Wednesday, 22 January 2020
by Hannah Clarke
Since November 2019 the US has seen the bankruptcy announcements of two major milk processors, Dean Foods Co and Borden Dairy Co. It is reported that the two Texas-based dairies controlled around 13.5% of the US dairy market.
Both companies cited falling domestic liquid milk consumption as a key reason for their financial difficulties and need to restructure. Declining per capita consumption of fresh milk and volatile farmgate prices have made industry margins harder to manage. In addition, the move by retailers such as Walmart into processing, has made pricing much more competitive. All this has squeezed processor margins.
While total per capita consumption of dairy in the US has actually risen over time – thanks to rising consumption of value-added products like cheese and yoghurt – per capita consumption of liquid milk has fallen by over 40% since 1975.
There are several contributors to this decline. The consumption of milk at breakfast time has suffered, as US consumers are reportedly ditching bowls of cereal and milk in favour of dry cereal bars on-the-go. In addition, some consumers are increasing their demand for plant-based alternatives, driven by perceptions around health, animal welfare and environment.
Despite liquid milk facing challenges, speciality products such as flavoured and lactose-free milk are enjoying growth. US sales of flavoured whole milk grew by nearly 9% in the 10 months to October 2019, with October 2019 sales up 13% on the year. This suggests US consumers are not looking to leave cow’s milk entirely, but are looking for innovative, value-added products.
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