- Full-fat dairy products are rebounding after decades of tying dairy fat content to health concerns. National sales of whole milk increased 4.5% last year, according to IRI data reported by industry marketing group Dairy Management.
- At the same time, fat-free milk sales declined 12.3% nationwide last year.
- The most recent reiteration of the U.S. Dietary Guidelines still recommends Americans consume low-fat and fat-free dairy products because of concerns surrounding saturated fat.
Saturated fat is thought to raise cholesterol levels that lead to heart disease. That has been the basis for decades of nutritional guidelines that suggest consumers avoid products like red meat and full-fat dairy. However, more recent research has challenged these long-held beliefs, suggesting that saturated fat and full-fat dairy have valuable health benefits.
That research, combined with consumers' increasing demand for more "natural" foods and beverages, has contributed to whole milk's rebound and the categorical growth of full-fat dairy products such as Greek yogurt. Also, concerns about sugar content has hit fat-free milk sales, because manufacturers tend to replace saturated fat with sugar for flavor and preservative properties.
But while whole milk sales increased last year, overall dairy sales continue to tumble as consumption in the U.S. decreases. Over the past five years, U.S. milk sales have dropped about 14%, due largely to an expansion of fast-growing competing beverage categories, such as bottled water, sparkling water, sports drinks, energy drinks, and RTD tea and coffee.
Also, as the cereal industry has declined, a major consumption occasion for milk has declined along with it. Cereal companies are increasingly distancing their products from milk as a companion ingredient to improve convenience of the products and are continuing to push cereal toward more occasions throughout the day, beyond breakfast.
The question is if and how dairy manufacturers will pivot their R&D and marketing investments to capitalize on the increased demand for full-fat dairy. Instead of positioning products as "diet," which is quickly giving way to "healthy," manufacturers may focus instead on marketing the health benefits provided by full-fat dairy products, which are more relevant and appealing to today's consumers.
As for product development, it's unlikely manufacturers will cease creating fat-free and low-fat dairy products for two reasons: Consumers will still demand the variety of options that includes low-fat (and thereby, low-calorie) products, and fat-free and low-fat dairy are still aligned with the latest Dietary Guidelines.
However, manufacturers may consider rerouting more of their R&D spending toward full-fat products, such as whole milk and Greek yogurt, to capitalize on a renewed interest in their health benefits and remain competitive against rising plant-based dairy alternatives.
Premium dairy products have been a boon and focus for manufacturers like Dean Foods and WhiteWave, so positioning full-fat dairy and its benefits in the premium dairy category is one way dairy producers can combat tumbling milk sales.