I.

Introduction
The European Union market is regarded as being the most diversified and very vast
with a composition of 27 member countries hosting over 500 million people. This vast
diversity reflected in its vast disparity in consumer preference and taste for the diverse
region it covers. This has made the EU a participant in all forms of international trade
and economic activity. (The European Union, n.d.)

The most important is the EU dairy sector. Due to the increased demand of the
consumer regarding health and innovative food items, yogurt became a part of the
majority of every European's household.

This is consistent with an increased consumer trend related to nutrition and well-
being, responsible for driving innovation in new food products toward these changing
attitudes. (European Union, 2023) Thus, in most everyday diets, there is such a strong
market for dairy products including yogurt owing to the fact that there are high-
quality standards concerning food and safety. (European Commission, 2022)

The importance of the EU Food Industry is growing. A fair number of leading

food enterprises are located in the EU. However, competitiveness of the European
Food Industry is weak compared to the US and Canada (Banse et al., 2009)

Both big businesses and SMEs, such as those in the ingredients and packaging
sectors, contribute to innovation. Large companies dominate the dairy business in
northwest Europe. The dairy sector is centred in the Netherlands. There are numerous
medium-sized and small-sized businesses in France and Germany, but not many
major businesses. Both the number of new entrants and medium-sized and small
businesses are greatest in Italy.

From 2004 to 2006, the number of dairy firms in the top 10 rose. The majority of
nations have seen increases in worker productivity. The global market is expanding
more quickly than exports from Europe.(Wijnands et al., 2007), the increase in value
added and improvement in labour productivity make up for the decline in market
share.

In conclusion, despite being a worldwide player and innovator, the EU dairy industry
is losing market share. The competitive standing is only mediocre.
In contrast, The Kuwait Dairy Company is widely known to be shortly identified as
Kuwait Danish Dairy, one of the longest established and most conspicuous amongst
food and beverage manufacturers in the Arabian Gulf region. Founded in 1962, the
company has grown into a synonym for high-quality fresh dairy products in Kuwait
and beyond. (About KDD, n.d.)

In light of this, our paper will analyze the factors affecting KDC’s entry into the EU
market.

II. Competitive (Comparative) Advantage in the EU Market

Competitive advantage, in the EU market comparative approach, comes through a

number of significant factors that mould the economic dynamics of the region and its
positioning in the global marketplace. The main constituting elements for competitive
advantage in the case of the EU are as follows :

1. Strong Industrial Base

With its rich industrial heritage, the EU stands as a historical hub in manufacturing
and technological innovation. This foundation gives it a diversified economy
comprising sectors such as automobiles, biotechnology, renewable energy, among
others, contributing to giving it a cushion against economic downtime cycles. (Jurak,
2023)

2. High Standards and Quality

Products made in Europe enjoy worldwide recognition for their quality, safety, and
sustainability, indeed, the EU maintains some of the world's most strict regulatory
frameworks that ensure high-quality standards and provide countries with a
competitive advantage in the global economy. Precisely because of this reputation for
quality, it is easier for European businesses to set themselves apart from the
competition (Galán Hernández, 2024)

3. Single Market Benefits

Through EU single market, free movements of goods, services, capital, and labors are
allowed across its member states. This integration provided a huge amount of
consumer base, more than 440 million people, that enables the businesses to reap the
economies of scale and wider markets without substantial barriers (Jurak, 2023)

4. Innovation and Research Investment

The EU heavily invests in R&D, hence driving innovation at all levels. A strong
university and research institutional network that is driving technology and
productivity improvements supports them. Simultaneously, there has also been a
realization that Europe must do better in emerging technologies of AI and quantum
computing to stay competitive (European investment Bank, 2016.P22)

5. Digital Transformation

Ongoing digital transition will be vital to enhancing competitiveness. For European

firms, the adoption of key enabling technologies such as artificial intelligence,
Internet of Things, and robotics will bring operational efficiency and innovation in the
business model. The e-commerce expansion offers direct access to international
markets too (Galán Hernández, 2024)

6. Sustainability Focus

The EU is thus committed to sustainability and the protection of the environment,

which has increasingly turned into a source of competitive advantage for global
consumers who are taking into consideration sustainability criteria. Initiatives such as
the European Green Deal would thus allow the EU to be in the vanguard in
sustainable industries while combining the latter with long-term economic growth
(EUROPEAN COMMISSION, 2023,P02)

7. Strategic Trade Policies

The EU is open to diversified trade policies with a view to increasing competitiveness

in the global market. Supply chains related to critical raw materials can be secured
through trade partnerships and agreements while reducing dependencies on non-EU
countries (EUROPEAN COMMISSION, 2023,P16)
III. Product Quality & Differentiation

KDC's emphasis on quality fresh dairy products, mainly yogurt, places it in an

enviable position within the European market, which has become more health and
freshness-conscious. The EU market is indeed characterized by increasing demand for
natural and organic products, where high concern for quality constitutes a strong
source of competitive advantage for KDC.

