The USDA’s National Agricultural Statistics monthly Milk Production report, released on Feb. 20, 2020, showed the most significant annual decline in the number of licensed dairy operations since 2004.
The report shows annual milk production in the United States in 2019 was 218.4 billion pounds, up 0.4% from 217.6 billion pounds in 2018. Milk production is up to due to the ever-increasing productivity of milking cows; the United States has seen the average number of cows decline from 9.406 million in 2017 to 9.336 million in 2019. American Dairy farmers have struggled to remain solvent since 2014 due to milk supply outpacing demand globally and keeping prices low.
Dairy Industry Performance by Category
Sales of butter and butter blends were up 1.3% (to $3,131.4 million), and unit sales jumped 2.5% (to 840.6 million) during the 52 weeks ending Aug. 11, 2019, according to the market researchers at Chicago-based IRI. Many butter companies are releasing flavored butter products to pique the interest of culinary-minded consumers.
Cheese rose 1.3% during the 52 weeks ending Aug. 11, 2019, to $13,117.4 million, with unit sales climbing 2%. Processed cheese struggled, however, according to IRI. Dollar sales fell 3.3% to $1,558.9 million, while unit sales tumbled 3.6%.
“Cheese is a staple of the American diet,” said Kristin Crouse, IRI principal, client insights. “Consumers buy cheese for a variety of occasions and needs. While the dairy case will always be a destination for cheese, the deli is driving category growth.”
Ice Cream & Frozen Novelties
Frozen novelties saw a pretty payout, with dollar sales rising 4.2% to $4,906.3 million during the 52 weeks ending Aug. 11, 2019, unit sales increased by 1.2%, according to IRI.
Ice cream sales disappointed, falling 1.4% to $6,063.8 million, with unit sales dropping 1.9%.
Indulgence was the one trend that has traction in the ice cream and frozen novelty space.
“If there’s one thing everyone in the world can agree upon, it’s that ice cream is supposed to be indulgent,” said George Denman, vice president of sales for Cincinnati-based Graeter’s Inc.
Dairy ingredients are substances extracted from dairy products used to add texture and flavor to food and beverages. They come in a variety of forms, including dry, concentrated, and liquid. Dairy ingredients provide emulsification, fat holding, viscosity creation, and gel formation.
According to a Markets by Markets press release, the global dairy ingredients market is estimated to be valued at $53.8 billion in 2019. It’s projected to reach a value of $81.4 billion by 2025, growing at a CAGR of 7.1% during the forecast period.
Overall, dollar and unit sales of milk are down 1.3% and 2.3%, respectively, during the 52 weeks ending Aug. 11, 2019, according to data from Chicago-based market research firm IRI.
According to Mintel Analyst Madelyn Franz, “Milk sales are composed of two opposing, connected markets: the struggling, but sizable, dairy milk market and the growing non-dairy milk market. While traditional dairy milk is still considered a household staple by most consumers, sales are declining due to rapid innovations in the non-dairy market and low prices that have led to an oversupply of dairy milks. Similarly, non-dairy milk may face a kind of oversupply stemming from the sheer number of alternative milk bases. As such, vying for consumers’ attention will be increasingly difficult.”
In the 52 weeks ending Aug. 11, 2019, yogurt’s dollar sales fell 1.8% to $7,135.1 million, while unit sales dropped 4.8%.
“With the Greek yogurt revival having run its course, yogurt and [smoothie] usage rates having dropped to 52%. Usage rates for cottage cheese, despite efforts to renew interest in this stalwart category through novel sweet and savory flavorings, [also] slipped to 49%,” states the Packaged Facts division of Rockville, Maryland-based MarketResearch.com in its September 2019 “Eating Trends: Meat, Dairy, Vegetarian and Vegan” report.
A Way Forward
The forecast remains cloudy for the dairy industry, but the market presents some opportunities if companies are willing to innovate. Flavored butter, ingredients, and deli cheese offer substantial opportunities for dairy companies to pursue.
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