Episode 31 – How Is Dairy Changing? The Truth About U.S. Dairy Consumption

Is U.S. dairy consumption going up or down? What is the current dairy product mix and how has it changed over time? What are some of the latest product trends that dairy is part of?

Listen in as New York dairy farmer and National Dairy Board member Val Lavigne asks two legendairy experts, Madlyn Daley, Senior Vice President, Strategic Insights & Evaluation at Dairy Management Inc. and Peter Vitaliano, Vice President, Economic Policy and Market Research for National Milk Producers Federation, these questions and much more. They will discuss how U.S. consumers are purchasing and consuming their dairy then versus the past and how they feel about the future of dairy.

Tune in to find out!

To learn more about the national dairy checkoff and your local dairy checkoffs, please visit www.usdairy.com.

Host & Guest:

  • Host: Val Lavigne, New York Dairy Farmer and National Dairy Board Member
  • Guest: Peter Vitaliano, VP, Economic Policy and Market Research
  • Guest: Madlyn Daley, SVP, Strategic Insights & Evaluation at Dairy Management Inc.

Transcript (AI-generated, please ignore the typos)

Val Lavigne  0:00 

Hello everyone and welcome to another episode of your Dairy Checkoff podcast. I am Val Levine, a dairy farmer from eastern New York State, and I will be your host for today’s discussions on taking a deeper look at the dairy sales over the years. Today, we will be talking to Madeline Daly, Senior Vice President of strategic insights and Evaluation at Dairy Management, Inc. And Peter Vitaliano, Vice President of economic policy and market research for National Milk Producers Federation as they discuss how consumers are purchasing and consuming their dairy now versus the past. Madeline, let’s start with you. Do you want to tell us a little bit about yourself and your work at Dairy management Inc.

Madlyn Daley  0:43 

Thank you, Val. Hi, my name is Madeline Daly, I’m at DMI and I’ve been here for over 30 years. So obviously I love what I do. I love the products, I believe in dairy products. And my job here at DMI is to really look at market intelligence. And what that means is that I am constantly analyzing what’s happening in the marketplace from a sales perspective. I also look at it from a consumer perspective. So how are they thinking about dairy products. And the way that I do this is through analyzing several databases. So I have information relating to sales, I have information that helps me to understand the reasons behind those purchases. And I also know how consumers are thinking about not only our industry, but putting it into the larger context of what’s happening in the food and beverage marketplace.

Val Lavigne  1:31 

Awesome. Madalyn, thank you so much for joining us. 30 years is a really great accomplishment. And I know that we in the dairy industry are very thankful to have you here. Peter jumping to you, do you want to tell us a little bit more about your work with National Milk Producers Federation?

Peter Vitaliano  1:48 

Yes, I’ve been involved with my current position at National Milk for even longer than Madeline has been. Again, because I love the work I love the group that I’m working for. Basically, my job is to be has been to be responsible for analysis of all the policies of National Milk Producers Federation that’s spans a big gamut from our safety net programs, formerly the price support program, or recently, various margin protection programs, federal orders, and also international trade policy, I was handling our international trade for about 10 years when when there was a lot of trade negotiation activity through the WTO and the North American Free Trade Agreement. It’s always interesting, this is a very lively industry that involves a lot of policy, a lot of marketing and a lot of a lot of concern about about consumption, because my feeling is that a lot of policy and something we need to pay attention to. If consumers don’t consume dairy, none of this has anything to do. So what the EMI does is critically important. Great,

Val Lavigne  3:08 

I’m really looking forward to this conversation with two veterans of the dairy industry. So this ought to be a really great conversation today. How have, you know, dairy sales overall been in the United States, as

Madlyn Daley  3:21 

we think about dairy sales. And maybe over the last couple of years, we’ve seen a lot of change that’s been occurring in the marketplace. So from the domestic front, we noted that in 2022, we had a lot of really high prices, which certainly had an influence on what consumer sales were with regards to these products. So we saw a little bit of a downturn in the marketplace, which was made up by the export market. So more than kind of offsetting the loss that we saw on domestic 2023. We saw some nice sales lifts on the domestic front. And what we’re noting right now, certainly we only have a couple of months of data for 2024 at this point in time, is that basically we’re pretty much stable with where we were last year, maybe slightly down. But as we look at retail sales, we are seeing in 2024, we have four months of data. So a little bit more than we have on a USDA front, but we’re seeing some really encouraging signs. Sales are up for nearly all dairy products, which is great. We’re seeing recovery occurring within that marketplace. And certainly I’d be happy to highlight any of the products as well. Could you

