The land of milk and honey. Milk does a body good. Our relationship with milk has been a strong one, a healthy one, for a long time. That relationship has changed, though, and it's probably been a long time coming.
The dairy industry has seen a significant downtown in recent years, due to factors such as increased competition among retailers, low milk prices and shrinking milk consumption. Today's consumers are also more suspicious about products that companies make in mass and about how the animals that provide those products are treated.
Across the U.S., dairies are shuttering their operations. In 2019, Andrews University is shutting down its dairy farm business in Berrien Springs, MI, to focus on the farm's food crops, reported The Wichita Eagle (June 6). Garelick Farms will close its plant in Lynn, MA, reported The Daily Item (May 22). The facility, which produces milk, orange juice and soft serve ice cream, is a subsidiary of Dean Foods.
Dean Foods also plans to close its milk processing plant in Thief River Falls, MN, reported Minneapolis Star Tribune (June 5). The plant, which processes milk for Land O'Lakes, will close permanently by the fall. The company also canceled contracts with about 100 dairy farmers in eight states, citing competition from a retailer's new fluid processing plant coming online in the region, reported CNBC (June 1).
Why is this all happening?
For one, dairy alternatives have become increasingly popular, jumping 4% in the five years ending in 2017, while milk sales fell 3.5% during that time, according to a report by Rabobank, reported CNBC (May 29).
While the report noted that the dairy industry brings in roughly $600 billion in global sales every year, and the dairy alternative industry accounts for just $18 billion, consumer preferences can't be ignored.
"Consumers are making a shift in perception that dairy-free is healthy," says Rabobank analyst Tom Bailey. "But there's no evidence to prove it."
Even though the dairy industry points out milk's nutritional and flavor superiority compared to plant-based beverages, "the makers of dairy alternatives generally appear to be doing a better job of connecting emotionally with consumers who favor more dairy-free options to meet their own perceptions about health and lifestyle," Bailey says.
Still, some traditional milk producers have been able to grow. Coca-Cola touts its premium ultrafiltered milk brand, Fairlife, as having the attributes that consumers desire: more protein and calcium, less sugar and lactose. Hood's Simply Smart ultrafiltered milk has seen success, as well.
"There's value to be realized in innovation and 'premiumizing' milk products," Bailey says.
However, U.S. milk producers are concerned that imported ultrafiltered milk may take the place of the domestically produced milk used to make cheese.
Their concerns aren't unwarranted. Coca-Cola Canada will spend over $65 million to build a production facility in Peterborough, Ontario, making Canada the first international market for its Fairlife ultrafiltered milk products. The facility will open in 2020.
But if you thought dairy alternatives or imported ultrafiltered milk were the biggest threats to the dairy industry, you'd be wrong. Milk's biggest competitor is none other than bottled water, says Michael Dykes, CEO of the International Dairy Foods Association.
Bottled water consumption was forecast to reach 103 billion-gal. by 2017, a sharp jump from the 56 billion-gal. consumed in 2007, reported Dairy Herd Management (May 29).
"The beverage case is an expanding case, it's a competitive case, and it's a consumer case full of choice," Dykes says.
To stand apart from the competition, the milk market is promoting milk's health benefits, grab-and-go milk products and simplifying labels with ingredient lists that are easier to understand.
Ice cream also gives the dairy industry hope. The global ice cream market is expected to be worth $78.8 billion by 2025, according to Grand View Research. The category has been swept up in the healthier indulgence trend, and brands like Halo Top, Ben & Jerry's and gelato maker Talenti are creating pints that showcase fewer calories, less sugar and in some cases, a higher protein content, reported Dairy Foods (March 6). Ice cream brands with a more premium identity and those featuring simple, natural ingredients are the strongest performers, according to a report from Mintel.
Breyers has even committed to source only 100% Grade A milk and cream and will update packaging to reflect that commitment. In addition, the company is contributing to a fund that will partner with the Dairy Farmers of America on initiatives to support cost savings and environmental sustainability on dairy farms.
Fairmont Creamery is collaborating with Hi-Tech Pharmaceuticals to develop whey and milk proteins, as well as ice cream-flavored protein. Hi-Tech expects many ice cream flavor profiles to launch within the coming months.
And dairy companies are also promoting A2 milk for consumers who avoid milk because of indigestion, reported The Modesto Bee (June 1). A2 milk, which comes from cows that produce milk lacking a protein associated with milk's dyspeptic tendencies, costs an extra dollar or more per half-gallon.
Meanwhile, the governor of California recently recognized the contributions of dairy farms to the state's community and economy. California produces the most fluid milk, butter, ice cream, nonfat dry milk and whey protein concentrate in the U.S.
For its own part, Wisconsin has created a task force to help save the state's dairy industry, reported The Seattle Times (June 5). After a loss of 500 dairy farms in 2017 and about a 20% drop in the total number of milk-cow herds from five years ago, the state's agriculture department is joining forces with the University of Wisconsin System to bring industry experts together and create solutions to help farmers, processors and related industries.
The dairy industry is fighting to keep its place at the table, and we might as well welcome our old friend. Can you think of a better way to celebrate International Dairy Month than by toasting with a good ol' glass of milk?
Sarah writes for the weekly Food Institute Report and the daily news update, Today in Food. She also writes and edits the Food Institute’s annual publication The Food Industry Review and assists with The Demographics of Consumer Food Spending.
Sarah has more than 15 years of experience as a writer and editor, with a well-rounded knowledge of the food industry and business-to-business research content. Her background includes an editorial role at Convenience Store News magazine, and she has worked for Nielsen, the USA Today Network and Bauer Publishing.
Sarah is currently working on her MBA at Rutgers University. She can be reached at firstname.lastname@example.org to talk about anything food-related.
10 Mountainview Road
Upper Saddle River, NJ 07458
Food Institute reps are available to answer your questions
BECOME A MEMBER
For close to 90 years, The Food Institute has been the best "single source" for food industry executives, delivering actionable information daily via email updates, weekly through The Food Institute Report and via a comprehensive web research library. Our information gathering method is not just a "keyword search."