The power of dairy products

If there is one theme I have witnessed beyond the oft-mentioned health and wellness and flavor trends, it is today’s staying power of dairy products. Perhaps we should call this the “Golden Age” of dairy.

Although not every dairy category is growing like gangbusters, we can report many are doing extremely well. This includes this month’s Market Trends report, which shows refrigerated butter blends have joined cottage cheese and yogurt in dairy’s double-digit, year-over-year (YoY) growth, according to Circana. Specifically, refrigerated butter’s dollar sales gained more than 10% YoY for the period ending May 13, reports the Chicago-based market research firm.

Another important fact is that milk sales declines have been halted, and could get a big boost if the U.S. Senate passes the Whole Milk for Healthy Kids Act.

Of course, as the U.S. Securities and Exchange Commission disclaimer reads: “Past performance is not indicative of future results.” In other words, good dairy sales in the past do not mean the future is bright. However, for more information on dairy’s future, McKinsey & Co. Ludovic Meilhac, expert partner at McKinsey, sheds light on the situation in this month’s “Let’s Talk Dairy” podcast. He also presents fascinating information from the research company’s seventh-annual Dairy Survey.

I believe there is no better way to predict the future of the dairy industry than if dairy executives are willing to spend money in the future. According to the survey, nearly two-thirds of dairy executives plan to increase investments in product innovation in the next five years, and 79% plan to increase their spend on manufacturing innovation during the same period.

“For example, many interviewees noted they are investing in packaging capacity for extended shelf life. Other investments (for example, in AI (artificial intelligence) and tech) have centered on efficiency and operational resilience,” McKinsey notes in its report.

The survey also revealed that 70% of dairy executives are optimistic about the future of the dairy industry. One dairy executive said succinctly, “We have seen a resurgence in demand for consumer dairy.”

Another positive data point: Nearly 80% of leaders surveyed expect volume growth greater than 3% over the next three years, according to McKinsey data.

“As consumers move away from ultraprocessed foods, I think they will look for less-processed foods with functional benefits. Dairy is perfectly positioned at the center of the movement,” states another dairy executive survey respondent.

Of course, this does not mean dairy executives have nothing to keep them up at night. Cost has risen in importance, with 69% of executives citing it as their leading priority in 2024.

“This marks a significant jump from 48% in 2023 and 50% in 2022, reflecting concerns over increased volatility, rising inflation, high costs of raw materials, and logistics (for example, shipping and trucking) squeezing margins and forcing companies to look for efficiencies,” McKinsey reports.

Also, according to the research firm, “dairy executives are still feeling pressure on talent, a lingering effect of the COVID-19 pandemic. Talent remains a top priority for 67% of respondents, versus 60% in 2023 and 44% in 2022.”

Hence, although there are certainly headwinds, dairy products are selling in droves. The dairy industry has won a huge battle.

For a full copy of McKinsey’s report, see the “Let’s Talk Dairy” article. DF

Brian Berk is Editor-in-Chief of Dairy Foods. Contact him at 516-402-1369 or berkb@bnpmedia.com.