Competitiveness Makes a Difference in the European Dairy Sector

Abstract

SummaryIn the post‐quota era, competitiveness has become the key determinant of success of dairy sectors within the EU. To understand the evolution of the sector, we identify key determinants of the competitiveness of national dairy chains by combining an analysis of competitiveness indicators with case‐studies in selected EU countries. Around the Baltic Sea region, we find steady productivity growth on dairy farms in the old Member States, and no evidence that the newer Member States are managing to reduce their productivity gap. In contrast, growth accounting for the dairy processing sector indicates that newer Member States are catching up in terms of productivity. Competitiveness is heavily influenced by the efficiency with which economic units operate within their national dairy supply chains, in particular with respect to cost management, sales and marketing. Although there exist numerous quantitative competitiveness indicators, we stress the importance of several qualitative factors that strongly influence competitiveness, for example, the relationships of dairy chain actors with other economic sectors, the chain's weight in the national economy, national policy decisions, the availability of supporting services and the nature of public perceptions of the sector. Although often overlooked in competitiveness analyses, those factors should be given due consideration.