Val Lavigne  4:27 

give us a breakdown of the sales and consumption are maybe the top three dairy product categories? Yeah, so

Madlyn Daley  4:34 

let’s let’s start out with cheese because cheese really is the the growth engine for the dairy industry overall. In fact, if we look at total domestic sales of dairy products, cheese represents about 29% of that volume. So certainly a very large chunk. And even when we look at retail it’s it’s more than a third of all sales that are taking place. And we’ve seen some really good growth within the cheese category. First of all, if we think of it again, at the retail front, we’ve been noting that natural cheese has been the the engine kind of behind overall cheese sales, natural cheese makes up probably about 85% of that category. And certainly some of the top varieties of cheese are really helping to grow it. So in other words, cream cheese is a big driver right now, as well as we’re seeing mozzarella. And in fact, you know, as we think about mozzarella, not only at retail, but at foodservice, its importance in that pizza front, which again, helps to drive that overall category has been very impressive. Consumers are looking at cheese from a number of different fronts. Certainly, it’s a big part of meal ingredients. People tell us that it makes meals better. And so we see shreds, for example, just a very large portion of the overall category. And that certainly has propelled some good growth. We also see slices, so people, you know, staying at home more often than they have in the past, certainly putting on burgers as well as sandwiches, that’s also been a good piece of the growth that we’ve been seeing. If we look to other larger dairy products, let’s focus on milk. We know that milk sales, you know, were declining for a number of decades. But what we’re noticing right now is that it’s almost like a leveling off that’s occurring at retail, we actually saw in the first few months of the year, a little bit of an uptick, which is really exciting to see within that category. And so as we look a little bit deeper as to what’s driving that, we see that there are certain products that really are helping to drive that growth. And one of them is lactose free milk. Right now it’s about 8% of the category, but has really just been year after year for more than a decade growing in terms of sales. And I think what’s interesting here, it’s not just people who are lactose intolerant who are driving that, but it’s people who perceive those products as just being maybe a little bit healthier. Some of it’s because they have higher protein levels, they have higher calcium levels in some cases. And that has caused consumers to kind of gravitate towards those products. Another exciting kind of development within the milk category would be whole milk sales. Right now, it’s it’s almost half of the category. And it again was declining for decades. But what we have seen as a reversal, and that trend, in fact, a lot of the investment that dairy farmers have been making, in terms of whole fat science is to help to kind of change the mindset of health professionals as to how they look at whole fat milk. And consumers are responding with buying more of them product. And I think what’s really exciting for us to see that that increase in whole milk sales, not only is kind of helping to maybe switch people from lower fat products to products, maybe they taste a little bit better. But it’s also helping to grow overall sales. It’s bringing in some new buyers, and it’s helping people to buy more milk overall. And then finally, another category I would just highlight would be yogurt. Yogurt is certainly on trend. Right now consumers are trying to be more proactive about their health. We see people kind of shifting looking for digestive products, we see them looking for more probiotics, and certainly yogurt is helping to fill those needs today. And so again, some nice lifts, both in terms of 2023 as well as 2024. We see Greek yogurt being a driver of that. So people looking for more protein and their products. We also see people trying to look at it in terms of some of the drink bubbles that are out there today.

Val Lavigne  8:39 

Awesome. If that’s not a reason to be excited about the future of dairy. I don’t know what it is. So now that we have a good current snapshot of what’s going on with dairy sales in the United States, let’s just go back in time for a bit and chat a brief history about dairy sales in the United States.

