Americans souring on dairy milk

Bankruptcy filing by major producer, shift to plant-based options shake up industry

Americans' love of milk has spoiled.

The collapse of one of the largest milk producers, Dean Foods, which filed for bankruptcy in November, has highlighted the sector's problems, ranging from new types of milk to health concerns.

Milk consumption by Americans has been on the decline for more than a decade. In 2010, Americans drank 55 billion pounds of milk. By 2018, that fell 13 percent to 47.7 billion.

Why the change?

Consumer palates have shifted as many people prefer plant-based milks or milk-alternatives like soy, almond, coconut and oat milk, according to the Plant Based Food Association (PBFA).

The shift is about health for some consumers, while for others, allergies to dairy along with lactose intolerance could be the reason for the switch, says PBFA.

But dairy milk organizations have hit back, saying plant-based beverages often have sugar added for taste and are fortified to have the same nutritional value as cow's milk. Many of these "milks" have oils and emulsifiers along with preservatives added to keep them from separating.

After receiving more than 13,000 comments on those complaints, the Food and Drug Administration (FDA) launched an investigation into whether the plant-based products should be labeled milk.

Alan Bjerga, senior vice-president of communications for the National Milk Producers Federation, told China Daily: "Our organization has been very vocal that the use of dairy terms on non-dairy products does mislead the consumers into what they think the nutritional components are, so we want to see the FDA enforce its already existing rules that don't allow this."

When Dean Foods, a 94-year-old Dallas-based company with 15,000 employees, filed for Chapter 11 bankruptcy, it appeared that it fell victim to Americans' changing tastes. That, along with a series of decisions, affected its sales.

Dean had acquired at least 40 companies since the 1990s. It had dabbled in companies that made milk alternatives like WhiteWave, which made Silk milk and plant-based milk alternatives.

In 2012, Dean dropped a lot of those companies and focused on dairy.

Its brands include: Land O'Lakes, Organic Valley and Dairy Pure. It sells butter, cream, cottage cheese, sour cream and ice cream products.

In 2017, one of its major buyers, Walmart, developed its own plant in Indiana to make its own brand of milk. That caused Dean to cancel 100 contracts with farmers and miss out on the sale of 55 million gallons of milk to Walmart in 2018. Grocery chain Food Lion also stopped its partnership with Dean Foods.

Following its collapse, Dean Foods said it was negotiating with Dairy Farmers of America (DFA), the country's biggest dairy co-op, over a possible acquisition.

The US dairy industry has been in dire straits for years for several reasons, including chronic oversupply.

In 2018, more than 2,731 dairy farms in the US closed, according to the US Department of Agriculture. Nearly a third of the closings occurred in Wisconsin, nicknamed "America's Dairyland".

The plight of dairy farmers in the US also hasn't been helped by the trade dispute between the US and China, which caused a decline in exports. The dairy farmers reported that annual net domestic sales in 2018 wer— $13.6 billion – a $1.1 billion decrease from 2017.

Globally, milk consumption is also on the decline. In 2015, the European Union ended milk quotas. Russia banned imports, and in China, demand for milk slowed.

Those developments caused milk prices to decline worldwide. But the US market was buoyant for exports until retaliatory tariffs from Mexico and China were put in place, hitting the industry and many farmers hard.

As milk faced those challenges, the global market for milk alternatives showed growth. It is expected to be worth more than $18 billion in 2019, an increase of 3.5 percent on 2018, according to Euromonitor. Sales of oat milk alone rose 636 percent to $53 million this year.

"In terms of the impact of these beverages on dairy and milk consumption, it tends to be exaggerated,'' said Bjerga, of the Milk Federation. "We've done research on this. If you take a look at where the loss of fluid milk consumption has come from, most of that lost consumption has gone to water. Then it goes to coffee and tea, then sport drinks, and plant-based drinks."

There is a glimmer of hope for dairy farmers. The trade agreement negotiated in 2018 and signed last week by the US, Mexico and Canada (USMCA) will allow US dairy farmers to sell three times as much milk to Canadian markets than before, says US Congressman Ted Budd, a Republican representing North Carolina.

Adam Landau, senior vice-president at Global Innovation Partnerships for Dairy Management Inc, a trade association funded by 37,000 dairy farmers in the US, also sees positive signs.

"On the fluid milk side, sure we have seen some declines in the past few years, but it still remains a pretty powerful category that retails over $13 billion (and) it's in 94 percent of households," Landau told China Daily.

"Households are buying almost 30 times a year, per fluid milk, and so, it's a category that, sure, there's been some changes going on in consumer trends in the world, but (it) remains very powerful."

He said milk is seeing explosive growth in use by McDonald's McCafé line and Espresso drinks, as well as coffee houses, which use a lot of milk and cream.

One milk processor showed it's possible to reinvent itself. In 2016, Elmhurst Dairy, New York City's last remaining dairy plant, shut down its milk operations. But a year later, the brand returned, offering a dozen non-dairy milks.