The best way to describe the mood in dairy production these days could be applied to the post-Covid world in general: cautiously optimistic. The industry entered last year with a report from the USDA indicating that consumption across all categories of dairy products surpassed 650 pounds per person annually, with cheese consumption specifically at a record high of nearly 42 lb. per person. Ice cream enjoyment, too, was noted as on the rise, and yogurt and butter were holding steady at high numbers set previously.

While the USDA report highlighted dairy’s consistent growth and positive position among consumer preferences, some hiccups could be coming. Negative farm-level margins in mid-2023, along with some adverse weather, pulled US milk production below year-ago levels and dairy farmers have been reducing the size of their herds. US milk production in 2024 is expected to increase 0.8%, with most of the growth coming in the second half.

This relatively weak domestic milk production could limit production of certain dairy commodities, in turn limiting exports. Production of nonfat dry milk, skim milk powder, and butter are expected to fall in 2024. Production and exports of those products were weak during 2023 and that likely continues in 2024. So, while the US market looks relatively balanced in 2024, without the need to move a lot of additional milk into the export market, for processors decent global demand and relatively tight supply mean prices will likely shift higher in 2024.

Dairy Ups and Downs by Circana Market Research, as reported in Dairy Foods

Despite recent lower inflation figures, dairy was affected by inflation during the past year in many categories. This resulted in dollar sales increasing across many segments, while unit sales dropped for the period ending Aug. 13. Dairy milk, plant-based milk, non-fruit drinks, processed cheese, cream cheese, creams/creamers, margarine/spreads, sour cream, yogurt, ice cream/sherbet and frozen novelties all can be characterized under this umbrella. Bucking this trend, enjoying both dollar sales and unit sales growth, were natural cheese, butter blends, cottage cheese, and whipped toppings.

Big Cheese

While plant-based milk analogs are giving dairy milk a run for its money, growth in the plant-based cheese category seems to have no impact on dairy cheese products. Cheese consumption continues to grow, driven by consumer interest in more exotic and artisanal cheeses as well as its favored image as a healthful, protein-packed treat providing fullness and flavor in small amounts.

Overall, natural cheese and the diverse types of shredded, chunks, slices, string/stick, crumbled, cubes, ricotta, and all other forms, generated $17.4 billion in sales, a year-over-year (YoY) increase of 7%. Unit-wise, all-natural cheese collectively sold 4.3 billion units, a mere 0.3% increase over the prior year.

Cheese forms that boasted dollar sales of more than $1 billion last year included shredded, at $6.6 billion (a 7.8% increase); chunks, at $4.4 billion (YoY growth of 6.6%); slices, $3.1 billion (a 5.6% rise); and string/stick, which climbed 5.8% to $1.5 billion.

The Tao of Cheese by Circana Market Research, as reported in Dairy Foods

John Crawford, senior vice president of Client Insights-Dairy for Circana Market Research, notes that private label makes up 49% of the total Natural Cheese category, which is much more competitive than the other categories. “Several brands make up the other 51%, including Sargento, Kraft, Tillamook, Cabot, etc.,” Crawford explains. He points out that dollar growth in cheese, as with many other dairy categories, has been almost entirely driven by inflation-generated higher prices over the past two years. “In 2023, we started to see volume rebounding a bit as price increases have eased,” he says. “2024 is starting to look like 2019, with low volume growth—1-2%—with stable prices resulting in 1-2% dollar growth.”

A Cultured Position

The pandemic might have faded, but the interest in immunity, especially gut health, has only continued to grow. Cultured dairy product offerings have expanded beyond yogurt, kefir, and cottage cheese to products such as skyr, cultured dips, plus sour cream and cream cheese with active probiotic bacteria cultures.