Peter Vitaliano  8:56 

Yes, if we zoom out to a very long time horizon and I put I put together recently several USDA databases going back really to the beginning of the last century, to show that over a long enough period of time US consumers have made major changes in their consumption of individual dairy products. Cheese, as has been remarked has been a major driver. You go back far enough and she’s concerned option per per capita in this country was 1/10 what it is now fluid milk is been a bit the opposite as we all know peaked. Its consumption per capita peaked during World War Two and since then, since pretty much the late 50s. It’s been on a generally downward trend with some some recent developments of Madeleine discussed. Butter is an interesting one. At one point per capita consumption of butter it’s about was three times what it is now. It had been by Under consumption had been negatively impacted by a lot of things. So, wartime rationing competition with margarine at a time when consumers were much more amenable to saving money by going to plant based alternatives. And then for many decades, the science about consuming dietary fat was negative that held better down to a very, about four and a half pounds per person. When that was rethought and DMI is research has played, in my opinion, a major role in turning around that, that perception, butter consumption is starting to recover recently was subjected to retail price inflation, but as quickly recovered from that, as we’ll discuss a little bit later, yogurt consumption has gone from pretty much nothing to about 14 pounds per person. It’s very difficult to find any consumption data about yogurt prior to 1970s. It’s that it’s a relatively recent product, to some extent has also taken over some of the sales from cottage cheese, which is a product that has some similar similar uses. But overall, you’ll see that per capita that over general consumption in the United States. On that final chart, shown in the green line on a milk equivalent basis, has been generally growing at a pretty steady rate. The trend line is shown in the dotted red line there. And it’s it’s a combination of growing overall per capita consumption but growing population. Generally, we could probably count on in the near future or in the immediate future with that domestic consumption continuing to grow pretty much at that rate. Over the last 30 years, we’ve seen a major development of the the growth of commercial exports. It’s a result of many countries of the world formerly developing countries, developing middle classes, and increased disposable incomes, and developing a taste for Western products including meat and dairy. As well as the international policy arena for dairy has been moving away from heavy subsidies to the point where commercial trade has been possible and dairy products, US dairy products have benefited from them. Unlike the domestic market, we face a lot of competition in the world market, particularly from the Europeans and the New Zealanders. But we’ve been able, as you can see from that last chart to because of the growth of exports to grow the industry at a faster rate shown by that that red line with the green dotted line as a as a trend line. And as long as we can continue to grow our exports, we we are able to sustain a somewhat faster growth than the domestic market alone would would permit. Thank

Val Lavigne  13:22 

you for bringing us through that delve into history about dairy products and dairy sales. Have there been any bright spots in dairy sales for products outside of those top three major products? Yes,

Madlyn Daley  13:35 

over the last couple of years, we’ve been seeing a real change that’s occurring in the marketplace. And one kind of exciting trend that has occurred over the last year or so would be in cottage cheese. And if we think about cottage cheese in the past, it was a product that tended to skew towards older households. Baby Boomers, for example, were very, very strong buyers of that product, but certainly not so much in terms of the younger generations. And over the last year, we’ve seen kind of a viral sensation that’s occurring on social media, there’s so many different tick tock recipes that are available right now. That’s really are bringing in those younger consumers. And so for example, as we think about the percentage of households that buy these products, it’s over 50% for baby boomers, but for someone like Generation Z are millennials, so people under the age of 40. Basically, it’s about 35% or so. But over the last year, we’ve brought in 3 million more households to the cottage cheese market. And volume sales have grown in 2023 by about 13% Over the last 52 weeks, I should say. And so very, very strong increases. And I think what’s exciting is that we’re seeing lifts or sales gains across various different demographic groups. So certainly something that’s kind of changing the course of that product. And I think it’s also tying into the protein trend. Consumers are looking for more protein. Certainly they receive that through Milk, they also are looking to Greek yogurt for that product. But now they’re also gravitating to cottage cheese. So that’s one example. A second one that I would say is another maybe smaller product whipping cream. We’ve seen over the last couple of years or so even actually, throughout COVID, that consumers are kind of bringing the coffee habit a little bit more into their own house, they’re getting a little bit more adventurous with how they’re making products. Whipping cream has kind of come along with that trend, as well as perhaps, on the indulgent front as well. And we’ve been seeing some very, very nice gains. In terms of sales over the last 52 weeks, we see a 10% lift in overall sales of whipping cream. So those would be two examples of products that maybe in the past, we have not seen as large of growth, a third