1. Health Consciousness: An increasing share of European consumers have

become health-oriented, with a tendency to favor those kinds of foods that
provide health benefits. KDC could also use the health benefits of its yogurt
products, such as probiotics and natural ingredients, to further influence
demand for the product. (About KDD, n.d.)
2. Quality Differentiation: The company should differentiate its products by
focusing on superior quality. This may be done by using superior sourcing
practices and implementing stricter quality control measures. Given that the
EU has mostly favored high-quality food products, this will go a long way in
ensuring brand loyalty among these consumers. (Schetter, 2020)

Here is the Question: Does the Advantage Translate to the EU Market?

Advantages at home, such as local sourcing and strong brand reputation, may not
translate to the EU market without adjustments.

1. Local Sourcing: In the domestic market, this develops KDC's brand image.
However, to be able to export to the EU, KDC will have to consider
compliance with EU regulations associated with food safety and traceability
standards. To ensure success, these practices will need to be adapted to the EU
standards.
2. Brand Reputation: The built reputation of KDC may not be that well
recognized in Europe. It will have to build brand reputation through focused
marketing campaigns and alliances with local distributors to win consumer
confidence in the competitive milieu.
 - Sustainability of Advantage

Whether the competitive advantage of KDC is sustainable in the changing EU market

could be considered from the following different aspects:

1. Continuous Innovation: KDC should also focus on continuous product

innovation to maintain its competitive edge through adapting new tastes,
changing consumer preferences, and trends evolving in the dairy industry.
This involves coming up with new flavors, innovative packaging, and health-
related product developments.
2. Legal Compliances: The EU has set strict regulations related to food safety
and environmental sustainability. Production processes should be aligned with
such regulations in order to keep the market position of KDC intact.
3. Market Dynamics: Competition is immense in the European market.
Economic conditions, consumer attitudes, and technological changes all shape
these dynamics. KDC will need to be agile, quick, and nimble with respect to
these changes if the company is going to sustain an advantage over an
extended period of time

IV. Market Size and Growth

The EU dairy product market, especially yogurt, holds immense growth opportunities
on the back of increasing health awareness and demand for functional foods among
the growing population. While the market is currently recording a steady increase,
yogurt stands as the fastest-growing segment. Most significantly, with positive
purchasing power and changing consumer tastes and preferences, the EU dairy market
presents an enticing opportunity for new entrants like KDC.

1. Current Market Size of Dairy Products

Whereby, the projected value of the EU yogurt market for the year 2024 is around
USD 37.03 billion. As such, it denotes the impact or the place of yogurt in the general
scheme of things in the dairy market, further entrenching this product in European
public's consumption list. The current projection of the dairy market of the European
Union is expected to hit around USD 204.62 billion for the year 2024. (Europe Dairy
Market Size | Mordor Intelligence, 2024)

2. Tendencies of Development within the Dairy Market

The overall EU dairy products market is set to grow at a CAGR of 5.86% between
2024 and 2029, ( Functional Dairy Products Market, n.d.) reaching a volume of USD
399.50 billion by 2029. Increased health awareness acts as a major driving factor;
demand for functional foods is growing as the trend moves toward healthy eating. In
contrast, the yogurt segment, with the influence of new flavors and consumers
indulging, may see a growth of 4.13% CAGR during this period. (Mordor
intelligence, 2024)

3. Fastest-Growing Segments

Among all the segments of the dairy market, after milk, yogurt can be considered as
the second-fastest-growing category in value and volume. Also, demand for
functional dairy is growing rapidly and is likely to rise at a CAGR of 4.5% between
2023 and 2033. Furthermore, consumption of healthy alternatives to dairy products is
also gaining momentum among consumers, with lactose-free and low-fat products
gaining increased momentum. (Edlong & Osnaya, 2023)

4. EU Dairy Market Attractiveness for KDC:

The EU dairy market provides a very attractive opportunity for KDC, especially
considering good growth prospects and promising consumer behavior. In the health-
and-wellness-oriented region, there is increased demand for functional dairy products
that KDC may answer with its innovative offerings. Besides, European consumers
have very stable purchasing power that is on the rise to premium and differentiated
dairy products. (European Commission, 2021) Such a consumer behavior perspective
corresponds to changes happening in the market dynamics and thus would be a good
timing for KDC to get into the market and capture the share.

Entirely different from the U.S. experience, entry into the European Union dairy
market is a raft of overcoming cultural diversity, legal regulations, trade barriers, tax
implications, risks in currency exchange, and logistic challenges. Knowing and
adapting to the factors will position KDC for success in this lucrative, yet highly
competitive, marketplace.