Dan Buckstaff, CMO for research group SPINS, LLC, detailed the positive growth pattern in several subcategories of cultured dairy. These include: Refrigerated Cottage, Ricotta, and Farmer Cheese, with unit sales up 16.1% at dollar sales of $1.7 billion; Refrigerated Sour Cream, $1.7 billion in sales, up 13.6%; and Refrigerated Drinkable Yogurt, $1.3 billion in sales, up 13.1%. “Cottage cheese specifically is one of the products that has been touted by fitness influencers.” Buckstaff notes. “This is because of its probiotics, high protein content and ability to be added to many recipes without altering the taste.”

Under Dairy and Plant-Based Dairy Alternatives/Other, SPINS data documented sales of $3.3 billion in Refrigerated Cream Cheese and Other Cheese Spreads, and $1.7 billion in in Refrigerated Sour Cream, a double-digit uptick of 13.4% and 13.6%, respectively.

Another cultured product that has seen growth: buttermilk. Buttermilk is the thick milky liquid that remains after churning butter from cultured or fermented cream, and a new generation seems to have discovered the classic product, driving steadily growing sales. Research group 360 Market Updates reported that the global buttermilk market “looks promising in the next five years,” observing that it already has surpassed $5.2 billion and is expected to close in on $6 billion by 2028.

But there still is some fluctuation to note. For the 52 weeks ending Aug. 13, Circana reported that sales of shelf-stable yogurt and yogurt drinks were up only 33.3% in multi-outlets, 16 points below last year’s 49.3% rise. Still, a boost from inflation allowed the subcategory to yield $106 million in dollar sales compared to last year’s $77 million.

Shelf-stable yogurt and yogurt drinks, on the other hand, rose 7.7% in YoY sales to 18.2 million units. This is in spite of a price-per-unit average increase of 23% over last year’s pricing. And while still at No. 1 in the cultured dairy category, refrigerated yogurt saw a unit sales decline of 4.3% to 3.6 billion, but was saved by inflationary dollar sales of $9.3 billion, a rise of 11.8%.

Go, Go, Yogurt

In 2022, low-fat yogurt alone rang up $20.2 billion in sales and, according to a report by Research and Markets, is projected to ultimately hit $37.1 billion by 2028, at CAGR of 10.28%. Two trends among some dairy processors are to incorporate extra protein (typically whey protein), thereby increasing total solids content, and adding thickeners to yogurt products to make them a closer match in texture to the highly popular Greek-style yogurts.

According to SPINS’ Buckstaff, growth in yogurt is being driven by consumers swapping out other ingredients in favor of yogurt due to its being a good source of protein, calcium, and probiotics. Buckstaff further notes that out of all the cultured dairy categories, yogurt fosters the greatest competition, pointing out that, “there are so many different types, from Icelandic to Australian, that are all competing to be the favorite yogurt.”

When assessing the yogurt market, Circana divides it between “Spoonable” and “Drinkable.” Drinkable products account for 13% of total yogurt sales, with spoonable at 87%. In dollar sales, drinkable yogurt is up by 11.6%, but once again, this is the result of inflationary price jumps as actual sales volume in the category is down 3%. For spoonable, sales are up 11.1% and volume down a mere 1.3%.

Flavored butters spreading

Butter as a category typically does not have a reputation for trend-setting shifts and shake-ups. That’s changing. In the Global Flavored Butter Market Overview of its February 2024 report, Market Research Future, Ltd. wrote the following: 

“The Flavored Butter market is experiencing a surge in demand, buoyed by the prevailing wave of health and wellness consciousness among consumers. As individuals increasingly prioritize wholesome and natural food choices, flavored butter has emerged as a sought-after option that aligns with these evolving dietary preferences. Health-conscious consumers are drawn to flavored butter products that offer not only a burst of enticing flavors but also the promise of high-quality and nutritious ingredients.”

According to the Market Research Future research, once the 2023 numbers are in, the Flavored Butter Market size is projected to have topped $2 billion and to more than quadruple over the next eight years, to $8.77 billion by 2032, at a strong, double-digit CAGR of around 20%.