Peter Vitaliano  15:47 

one that probably doesn’t get commented on nearly as much. But it is basically an example of growth through using more of milk that’s produced. Not too many decades ago, the waste stream from cheesemaking was considered a waste product spread on fields disposed of in municipal wastewater management systems, but over time, we’ve discovered that that the waste stream is a source of very, very valuable ingredients, both domestic in domestic use, as well as export use, particularly on the protein side. So we no longer look at those as a waste product. I mean, we’ve developed a whole panoply of products from dry whey to whey protein concentrate, whey protein isolate, to a number of things that are used, particularly in in various food formulations to take advantage of that. Growing consumers desire for protein that Madeline referenced, so we’re using, you know, more of the more of the, of what dairy farmers are producing, rather than just focusing on on part of that, and that that’s been part of the growth we’ve seen over the last several decades as well. So

Val Lavigne  17:10 

looking at the other side of the ring, you know, what are some of the products that are dairies biggest competition? Yeah, sure.

Madlyn Daley  17:16 

So, you know, as we think of, for example, milk, milk certainly competes with plant based beverages within that refrigerated dairy case. But actually plant based beverages are not the largest threat, I guess I would say in terms of competition, we see, for example, coffee and water. As we do research to understand how people kind of are switching in and out of categories, we see that these very large kind of beverage categories really are taking more volume away from milk. And so as we think about coffee, for example, it’s it’s really providing consumers with that energy need, or water is preventing consumers with that hydration need that they’re really looking for today. So you know, as we think about milk, we think about it in terms of having a glass of milk, but it’s also its own competition in the sense that it could be an ingredient, for example, and many of the specialty coffees that are popular today. So we see lattes, for example, you know, sometimes are more than half milk within them that consumers are embracing, or we also see iced coffees, again, an ingredient key ingredient could be milk within those products. But milk also has competition from things that aren’t beverages. So for example, people over the last few years have been switching up their breakfast routines. And what we’re finding is that consumers being at home more often are opting for breakfasts, oftentimes that are hot, sort of, they’re looking towards eggs and waffles and pancakes, etc. Certainly things that maybe they’re not necessarily having milk with them as a beverage. But certainly milk or cheese can be an ingredient and many of those products. We also see consumers kind of looking towards kind of breakfast bars. So certainly Peter mentioned kind of whey protein, certainly protein is often in many of those bars that consumers are consuming as well. So those are many of the the key competitors for milk. And oftentimes on cheese, what we find is that it may not be a direct competitor, but it could be something like you, you opt to have maybe a sandwich without cheese on it. So again, always trying to think of ways in which dairy ingredients can be kind of incorporated into those favorite foods that consumers have today. And

Peter Vitaliano  19:31 

I’m not necessarily an expert in this, but I have the feeling that today’s consumers are gonna react differently from to plant based alternatives. You know, that’s obviously a major issue out there. But I have a feeling that dairy is is a lot more resilient to that kind of competition than for example what I mentioned earlier in the post World World War Two period when consumers were are willing and almost eager to embrace margarine as an alternative to butter and stole a lot of sales from butter. I don’t think we’d see that same kind of thing to that extent. And many of the dairy products now,

Madlyn Daley  20:14 

agree, Peter. And I think also, as we consider maybe those plant based alternatives that often are kind of talked about in the media, when we compare them side by side with dairy products, what we find is that just dairy just towers over them in terms of size. So the very largest plant base category right now would be in the beverage side of it. So the the oat, you know, milk alternatives, or almond milk, alternatives, etc. And what we find is that milk is so much larger, milk Cole’s about 90% share of that category overall. And currently, milk is seeing a little bit of an uptick, yet, we’ve been seeing declines in those plant based products for a couple of years already at this point in time, and continuing into 2024. And similarly, if we think about cheese, or we think about yogurt, sour cream, etc. Again, dairy is the dominant factor within those categories. So again, real dairy products are certainly much, much larger, and on a better growth trend than the plant based at this point.

