Greek consumers’ preference for healthy foods and the frequent launch of new dairy products are expected to drive the dairy industry forward in the next two years, a study by the Foundation for Economic and Industrial Research (IOBE) released yesterday has suggested. The report said the local dairy industry is set to expand at an average annual rate of 4 percent up to 2003 and the yogurt market by 4.7 percent, continuing the strong pace of growth recorded since 1998 and making it one of the fastest-growing sectors in Greece. IOBE said the industry is set to benefit from Greeks’ shift to healthier foods in the last few years and the launch of a diverse range of value-added products following a period of heavy investments. It said the modernization of the sector, relating principally to production facilities and the distribution network, has been made possible by favorable development laws and regulations enacted in the past decade. In the period 1990-1999, dairy manufacturers received 105.9 billion drachmas for upgrading their equipment based on this legislation. Grants given out between 1990-1998 represented 40.2 percent of total investment spending of 25 billion drachmas. Dairy manufacturers’ attempts to revamp their facilities and bring them up to date, however, have done little to improve their position abroad, the study noted. With the exception of yogurt products, which made up 66 percent of export sales, exports have been limited. Greece continues to be a net importer of dairy products, notably milk from Germany and Spain. The IOBE study noted that although sales of dairy products increased at an annual rate of 9 percent between 1996 and 1999, companies’ profit margins have been declining marginally by 0.4 percent annually. Production costs, in contrast, rose by an average annual rate of 12.1 percent in 1998. The report said that pressure on profit margins and attempts to lift their market share have led to a wave of consolidation among yogurt and ice-cream manufacturers, effectively creating an oligarchy. Of the companies covered in the survey, the two largest manufacturers control more than 50 percent of the market. The dairy food division presently accounts for 15 percent of the domestic food and beverages market, making it one of the most significant sectors.