V. Cultural Differences and Navigation

Cultural differences in dairy product consumption vary significantly throughout
Europe. As an example, yogurt is mostly eaten either as a dessert or as a snack in
France, a fact that underlines a love for rich flavors and traditional recipes. On the
other hand, Germans are more health- and sustainability-conscious, hence demanding
functional and low-fat yogurts. (Adamczyk et al., 2022)

Finally, as a general rule, Polish consumers tend to hold a much more positive
attitude towards milk products than their German and French counterparts. These
insights, therefore, evoke that while developing product lines, KDC should consider
regional preferences to present their offerings in a manner that will surely attract the
taste of varied consumers.

To effectively penetrate the EU market, KDC is supposed to implement localization

strategies on flavors, branding, and packaging for different countries. This can involve
the selling of various flavors of yogurt that appeal to local tastes, such as fruit or low-
fat versions in Germany, while introducing a thicker, more sumptuous product in
France. (The Mind Market, 2023) In terms of packaging, too, cultural norms and
preferences should be brought into play: German consumers could be made aware of
environmentally friendly packaging; in France, the value of the product may be more
appropriately conveyed through high-end packaging.

VI. Legal Dimensions

KDC should be able to know all the regulations that have been set by the European
Union concerning contracts. This is especially so in regard to fairness and
transparency of consumer contracts. The Commission is also working towards giving
one set of rules to govern online purchases. As such, it will be compulsory for the
company to strictly abide by the standardized directives of the EU so that the interest
of customers is protected. It is vital that KDC comprehend all these regulations so that
it doesn't fall into any trap which may be destructive enough to make it fail to operate
successfully within this jurisdiction. (your Europe, n.d.)

The protection for the KDC's trademarks, branding, and recipes within the EU can be
aided by the Trademark Regulation available at both national and EU levels. Where a
recipe itself cannot be copyrighted, it can still be legally protected as a trade secret
through confidentiality agreements. KDC should make it a priority to register its
marks in the important markets that help to identify them so that the marks maintain
their distinctiveness and are not infringed upon. (European Parliament, n.d.)

The legal standards of food labeling and ingredient disclosure in the EU are very
exacting. KDC will therefore be obliged to have its packaging clearly indicate such
information as ingredients used in its products, their nutritional values, and possible
allergens in conformity to EU regulations in order to help gain consumer confidence.
Compliance of this nature will protect not just interests of the company but also its
reputation in the market. (Measurlabs, n.d.)

Trade Barriers (Tariff and Non-Tariff)

Tariffs levied on the importation of dairy products to the EU will have a significant
impacts on KDC pricing strategy and profitability. Traditionally, the EU has slapped
high tariffs on imported dairy products to ensure that the local production does not
face much competition from imports, and this may be compelling KDC to adjust
prices in such countries while taking into consideration the additional costs
occasioned by such tariffs. KDC is supposed to do proper market analysis to
determine how such tariffs are likely to affect their pricing strategy.

Besides the tariffs, KDC has also to keep in mind non-tariff barriers, like the strict
technical, health, and environmental standards. Among EU food safety regulations are
specific packaging standards and sustainability practices that have to be met for
market access. KDC needs to formulate an effective strategy keeping in mind all the
regulatory requirements to align the products and processes regarding meeting the
expectations of the market as well. (International Trade Administration, n.d.)

VII. Tax Issues

KDC needs to take into consideration the varying implications of VAT within
different member states of the EU. While the standard rate of VAT is at least 15%
within the EU, various countries offer a reduced rate for commodities like dairy
products. These variations currently create a difference in the price set by KDC.
Consequently, VAT needs to be taken into consideration while planning the financial
aspects of the EU operation.Other tax considerations, such as excise taxes payable on
imported dairy products in different EU countries, should also be analyzed by KDC.
Although excise duties would normally apply to alcohol and tobacco products, an
understanding of such would give an insight into the wider tax environment in which
KDC would be operating. Care must be taken to minimize the financial burden of
cross-border trade and maximize opportunities for tax efficiencies.

There is some risk because of currency fluctuations between the Kuwaiti Dinar and
the Euro that may affect profitability considerably, KDC should develop a hedging
strategy by using forward contracts or options. Such instruments will provide the
company with a pre-determined exchange rate and safeguard against unfavorable
movements once the transaction is in process.

Additional Challenges

Resulting from this, the transportation of the dairy products to the EU presents special
logistical challenges, especially those related to cold chain management. Keeping the
dairy at controlled temperatures during transportation will be necessary to maintain
product freshness and meet the standards set by the EU. (Tank Transport, 2024)

KDC needs to invest in effective and reliable logistics solutions that will help the
company address such challenges without compromising on product quality.
(International Trade Administration, n.d.)