Val Lavigne  21:19 

I mean, I just have to chip in there, everything is better with cheese. So these people that are home that are switching to hot breakfasts, I mean, just put some nice shredded cheddar cheese on top of those eggs, something like that, that’s, that’s where it’s at for me. And we’ve touched on this a little bit. But I really just kind of want to make sure that this is out there, should the dairy farmers be worried about fluid milk,

Peter Vitaliano  21:44 

my feeling is, if you look at total dairy consumption, sort of in that that last chart that that I talked about, the story is basically one of positive growth, and that I’m quite content and quite content is going to continue the mix of products, it’s going to change. But it seems that that both on a per capita basis, as well as on a on a population growth basis. Dairy is gonna continue to grow, it seems to be you look at any of the charts and at the numbers. And there’s a huge robustness about that. Obviously, the major categories, including fluid, which has historically been very large is very concerning when we see the kind of the kind of declines that we’ve had for decades now. There are some bright spots. But at some point, again, looking at the the overall history of dairy product consumption, there are certain things that probably are going to be relatively inexorable, both in the growth side and on the declining side. But the the thing to keep your eye on is what is the total growth in the use of what dairy farmers produce. And that is all of the milk components that are now being pretty much fully utilized. So who knows what the future is going to be but but in terms of have the perception that I know a lot of the media has the dairy is in decline, because fluid milk is in decline is totally wrong. So

Val Lavigne  23:28 

Peter, you mentioned you know that US per capita consumption of dairy is on the rise. Do you see this peeking anytime soon? Or do you see it continuing to rise? What do you see in the future for that?

Peter Vitaliano  23:43 

Well, theoretically, we’d have to expect there is a maximum out there, but we don’t seem to have approached it in any in any sense. So I’m not ready to predict where that point of of of satiety is going to be for consumers. As

Val Lavigne  24:02 

we all know, inflation has been a very hot topic recently. How has inflation impacted theory sales, I’ve looked at this

Peter Vitaliano  24:12 

in particular for butter. Butter has been the one product dairy product that’s been most subject to the most extreme inflation, inflation eat dairy products, about a year after it started and the general the general economy fluid milk information was a little bit in advance, but most of the other dairy products was mostly into 2022. And when it did hit dairy, it it was more it was more intense in terms of the rate of increase then in the general economy, but it didn’t last very long and those prices are starting to come down now actually in real terms. Get butters had the most extreme inflation, and per capita consumption and 2022 dropped by half a pound per person. USDA has not released its official numbers for 2023. But they’re pretty easy to estimate just gives me I’m expecting that better per capita consumption is going to fully recover. And even more so in 2023. Compared to say, 2021, it will have last two years where the growth but in terms of have a lasting impact. I don’t see that for butter. And men who may know a little bit more about the other products.

Madlyn Daley  25:47 

Yeah, yeah, Thanks, Peter. In fact, 2022 was was, you know, a significant year in terms of inflation, we did see kind of the market respond, where consumers were pulling back, we saw many consumers who were staying within categories of dairy. But what they were doing is trying to trade down perhaps in price. So we saw private label products, for example, see larger increases, then maybe a little bit higher priced, branded product, we saw consumers, you know, perhaps buying at whatever they would see maybe club stores that had better prices, or Walmart, for example, might have a little bit lower prices. So people kind of shifting the channels and where they buy it, and also the items that we buy. But certainly there was a little bit of a downtick across most most dairy products. The good news is that at retail, we saw people recovering already and 2023, continuing into 2024. And what we also know is that when we think about kind of the foodservice market, particularly restaurants, that’s what was hardest hit during all of this time period. And restaurants took a much higher price increase than we saw at grocery consumers recognize that. And so it’s the first place people cut back in terms of trying to save money on food. And the good news, I guess, I would say is that from a dairy perspective, more of the products that are sold at restaurants tend to be at those quick service type restaurants. So the Taco Bell’s and McDonald’s of the world. And that is recovered more so than kind of the the fine dining or the sit down restaurant aspect of it. So I think we’re in a better place now than we were certainly just a couple of years ago.

