Svenska mejerier stärker positionerna : incitament för lansering av lågprismjölk

University essay from SLU/Dept. of Economics

Abstract: The competition in the milk industry has increased during the last couple of years. This is a result of the trade barrier that dissolved when Sweden entered the European Union. The membership signifies an increased internationalization for the dairies, which has also increased the existence of low price chains in the Swedish food market. The increased share of private brands has strengthened the competitive situation for the manufacturer- owned brands. Three of Sweden's seven largest dairies have now decided to launch a low price milk to cope with the competitive situation. The aim of this master's thesis is to identify and describe the incentives that caused these large dairies in the Swedish market to introduce low price milk. It refers to establishing what the introduction will mean to the dairies, strictly with regards to trade. This study has been made possible due to the interviews with department managers at the branch organisation, Swedish Milk, along with those at Arla Foods AB, Gefleortens Mejeriförening and Milko. Arla was the first Swedish dairy to launch low price milk and that was considered to be a reaction to the development in the market. It was a resulted of an increased sale of imported milk and the dissolving of geographic divisions between the dairies. Not long after, the other two dairies introduced their own co produced low price milk. This was because they felt forced to react quickly to this situation to prevent Arla from obtaining a dominant position in the market. The interesting thing is that the introduction of low price milk is not a result of consumer demand; it's rather the effect of increased pressure from the food stores. Earlier studies illustrate that consumers do not prioritise low price in their choice of milk. However, the consumers in Sweden consider that nationally produced milk is worth more to them. The advantage with this preference is that it may result in a strengthened position for the Swedish dairies. The untreated milk product is from the exactly same milk farms as the Swedish premium milk and these two alternatives are of the same quality. The difference between the two alternatives is the pasteurization process, which leads to an extended shelf life. The amount of added vitamins is in accordance with the recommendations from the National Food Administration. The production methods and the low price packaging are a contributing factor to the low price. The costs of marketing are eliminated due to the fact that the dairies not want to popularise low price milk. Arla chose to mark their low price milk with their logotype. The other two dairies have rejected this strategy because they do not want to be associated with low price products. Arla indicate that the low price milk might be possible to gain volume and market shares at the cost of premium milk, which the other two dairies not agree in. However, all of them are expecting to be able to strengthen their positions in the market by introducing low price milk.

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