Dairy cows in a field

Dairy’s Just Another Industry at a Crossroads

Denis Storey
May 1, 2020

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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 2019, U.S. milk production reached a record of 218.4 billion pounds – up 0.4% over the year before.

Americans drank an average of 24 gallons a year in 1996, according to USDA’s numbers. By 2018, that fell to 17 gallons a year.

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 those court papers, Borden’s lawyers claimed that “2,730 U.S. dairy farms have gone out of business in the last 18 months alone.”

The Bad...

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 have appeared to bounce back of late. Whole milk sales were up 0.8% in 2019. But flavored milk remains a consumer favorite – and the industry’s most significant source of optimism – with sales up 9%.

Organic dairy products haven’t fared much better. Whole milk sales experienced the second-highest rate of growth, up 9.9% over 2018. Flavored low-reduced milk showed the highest increase, up 41.5%. 

...the Good...

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 plant-based and alternative dairy market continues to dominate sales – hitting $16.1 billion in 2019 and is expected to reach $35 billion in global sales by 2025. Soy and almond milk remain the overwhelming favorites, with each accounting for 40% of the worldwide market.

...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.

Getting products to market fast demands efficiency at every stage of new product development. With one location for supply chain information and documentation, teams can bring new products to the market faster. Find out how TraceGains can accelerate your company’s new product development.

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