Producers are introducing innovative products to cater to changing consumer tastes
Los Angeles, CA (PRWEB) March 19, 2013
Over the past five years, the Dairy Product Production industry has benefited from an increasing popularity of yogurt and cheese products in the United States and abroad, which has offset declining fluid milk consumption as competition from substitute drinks has increased over the period. In addition, dairy producers have largely been able to pass along raw milk costs, which have risen 3.5% over the past five years, to their customers. These factors have helped industry revenue grow at an average annualized rate of 1.5% to $105.1 billion in the five years to 2013. “An exception to this growth trend occurred in 2009,” says IBISWorld industry analys Jeff Cohen, “when industry revenue experienced a 15.7% decline due to an overall reduction in consumer spending as a result of the recession, a drop in raw milk prices and lower global demand.” As economic recovery continues, rising incomes will help increase spending on premium dairy products and contribute to an increase in industry revenue of 2.0% in 2013.
During the past decade, dairy product wholesalers and retailers have consolidated to more effectively compete for national supply contracts from dairy producers, cutting costs related to purchasing dairy products. “Increased concentration in downstream markets required producers to supply vendors on a national scale,” says Cohen, “and the ability to compete on price became important for securing national sales contracts.” Rising feed costs caused raw milk input costs to increase, though, which forced producers to raise prices. Buyers are willing to pay higher prices to a certain extent, so to achieve lower per-unit costs (and achieve national scale), many dairy producers merged. Consequently, the number of enterprises fell an estimated 0.2% per year on average to 729 during the five years to 2013.
The Dairy Product Production industry remains fragmented despite consolidation during the past five years. A diverse range of private and public companies, dairy cooperatives and multinational food corporations undertake dairy production. Also, the industry produces a wide array of products, such as milk, cheese and yogurt, thus making overall industry revenue relatively large compared to other food industries. Dairy producers may focus their operations on one particular commodity, such as cheese or butter, or diversify their activities to make a range of dairy products. For example, Kraft focuses its dairy production on cheese. Other major companies include Dean Foods Company, with brands like Silk and Alta Denta, and Dairy Farmers of America, with brands like Borden Cheese and Plugra Butter.
Throughout the next five years, rising disposable household income stemming from economic recovery is expected to boost dairy product demand and producer revenue. Producers are anticipated to introduce innovative products that cater to changing consumer tastes, continuing a trend over recent years. Meanwhile, rising feed costs will hamper significant profit expansion, and competition from overseas dairy producers will temper revenue growth. For more information, visit IBISWorld’s Dairy Product Production in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Dairy Product Production industry mainly manufacture dairy products such as pasteurized milk, cream, butter, yogurt, cheese, and dry, condensed and evaporated milk. The industry also manufactures substitute dairy products made from soybeans and other nondairy ingredients. Producers of dairy products like ice cream and frozen yogurt are excluded from this industry (they are covered in IBISWorld report 31152 – Ice Cream Production).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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