Dive Brief:
- Sales for the global dairy and soy food market are expected to increase from $617.9 billion in 2015 to $773.4 billion by 2020, at a CAGR of 4.6%, according to a recent Canadean report.
- Consumer insight firm Canadean expects emerging and developing markets to drive much of that growth, particularly the Asia-Pacific, Middle East and Africa, and East European regions.
- Demand for liquid milk has declined in North America and Western Europe while soy and other dairy alternatives have grown. But relatively low per capita consumption of dairy in developing countries means growth in demand has been steeper in these areas, where the middle-class population continues to expand.
Dive Insight:
Dairy companies' sales have struggled in the U.S., with Dean Foods seeing a 3.2% volume decline for raw milk and an 8.4% decrease in revenue in the latest reported quarter.
Demand and consumption have waned due to a number of trends, including the rise of alternative dairy sources, increased competition among health and wellness-positioned drinks across categories, and the disassociation of milk from cereal by manufacturers looking to make cereal a more convenient, snack-friendly food.
But, some premium dairy manufacturers, such as Dean Foods and WhiteWave, are making an effort to advance in the struggling category. Dean Foods launched DairyPure last year, the first national branded fresh white milk, and so far this year, it has invested in product development for its TruMoo brand and announced its acquisition of the manufacturing and retail ice cream business of Friendly's Ice Cream from Friendly's Restaurants. WhiteWave's premium dairy segment boosted net sales by 16% in the latest reported quarter.
But even premium dairy might not be enough. WhiteWave's premium dairy segment posted a 16% sales increase last quarter, but that rate slowed from 22% sales growth in the previous quarter.
If demand doesn't turn around in the U.S., manufacturers may consider pivoting dairy products (particularly non-premium varieties) to developing economies. That strategy may not be equally available or viable to all U.S.-based dairy companies. Dean Foods is specifically concentrated across the U.S. But, WhiteWave has 14% of its sales exposed to the euro alone already, according to Credit Suisse, so it may have an easier time setting up supply and distribution channels outside of the U.S., if it needed to.