Dairy Industry Struggles Continue

Posted by Denis Storey on September 18, 2019 at 2:54 PM

dairy businessDairy, a longtime staple of the country’s ag economy, is an industry struggling to find its way amid a sea of change. This past year didn’t make things any easier.

There’s no shortage of dairy supply. Last year, U.S. milk production increased more than 23 million pounds, a 1 percent increase to total 218 billion pounds.

That increase came despite a drop in operations. According to the U.S. Department of Agriculture, the United States lost more than 2,700 licensed dairy farms over the past year, a 6.5 percent drop.

Meanwhile, the steady fall in demand continues. In fact, U.S. milk consumption has fallen 40 percent since 1975—with 22 percent of that drop occurring since 2000. Throw in an accelerating trade war, which has slowed exports, and dairy operations face strong headwinds.

A Changing Market

One of the primary forces behind this fall in milk consumption is a shift in demand. Consumers have increasingly turned to other drink choices for years, including bottled water, sports drinks, and even dairy alternatives.

Traditional dairy products have slowed across the board — except for whole milk products, which have rebounded in recent years. Whole milk sales were up 2.5 percent in 2017. But flavored milk remains a consumer favorite—and the industry’s most significant source of optimism — with sales up more than 11 percent in 2017.

Organic dairy products haven’t fared much better, with sales in nearly every category suffering declines. In fact, organic whole milk sales experienced the only growth, up a modest 1.5 percent over the previous year. This is somewhat surprising considering the enduring popularity of organic products. One survey found that 53 percent of adults said they’re buying more natural and organic products than ever.

Nowhere is the shift more apparent than in the rise of the non-dairy market. If dairy is the reliable Betty to the consumer’s Archie, non-dairy drinks have clearly emerged as the seductive Veronica.

Research from Mintel shows 61 percent growth in the non-dairy market over the last five years —surging past $2.1 billion in U.S. sales last year. By 2021, analysts expect dairy alternatives to make up 40 percent of the market.

Almond milk remains the overwhelming favorite with consumers—taking up about two-thirds of market share. And while standbys such as soy and coconut remain popular milk options, consumers are filling their glasses with pecan and quinoa milk more frequently. 

Non-dairy drinks are surging. But the future is unsettled. The gap between production and consumption is only growing wider. At the same time, the country’s processing capacity is at its limit.

Dairy isn’t alone. Other market pillars are struggling to navigate their way through today’s changing landscape. Just ask the former CEO of Campbell’s Soup. Or the execs at either Coke or Pepsi. According to CNN, “The consumer staples sector is at the back of the pack in the S&P 500, down 13 percent this year. It’s on track for its worst year in a decade.”

The traditional products that have driven growth for decades aren’t delivering the same way. Consumers know it. Investors see it. Now manufactures need to act on it.

New product development doesn’t have to be as difficult as it used to be — or take as much time. With TraceGains, it transform the way companies do business.

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