Dairy, a longtime staple of the country’s ag economy, finds itself in the middle of a seismic transition. You could even go so far as to call it the bad, the good, and the ugly.
Production is higher than ever. In 2020, U.S. milk production reached a record 223 billion pounds – up 2% over the year before. But American milk consumption has fallen more than 40% over the last 25 years.
That’s hit American dairy farmers hard. On Jan. 5, 2020, Borden Dairy Co., one of the country’s largest dairy producers, filed for bankruptcy protection. In the court papers, Borden’s lawyers claimed that “2,730 U.S. dairy farms have gone out of business in the last 18 months alone.”
One of the driving forces behind this swing in milk sales and consumption is a dramatic shift in consumer preferences. While these changing tastes in dairy – and non-dairy – products can appear counterintuitive, it’s hard to argue with the numbers.
For starters, traditional dairy products have suffered overall – except for whole milk products, which bounced back in 2020: Whole milk sales were up 2.5%. But flavored milk remains a consumer favorite – and the industry’s most significant source of optimism.
Organic whole milk sales surged ahead further in 2020, climbing 12.3% over 2019.
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 emerged as the seductive Veronica.
The alternative dairy market continues to gain ground – reaching $2.5 billion in sales, a jump of more than 20% over 2019. Soy and almond milk remain the overwhelming favorites, while oat milk sales picked up steam.
...and the Ugly.
Besides whole milk, traditional dairy products appear to be falling out of favor with today’s fickle consumers. Non-dairy drinks are surging. But the future is unsettled. The gap between production and consumption is widening. At the same time, the country’s processing capacity is at its limit already.
And dairy isn’t alone. Other significant markets are struggling to navigate their way through the shifting sands of today’s marketplace. Just ask the former CEO of Campbell’s Soup. Or the execs at either Coke or Pepsi.
The traditional products that have driven growth for decades aren’t delivering like they used to. Consumers know it. Investors see it. Now manufacturers need to do something about it.
While the market has shifted along with consumer sentiment, the opportunities in the dairy industry are greater than the challenges, from an exploding export business to a growing direct-to-consumer market.
Download our eBook to find out how dairy companies can take advantage of these opportunities.