March 9 2020 08:01 AM

Updated at 2:30 p.m. on March 10, 2020

During the Wisconsin Agricultural Outlook Forum, University of Wisconsin-Madison’s Director of Dairy Policy Analysis Mark Stephenson addressed what he considered to be the “elephant in the room”: the demand for dairy products.

He explained that on a total sales basis, beverage milk sales were fairly consistent until 2010, when we started to see a rather substantial erosion of fluid milk sales that continues to this day.

“We’ve seen casualties from this trend,” he said, pointing to recent bankruptcies in the fluid milk sector that have made headlines. “This looks like a segment of the industry that is not doing well, and indeed, it is having some problems,” he said.

One of the issues the beverage industry has, he noted, is that the margins are very thin, very thin. “There’s just not a lot of profit, putting milk into a bottle,” he explained. “When you are in an industry with declining consumption, it makes it difficult to be showing profits.”

Of course, there are other factors at play when it comes to fluid milk sales.

“We’ve seen declining sales due to plant-based beverages, but it is more than that,” Stephenson said. “Probably a more potent competitor to fluid milk is bottled water.”

Grocery and convenience stores have shelves filled with drink options. “Competition in the beverage space has been fierce for fluid milk,” Stephenson said.

He also pointed to demographics as a reason for reduced milk sales. “Our population is getting older. We are having fewer children, and children are major consumers of fluid milk,” he explained.

On the other hand, Stephenson pointed out that there are bright spots in dairy product consumption.

“The headlines we see in the fluid milk industry do not reflect the overall health of the dairy industry,” Stephenson said. “It’s not all bad news.”

Cheese, yogurt, and butter have all been growth categories for the dairy industry, Stephenson explained. He added that last year, the U.S. had the largest per capita milk equivalent consumption since the 1960s.

While consumer preferences are changing and fluid milk sales are struggling, Americans are still eating their dairy. In 1975, each citizen was consuming around 540 pounds of dairy per year. Today, annual per capita consumption is over 640 pounds.

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(c) Hoard's Dairyman Intel 2020
March 9, 2020
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