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0px Helvetica}The forecasts ofthe butter market in theshort-term are necessaryto take the decision toenter or not in thatmarket. The indicatorsused to evaluate thefeasibility are the threemain indicators for onecountry: the GDPforecasts, the inflationforecasts and theunemployment rate. Inaddition to that, it isimportant to take into account the evolution of the butter business and the consumer behaviour.France forecastsThe situation in France will stagnate in the short-term. The GDP growth rate forecast isvery low.

The Eurozone on the other hand currently has a GDP growth rate of 0,60%. However,the situation can be changed at the start of the new year. Indeed, the minister of economicsBruno Le Maire and his colleague Gérald Darmanin have launched their new project called”Projet de loi de finances” (PFL). The objective of this project is to reach an economic growthof 1,7%.

In that case will the GDP growth rate be positively impacted.The inflation rate is very low. At the moment, the French inflation is of 1,2%, which is belowof the 2% required by the ECB. In relation with the French CPI, the first quarter in 2018 willshow unchanged results. Thus, the inflation should remain stable in the future, which is not agood thing for thegrowth.

French peopleprefer to invest theirmoney in protectedfinancial products.The last indicator is theunemployment rate,which is very correlatedwith the inflation rate andthe GDP growth rate. Wecan invoke the Phillipscurve to highlight the18French situation. There is an unemployment rate of 9.70% in France and the inflation rate islow and unchanged with respect to the recent years. According to the Philips curve, theunemployment rate should not change during the coming years. However, the growthexpectations in France will trigger a forecasted 9.

6% unemployment rate in 2018 and 9.3% in2019, which seems like a relief, especially for the French lower social classes, who alreadystruggle from industries outsourcing their production. In addition to that, the Frenchgovernment has decided to delete the “Contrats aidés” to increase the spending, in order toimprove the qualification of each worker. This strategy does therefore not change theunemployment rate in the short term.Consumer behaviorFor several years, the consumers have lost their confidence in the politics and in theeconomy. The trigger was the subprime crisis, when the governments were unable to resolveand stop the situation. The incapacity of the governments to strive against the unemploymentand to improve the economic growth does not reassure the consumers to plan their future.

Theconsumer confidence is a short-term indicator, which is measured with the forecasts ofconsequent investments. The economy, the security, the employment and the health are themain factors of the consumer confidence.On the graphhereby, the consumerconfidence betweenthe OCDE and Franceare very similar untilApril 2017.

In April2017, the consumerconfidence in Francehas increased,probably thanks to thepresidential electionsand the election of thenew presidentEmmanuel Macron. Thus, some French people have done investments in different projects orthey believed in change, as they believed that the situation would improve. Between Augustand September 2017, the situation has changed, French people have lost their confidence. Atthat moment, Emmanuel Macron launched different labour and social reforms, like for examplethe decrease of the “Aide Personnalisée au Logement” (APL). Because of that decision, manypeople had difficulties to find accommodations.France is always a target for the terrorists, thus some people are worried about the risk. 1.

5million tourists have been lost by Paris due to the risk of terrorism. The result of this risk is the19loss of earnings. Indeed in 2016 Paris has lost 1.6 billion euros. This is a curb to expand theeconomic growth.The French healthcare system is well-known, because it is very good and often freethanks to the Social Security.

Unfortunately, the Social Security has a lot of debt and thegovernment wants to decrease it. Thus, a few surgical operations or some drugs will be notrefunded in the future.Butter businessIn the United States, the milk market is very powerful. In 2016, the U.

S. have producedapproximately 95 million tons of milk. The milk market in the U.S.

is very protected by thecustoms and the health security. Indeed, this year Americans and Canadians have renegotiatedtheir agreement under the NAFTA. Trump’s and Trudeau’s administrations did not agree on thequantity, the price and the conditions to enter in the U.

S. The American consumption of milk islower than its production. The U.S. have a surplus of milk because 10% of its production isexported, especially in Asia. Nevertheless, the American consumption is very strong thanks tothe milk fat.

For example, in 2015 McDonald’s has decided to use butter in its production.Thus, the annual demand has increased of 20,000 tons. The milk fat is used to produce butter.During the last years, the milk fat was abandoned by the customers, because it was consideredas bad for the health.

As we said the U.S. market has increased the demand, and so has theAsian market.

