region is expected to grow faster than the mature markets of North America and Europe. It was valued at USD 2,349.1 million in 2014 and is projected to reach USD 3,685.0 million by This is due to the increasing demand for dairy foods, which is driven mainly by increased urbanization. China is the leader as the country s younger population is increasingly incorporating dairy into its daily diet. India is the world's largest producer of milk with most of its production used domestically as South Asians typically consume a dairy-rich diet. The demand for dairy foods is high in India and China, although the processing market in these countries is unorganized. The largest contribution for dairy processing comes from Australia and New Zealand. There is growing demand for fortified dairy products as the manufacturer s objective is to add value to the product. Hence, there is an increase in demand for dairy processing equipment. Another factor accelerating the growth is the technological advancement such as non-thermal pulsed electric field, high pressure (hydrostatic) or cold pasteurization, thin film UV light treatment, and ultrasonication in dairy processing equipment. 37