Herbs (such as garlic and chives), spices, peppers, smoke, and even sweet inclusions are just some of the flavors coming onto the scene as spreadable compound butters try to lure consumers. In addition, premium butter options from terroir-associated butters (Irish, Danish, French) add that touch of exotic allure to a normally staid product.

Another aspect of this “butter-plus” trend is the inclusion of functional ingredients, such as omega oils, added protein, and probiotics. These take the indulgence of butter and add a healthier halo. Also, organic butters are experiencing rapid growth and, ancillary to the flavored butters, unsalted butter sales are undergoing a rapid increase due to their favor as an unlimited base for infusions and inclusions.

Overall in the butter market, refrigerated butter dollar sales topped $4 billion for the 52 weeks ending Aug. 13 in multi-outlets and convenience stores, according to Circana. This represents an impressive 22% YoY increase. Unit sales, however, were essentially flat, dropping a mere 0.5% to $828 million.

Based on the Circana data, butter blends had an even better year overall, as both dollar sales and unit sales increased compared to the prior year, a rarity among dairy categories. Butter blend dollar sales jumped by 13% YoY to $437 million, while unit sales increased 6%, to nearly 100 million. Regarding margarine and spreads, the numbers also were impressive, with dollar sales jumping by 23% YoY to nearly $1.8 billion, while unit sales dipped by 3% to $477 million.

Ice Cream Dips

According to Circana, ice cream dollar sales increased 7% in the year ending Aug. 13. However, unit sales fell 4% to 1.6 billion. Frozen novelties experienced similar results. While dollar sales jumped 8% to $7.5 billion for the 52-week period, unit sales declined an identical 4%, to 1.7 billion. And all this during one of the hottest summers on record.

Frozen yogurt suffered an even more difficult year, with both dollar sales and unit sales on the downswing. The former fell to $329 million for the year ending Aug. 13, a drop of 5%, while unit sales dropped an equal 5% (71.5 million).

One ice cream category showing promise for future growth is alcohol-infused ice cream, also known as “hard ice cream.” A number of companies are merging the two indulgences, calories be damned. Flavors such as Irish Cream, White Russian, and Bourbon Pecan are becoming more common and, while many versions are relying on the flavorings while foregoing the kick, in the premium section of many stores you will find the real deal. While the prices of these spirited desserts are also premium, some of them are a bargain for their contents.

An example is a bourbon pecan ice cream by McConnell’s Fine Ice Creams, Inc. that uses a distinctly top-shelf bourbon: Garrison Brothers’ Small Batch whiskey, which retails for triple-digit prices. At less than $15 per pint, it’s actually a bargain. And if you want to add a spritz of whipped topping to that premium ice cream, you’re not alone. Refrigerated whipped toppings totaled $1.9 billion, on an annual increase of 18.6%. Try topping that!

Editor’s Note: We wish to thank the editors of our sister publication, Dairy Foods, for their generous contribution of material and information to this article. Find the full report on the State of the Dairy Industry.

David Feder, RDN, has been a food, nutrition, and health journalist for more than 30 years. A former professional chef helping pioneer haute-health and fusion cuisines during the 1970s and 1980s, in the 1990s he became a registered dietitian and completed research and coursework toward a PhD in nutrition biochemistry while teaching food science and nutrition. He lives in Austin, Texas and can be reached at federd@bnpmedia.com.

Faux Dairy
The global dairy alternatives market in 2023 should close at $27.0 billion once all the numbers are in, according to research group MarketsandMarkets, Inc. That figure is predicted to grow by more than 50% by 2028, to $43.6 billion, at a CAGR of 10.1%. The report notes, “Plant-based beverages have emerged as the favored substitutes for dairy products, experiencing a surge in popularity as people increasingly opt for dairy-free diets. This shift is primarily driven by the rising occurrences of lactose intolerance, milk allergies, and a growing preference for vegan and health-conscious lifestyles. Notably, plain and unsweetened versions of these dairy alternatives are particularly prevalent among consumers seeking low-calorie and low-fat options.”