In this light, establishing a distribution network within the EU should be done by

KDC through alliances with local distributors and retail chains that would know the
regional markets. This would help KDC through the complexity of market entry,
using established networks to effectively reach the consumer. Discuss the cultural
differences KDC may encounter in the EU, including varying tastes and preferences
for dairy products across countries (e.g., consumption of different types of yogurt in
France vs. Germany). (Francis Clark, 2023)

VIII. Conclusion

Due to its reputation for quality and furthering the latest European trends concerning
healthy and functional foods, such as yogurt, Kuwait Danish Dairy stands an excellent
chance of breaking into the European market. Simultaneously, KDC will face the
problems of diverse cultural preferences among the people of each country, strict food
regulations in the EU, and the logistics issues concerning cold-chain management. All
 these factors would require critical adjustment and strategic planning. While KDC
may look very promising in the EU, it must focus on continuous product innovation,
localized marketing, and stringent regulatory compliance. Partnerships with local
distributors and addressing logistical challenges will also remain the pillars for
sustained growth in this competitive market..

References

Adamczyk, D., Jaworska, D., Affeltowicz, D., & Maison, D. (2022). Plant-Based Dairy
Alternatives: Consumers' Perceptions, Motivations, and Barriers-Results from a
Qualitative Study in Poland, Germany, and France. Nutrients, 14(10), 2171.
https://doi.org/10.3390/nu14102171
Banse, M., Batowska, A., Gardebroek, C., Nesha Turi, K., Wijnands , J. H. M., & Poppe, K.
J. (2009). Competitiveness of the EU dairy industry .
Europe Dairy Market Size | Mordor Intelligence. (2024). Mordorintelligence.com.
https://www.mordorintelligence.com/industry-reports/europe-dairy-market/market-
size
European investment Bank. (2016). Restoring EU competitiveness. European Investment
Bank. https://www.eib.org/attachments/efs/restoring_eu_competitiveness_en.pdf
Francis Clark. (2023, October 3). Challenges in the dairy industry. LLP Site. https://pkf-
francisclark.co.uk/insights/challenges-in-the-dairy-industry/
Functional Dairy Products Market. (n.d.). Functional Dairy Products Market.
Www.futuremarketinsights.com.
https://www.futuremarketinsights.com/reports/functional-dairy-products-market
Galán Hernández, J. (2024, April 22). How to strengthen the competitiveness of the
European Union? Telefónica. https://www.telefonica.com/en/communication-
room/blog/how-to-strengthen-the-competitiveness-of-the-european-union/
Hernández, J. G. (2024, April 22). How to strengthen the competitiveness of the European
Union? Telefónica. https://www.telefonica.com/en/communication-room/blog/how-
to-strengthen-the-competitiveness-of-the-european-union/
https://growthlab.hks.harvard.edu/files/growthlab/files/2020-04-cid-fellows-wp-126-quality-
differentiation.pdf
International Trade Administration. (n.d.). EU - value added tax (VAT).
Www.trade.gov. https://www.trade.gov/country-commercial-guides/eu-value-
added-tax-vat
Jurak, N. (2023, June 8). EU’s competitiveness strategy: from crisis management to long-
term vision. Publyon. https://publyon.com/eus-competitiveness-strategy-from-crisis-
management-to-long-term-vision/
Jurak, N. (2023, June 8). EU’s competitiveness strategy: from crisis management to long-
term vision. Publyon. https://publyon.com/eus-competitiveness-strategy-from-crisis-
management-to-long-term-vision/
Measurlabs, P. T. (n.d.). Food labeling requirements & testing in the EU | measurlabs.
Measurlabs.com. https://measurlabs.com/blog/food-labeling-requirements-and-
testing-in-europe/
Measurlabs, P. T. (n.d.). Food labeling requirements & testing in the EU | measurlabs.
Measurlabs.com. https://measurlabs.com/blog/food-labeling-requirements-and-
testing-in-europe/
Schetter, U. (2020). Quality Differentiation, Comparative Advantage, and International
Specialization Across Products Working Papers.
Tank Transport. (2024, January 16). Dairy supply chain logistics: Ensuring safety and
efficiency in... Tank Transport. https://tanktransport.com/2024/01/dairy-supply-chain-
logistics-2024/
The European Union. (n.d.). EU - General Market Overview | CE Intelligence.
Www.ceintelligence.com.
https://www.ceintelligence.com/content_manager/contentPages/view/eu-general-
market-overview
The Mind Market. (2023). Europe Flavoured Milk Market Outlook, 2028. MCKINSEY and
WELL MANAGEMENT CONSULTANCIES L.L.C.
https://mckinseywell.com/products/europe-flavoured-milk-market-outlook-2028
your Europe. (n.d.). Contracts with consumers. Your Europe.
https://europa.eu/youreurope/business/dealing-with-customers/consumer-contracts-
guarantees/consumer-contracts/index_en.htm