The milk fat or the butter are dependent from the milk market.The Chicago Mercantile Exchange (CME) offers one of the largest exchange of futureson its market and is very powerful for the commodities market in the world. The commoditiesare very volatile, because the commodities market is a short-term market.

The CME tradesmainly futures securities. A futures contract is a financial security where the buyer and theseller reach an agreement and set the end date and the price that will be obtained on that enddate. The futures securities have an underlying asset. The aim of the futures is to enhance theprice of one asset in the future.The graph shows the fluctuationof the price concerning thefutures Milk III in the CME.Since August 2017, the futuresprices have decreased before itincreased until November 2017.That is why some investors hadplanned an increase of theEuropean production incomparison with the previousyears.

The second decrease isthat the European countries had aprice butter below the U.S. price20of butter, therefore they were able to export at cheaper prices, for example to China.The second graph shows theprice of the Futures Milk III in2018. Investors are veryconcerned about the situationof the milk in the short-term.The investors can be thecompany of the bulge bracket,broker-dealer or producers ofmilk.

Currently, from afinancial point of view, thesituation of the milk is not very good because the market makers have several questions aboutthe market environment, especially with the situation in Europe. However, they believe in aslight improvement in April 2018 with Easter season.Concerning the butter price in theU.S., investors have been veryconfident about its increase forseveral years. The American markethas a strong internal demand forbutter from the companies likeMcDonald’s or the households.

Eventhough the milk price decreases inthe U.S., the producers know thatthey could sell at a good price thanksto the demand of butter.In 2015 Euronext, the main exchange market in the Euro Zone, has launched a newfutures, which is underlying of the dry milk, the butter and the whey powder. Its name is”Unsalted Lactic Butter Futures”. The Common Agricultural Policy has been dismantled, thusproducers and suppliers are subjected to the price on the market. Unfortunately, in France as wesaid previously the producers cannot decide on their selling price. The French butter market isin a bad situation.

Some butter producers and distributors prefer to reduce their costs to be ableto cope financially if the situation continues. The Paysan Breton brand predicts a strong marketincrease, which is the reason why it decided to invest in its production of butter with themodernization of its equipment to increase its production by 10%.The structure of the French butter market and the European one is old next to the U.S.model. The French trade balance has a deficit (164 000 tons imported, 76 000 tons exported).The situation is extraordinarily surprising because France is the first consumer of butter in theworld. France needs to use the butter as a figurehead to boost its market.

21ConclusionAs managers who want to enter in the butter industry, it is very important for us tounderstand the background of the French economy and of the butter business, especially sincethe recent shortage. Having a global overview is mandatory before making a decision. Here arethe main key points that are essential before making our decision.The French economy is currently stable, and would probably increase in the next years.The projections made on the French GDP are quite interesting.

The amount of privateinvestment and the inflation rate seem to be the only drawbacks of the macro-economicoutlook. Despite those figures, France has to be considered as a stable economy and as apotential interesting place for us to enter.What about this industry in France? The butter industry is a domain where a lot ofuncertainty remains. Butter is a product that has a very large number of regular consumers onthe market. The demand remains high throughout the years. We could consider the demand asstable.There is more uncertainty for the offer from the suppliers. The global production and theFrench production of butter have known a major drop during the year 2017.

This decrease ofthe production has caused a shortage of butter in France. In our report, we set five main reasonsfor this drop:• A decrease of the French butter production• A growing worldwide demand• A price war between big firms in the market• The importance of cheese in the French consumer habits• The speculation of consumers that wanted to anticipate the shortageThis national supply issue in supermarkets reveals the tensions in regard to businessrelationships between French butter distributors, producers and suppliers. The market iscomplex and this is due to the high number of actors in the selling process, from the rawmaterials to the consumers. The fact that the production of butter has a lot of intermediariesmakes it difficult to enter the market.The power of the suppliers is very high and the rivalry is strong too in the butter market.The most competitive firms are big industrial companies that are very powerful. Creating ourown process of manufacturing would be long and costly.

For all these reasons, we do not see a lot of future in the butter industry, as managersthat are currently outside of the business. The forecasts of the butter market are not very good,and the rivalry of the market is very high, with powerful big brands that have a lot of marketshares.We saw that the domestic market is not interesting enough for us, but at the same time, butterhas known a worldwide increase, like in China, where French butter is very appreciated. Maybeit could be a solution to interest ourselves in a market outside of France.