The dairy sector is a fundamental pillar of the Azores economy. Due to the soil and climate conditions, the Region enjoys competitive advantages in this sector compared to a significant part of the Portuguese productive territory.
In January 2017, there were about 2040 dairy farms in the Azores, with São Miguel, Terceira and São Jorge islands accounting for 55%, 27% and 8% of the total, respectively.
Between 2010 and 2014, the amount of cow's milk delivered to industrial units in the Azores remained relatively steady at around 550 million liters. In the years 2015 and 2016, the amount of milk delivered slightly surpassed 600 million liters.
São Miguel is responsible for about 65% of the delivered milk, followed by Terceira with 25% and São Jorge with 3%. The average productivity of farms from these islands is about two to three times higher than those from smaller islands.
The price of raw milk paid to the farmers varies according to multiple criteria, including hygienic-sanitary and geographical factors. In larger islands the price is slightly higher. At the beginning of 2017, the average values in the Region were:
• €0.272/kg for milk from producers who have a cooling tank in their holdings and the transportation is paid by the buyer;
• €0.253/kg for milk from producers who deliver it at buyer’s reception stations and the transportation is paid by the seller.
In the secondary sector, the dairy industries employ about 1300 workers, 60% of them in São Miguel Island. About 70% of the companies operating in this sector employ less than 10 workers.
Manufacturing Industry Characterization
Traditionally, the dairy industry consisted mostly of small industrial units located close to the dairy farms. Nowadays, due to developments in storing and preserving processes for fresh milk, the productions tends to be concentrated in larger units. Still, in some of the Azores islands there are small production plants where the manufacturing process are carried in an artisanal way, particularly regarding the manufacturing of cheese.
Production and Marketing
According to the National Dairy Industry Association, the Azores dairy production represented during 2016:
- Cheese: 50% of the total Portuguese production. About 26,600 tons and 114M€ exportation revenues.
- Packaged Milk: 31% of the total cow milk commercialized in Portugal. More than 119,400 tons and about 54M€ exportation revenues.
- Powdered Milk: 75% of the total Portuguese production. About 17,000 tons and over 40M€ exportation revenues.
- Butter: 25% of the total Portuguese production. About 10,700 tons and more than 36M€ exportation revenues.
In 2016, the Azores produced a total of 136.5 million liters of milk, 99,96% of which UHT. São Miguel Island was responsible for 84% of the production while Terceira Island represented 14%.
Semi-skimmed UHT milk represented 85% of the total UHT production, with the skimmed and whole milk versions representing 10% and 4%, respectively.
Among other dairy products, Cheese is the category with the largest production values in the Region representing 42% of the 2016 total.
The following products are: Powdered Milk (22%); Whey (19%); Butter (16%); Yogurt (0.7%); and Cream (0.3%).
Critical Success Factors:
- Cattle graze during every month of the year;
- Higher nutritional and dietary value of milk (in these parameters, the milk of the Azores is among the best in Europe):
Comparison of 9 cheese samples (g/100 g FA)
- All dairy farms are subject to the Raw Milk Control Plan;
- All producers are certified and production structures are in compliance with land and environmental regulations;
- Periodic inspections are held to verify all parameters of health and hygiene;
- High average annual rainfall (more than 1,000mm per year) evenly distributed throughout the year;
- Atlantic climate with mild average temperatures;
- Soil productivity guaranteed throughout the year;
- Continuous water supply systems with virtually zero costs for farmers;
- Human resources with higher education and specific training;
- Brands with recognized quality;
- Certification and geographical recognition of final products;
- Attractive incentives for investment and job creation.
- Department of Agricultural Sciences - University of the Azores: provides higher education and skills development for human resources in the agriculture sector (approximately 450 students enrolled and 1400 graduates in the last 5 years);
- Center for Research and Agricultural Technologies of the Azores (CITA - A) - research and services unit in the field of agricultural and environmental sciences;
- Biotechnology Centre of the Azores (CBA): research in the fields of Agricultural, Animal, Plant, Food and Environmental Biotechnology;
- Regional Veterinary Laboratory: contributes to food safety and animal health in the Azores; conducts laboratory tests and examinations for animal products monitoring;
- Increase the value added of final products through different processing techniques, as well as the incorporation/improvement of the organoleptic, functional or other properties which are more valued in the market;
- Partnerships of Excellence with Research and Development Centres (e.g., University of the Azores, Agricultural Research and Technology Centre of the Azores – CITA, etc.) where resources are allocated to explore new potential;
- Potential for innovation: market for new products with higher milk incorporation, especially through strategic partnership with other food products (e.g. chocolate; fruit yogurt; dietary and sports supplements, etc.);
- Potential for "Organic Certification" of milk production and its contribution towards adding value to final products (since domestic production is insufficient, the majority of the organic milk sold in Portugal is imported from France);
- New trends in the market such as nutraceutics:
- It is considered by some as a new scientific subject. Combining "nutrition" and "pharmaceutical" nutraceutics studies the phytochemical components present in foods with the aim of discovering their medical and health benefits. Its overall objective is to ally the nutritional value of the products to their largely untapped therapeutic value.
- MarketsandMarkets estimates that the market for nutraceutical ingredients will grow from € 22.1 billion in 2013 to € 31.3 billion in 2018.
- Currently, the Azores has several financial incentives for Research & Development, which can be used as a source of funding for new projects that explore this market potential.
- Demand growth in probiotics world market:
- According to the World Health Organization, probiotics are living organisms that, when administered in adequate amounts, confer health benefits to their hosts. Probiotics effects are reported to range from intestinal bacterial balance and cholesterol control to reduced cancer risk.
- In 2016, Euromonitor International valued this market at around € 40 billion.
- Most probiotics reach the consumers mainly through processed yogurt (76% of sales). Fermented milk products account for 14% of the market. Distribution in the form of supplements is growing fast representing currently 10% of probiotic sales.
- According to the same source, the current market for probiotic food supplements (€ 4 billion) will grow by 38% between 2016 and 2021. Sales growth of these supplements is expected to surpass those of the remaining categories, including glucosamine, multivitamins, calcium, omega-3, CoQ10 and protein.
- In Europe, Italy is by far the largest market for supplements (€ 500 million), followed by Russia (€ 177 million), France (€ 104 million), Poland (€ 72 million) and Germany (€ 64 million).
Azores meat is certified with Protected Geographical Indication (PGI) – livestock are almost exclusively pasture-fed, guaranteeing the quality of the meat.
- The Azores are the only place in Europe where tea is produced at industrial level.
- There are three well defined wine regions producing internationally recognized certified wines.
- The islands are one of the main E.U. producers of Proteas.
For market segments seeking typical products, natural identity and quality, the Azores offer high quality natural and home-made products:
- Soft Drinks and Mineral Water;
- Fruit (Pineapple and Passion fruit);
- Home-made Products (jams and leather products).
Azores products can be associated with this unifying brand and benefit from:
- Regional identification of product origin, synonymous with quality;
- Product differentiation because of the outstanding attributes of the Azores - nature, high environmental values, diversity and natural exclusivity;
- Increase value added to Azorean products and services, stimulating their preference;
- Communication campaigns and brand marketing, with undeniable contribution to increasing the visibility of the associated products and services;
- Contributions on exportations and production growth.