Drinking Milk Products in the US
Following a year of significant struggles in 2016, drinking milk products experienced some mild relief in 2017, as commodity prices began to rebound from the significant declines of 2016 on the back of stabilising supplies, ushering in negligible current value growth for the category, following a 5% decline in 2016. Cow’s milk in particular struggled recently, with the average unit price declining by 6% in 2016, and retail value sales in that year declining by 8%. In 2017, however, cow’s milk saw a return to negligible unit price growth, which helped to limit the current value decline to just 1%. Despite indications of a positive turnaround for the milk industry in 2017, serious obstacles to future growth remain. Intensifying efforts by consumers to limit their dairy intake continue to threaten growth; efforts fuelled largely by personal health concerns and alarm over the environmental impact of the dairy industry. With the notable exception of full fat fresh milk, which has seen a strong resurgence of consumer demand, as perceptions of healthy eating and attitudes towards the consumption of fat evolve, cow’s milk is experiencing significant and sustained declines in consumer demand. In 2017 alone, volume sales of fat-free fresh milk fell by 6%, whilst volume sales of semi skimmed fresh milk saw a 4% decline. Furthermore, as consumers seek to limit their dairy intake, more and more milk alternative products are being developed and hitting the market, providing an array of popular alternatives that are rapidly growing and stealing share from cow’s milk.
With a 15% value share of drinking milk products in 2017, Dean Foods, the long-standing leader of the category by a wide margin, took advantage of 3% value growth to build upon its 14% share in 2016 and further tighten its grip on the category. The company is well-known for its TruMoo flavoured milk brand, as well as milk brands such as Dean’s, Mayfield and Garelick Farms; all three of which Dean Foods consolidated in 2016, alongside its remaining regional brands, under its recently launched Dairy Pure brand, forming far and away the largest brand within drinking milk products. Possessing such large and widely recognised brands, Dean Foods was able to lead flavoured milk drinks in 2017, accounting for a value share of 25%, as well as milk, within which it held a value share of 15% in 2017. At a time when sales of milk are facing significant obstacles, the decision by Dean Foods to incorporate all of its distinct milk brands, many of which were operating regionally and struggling for growth, under the banner of Dairy Pure seems to have paid off. The brand recorded 4% value growth in 2017, to reach USD1.9 billion, helping to drive an increased value share for Dean Foods.
Drinking milk products is projected to maintain consistent dynamism over the forecast period. With minimal growth expected for milk commodity prices, and the expectation of continued strong sales of higher-priced milk alternatives, average unit prices are expected to stagnate or decline in most categories at constant 2017 prices. At the same time, cow’s milk categories are expected to see further significant struggles for growth as demand continues to wane, with the exception being full fat fresh milk, as Americans become more accepting of consuming certain natural types of fat. These dynamics should fuel low positive growth for drinking milk products going forward, with the category projected to see 1% value growth overall over the forecast period. This represents an improvement over the negative value CAGR of 2% recorded from 2012 to 2017, which was fuelled largely by the growth in milk alternatives and the beginning of a decline in dairy demand.
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