Peter Vitaliano  27:27 

Yeah, but there’s no question that dairy had a setback, it food service during the last several years, and exports have been down a little bit as countries are, are working to become more self sufficient, perhaps as a result of the more uncertain international competition climate, let’s call it and as well as the fact that, you know, we’re we’ve been counting on our competitors, particularly the Europeans as well as in Zealanders cutting back their production, for environmental sustainability reasons. But you should never underestimate the ability of European dairy farmers when they get on their tractors and drive into cities, to set back some of the best plans from the government’s over there. To cut back production for environmental and sustainability reasons. We’re seeing that now. So again, the export environments can be more challenging than we’ve seen, that we’ve seen in recent years,

Val Lavigne  28:27 

I guess now’s the time to look into those crystal balls. And what product and sales trends do you see happening in the future for dairy,

Peter Vitaliano  28:35 

I think we’re gonna see continued growth in cheese, yogurt seems to have plateaued a little bit at about 14 pounds, it’d be good to see that grow a little bit more butter, I quite confident butter is going to continue to recover, whether we’ll get back to 18 pounds per person as we saw some years ago. That’s questionable. But I think some getting back up to around 10 pounds is in the not too distant future is is very possible. Again, in terms of growth and ingredients, we’re going to see more and more of that. And again, I’m hopeful that we’re going to be able to see some continued growth in exports both through particularly through gating at some point gaining market share from some of our competitors.

Madlyn Daley  29:25 

And I would add to that too, just thinking of it from maybe the consumer mindset is that what we’re seeing is that consumers are just much more into health and wellness today than they have been in the past. In fact, the the entire kind of health and wellness marketplace is just on fire right now. And so as we think of a more proactive kind of consumer in that space, certainly dairy products, I think fit within it. Consumers are looking for healthier snacks, which dairy can provide there. They’re also looking for products that are fulfilling very certain needs. That they have again kind of like don’t just an aspect of it is becoming more and more important to that consumer. We’re also looking at ways that we can maybe be an ingredient in products that are helping to fulfill many of those needs. And just think of it in the sense that right now, dairy is just ingrained in American culture. It’s a big part of the habits, the routines that we have on a day to day basis. So that’s, that’s not going to go away. And I think that there’s just more opportunity for us to grow in some of those health spaces.

Val Lavigne  30:29 

I for one, as a dairy farmer, I’m really looking forward to the future of dairy and the great things that dairy can do for everybody. How does Dairy Checkoff go about sharing this information out into the dairy industry? Sure,

Madlyn Daley  30:42 

we have very close relationships with some of the partners right now in the industry. So certainly with Milk Processors, as well as people within kind of that food service or restaurant space. So any insights that we have in terms of like new opportunities to help strengthen dairy, we’re always passing along, I would say as well, we have the innovation center right now in place, that’s a forum for bringing together kind of the dairy industry overall. And again, it’s a place to kind of share insights across the industry and and, you know, so that all of us can kind of have that same set of information and build upon it for the future.

Val Lavigne  31:22 

What is one thing that you want farmers that are listening to this to come away from this conversation with the dairy

Peter Vitaliano  31:27 

industry is alive and well and growing dairy farmers that want to be part of the industry generally find consumers are willing to support that growth? And I would add

Madlyn Daley  31:36 

to it that what right now is fueling kind of industry growth is much larger than any of the tensions perhaps that come up over time. So just a positive outlook

Val Lavigne  31:47 

great. I to see that positive outlook and I’m really excited about the future. Like I’ve said, Where would farmers go if they want more information about dairy consumption and sales? I think one place that

Madlyn Daley  32:00 

we can help to provide that information is through a report that an MPF works on with GMI I would encourage you to go to us dairy.com. On that you’ll find your Dairy Checkoff newsletter and you can subscribe and be provided with ongoing information on the industry.

Val Lavigne  32:19 

Great. It is a really an informational newsletter, I highly encourage you to sign up if you have not done so. Madeline and Peter, I want to thank you so much for this discussion today. It’s really been interesting and enlightening to hear about consumer purchasing consumption and trends as it pertains to the dairy industry. In closing, we just want to say thank you so much for joining us today on your Dairy Checkoff podcast. If you want to hear more about various issues affecting the dairy community. Please subscribe to this podcast on your favorite podcast platforms including Stitcher, Spotify and iTunes or you can check out our website Dairy Checkoff. podcast.com for future episodes. I hope you have a great day and enjoy some dairy with your meals. Thank you

Transcribed by https://otter.ai

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