It’s Time to Admit Dairy Faces Disruption

Posted by Denis Storey on September 24, 2019 at 9:03 AM

dairy disruptionHistorically, when disruption threatens an industry, it’s not an ambush. There are always warning signs.

Blockbuster was once as ubiquitous as Starbucks. At its peak, in 2004, the video rental giant boasted more than 9,000 stores across the country. This is two years after Netflix, founded in 1995, goes public. Less than a decade later, Blockbuster files for bankruptcy. By 2013, only a handful of stores remained open.

Ironically, Netflix now faces a similar threat. Ten years ago, two companies offered streaming video, Hulu and Netflix. Now, there are more than 100 streaming options for consumers to choose from, with more coming online every day.

And do we even need to bring up Amazon, which toiled in obscurity on the web for years, bleeding cash, before it emerged into the tech giant it is today?

The history of the world economy is littered with the remains of once powerful companies, whether it’s Kodak, Sears or Nokia. The U.S. dairy industry finds itself facing disruption. How it responds will dictate its fate.

Dairy Continues to Struggle

The numbers – as has been widely reported – don’t look good for the U.S. dairy business.

Production remains steady, but demand has fallen – both domestically and internationally. U.S. consumers are increasingly turning to alternative beverages, while tariffs have hampered exports.

Dairy businesses counter that only fluid milk sales are down – and that demand for butter and cheese continues to grow. They’re not wrong, but for every other dairy product, there are new alternatives appearing on store shelves every day.

Others argue that things are even worse than they appear. A new study, “Rethinking Food and Agriculture 2020-2030,” paints a dire picture, suggesting “Production volumes of the U.S. beef and dairy industries and their suppliers will decline by more than 50 percent by 2030, and by nearly 90 percent by 2035.” By 2030, the research, conducted by think tank RethinkX, posits that the dairy market will have shrunk by almost 90 percent.

But this disruption goes far beyond dairy, the researchers suggest, and will encompass the beef and fish industries as well.

“We are on the cusp of the deepest, fastest, most consequential disruption in food and agricultural production since the first domestication of plants and animals ten thousand years ago,” the report’s authors write.

A Way Forward

Even if things don’t turn out this badly, there’s little argument things are changing. And stakeholders in the dairy business can help themselves by preparing for that change.

Their protein neighbors in the beef business have already read the tea leaves and started to adjust the way they’re doing business.

At the very least, manufacturers need to expand their product lines. They can do that by sourcing suppliers and ingredients easily and efficiently with Market Hub. This can help companies get new products to market quickly.

Cost management will also be crucial to survival in a changing marketplace. TraceGains’ suite of software solutions can help companies better manage their data and save money by increasing operating efficiencies.

Tags: dairy