Dairy Product Production

The Dairy Product Production industry consists of operators that manufacture a wide variety of dairy goods and then supply them to downstream markets, such as wholesalers, retailers and foodservice establishments.

Industry revenue performance has been volatile but has declined overall. Volatility in the industry has also been due to large fluctuations in the price of raw, or unprocessed, milk.

Thus, industry revenue has declined at an annualized rate of 0.3% to $111.2 billion over the five years to 2021, including a decline of 0.3% in 2021 alone due to the lingering impact of the COVID-19 (coronavirus) pandemic creating unfavorable economic conditions.

The pandemic has reduced demand from wholesalers and foodservice establishments, although research anticipates this will rebound during the outlook period.

The Dairy Product Production industry manufactures dairy goods for wholesalers, retailers and foodservice establishments. Over the five years to 2021, the industry has experienced declining revenue, which has been primarily driven by a shift in consumer preferences.

The price of raw milk has most significantly affected industry revenue, exhibiting volatility during the period. Industry operators typically benefit from higher input prices because they can pass along the costs to consumers in the form of higher prices.

Consumers typically purchase these goods regardless of price hikes since dairy products are a staple of the average US diet. When milk prices decrease, industry players are typically forced to charge consumers lower prices, causing industry revenue to fall. However, the price of milk has increased at an annualized rate of 2.3% over the five years to 2021.

Additionally, a general shift in consumer preferences as dairy related to health issues in some studies, coupled with the COVID-19 (coronavirus) pandemic, has resulted in declining industry revenue. Thus, revenue has fallen at an annualized rate of 0.3% to $111.2 billion over the five years to 2021, including a decline of 0.3% in 2021 alone, which is likely due to a sharp decrease in demand from wholesalers and food service establishments.

Although research anticipates industry revenue to decline in 2021, it is somewhat of a recovery from 2020 levels, where industry revenue declined 11.6%.

Over the five years to 2026, the Dairy Product Production industry is expected to benefit from stabilized prices of feed and raw milk. This trend will likely be the primary cause of a slight increase in industry revenue. As input prices stabilize, industry operators will also likely benefit from increased demand from downstream markets. The economy is expected to rebound during the outlook period after the COVID-19 (coronavirus) pandemic has abated.

Thus, household disposable income is expected to rise, and demand for major market segments, such as retailers and wholesalers, will likely bolster industry production and sales. Increased demand is expected to encourage larger purchases, which will likely grant industry players a stable revenue stream as higher input prices, such as the price of feed, are passed downstream to a growing consumer base.

Furthermore, milk prices are expected to be less volatile compared with the five years to 2021, enabling producers to price their products more effectively and manage supply contracts better. Moreover, as more Americans become more health-conscious, producers will likely continue to innovate and introduce healthier varieties of dairy products, which they will likely sell at higher price points.

These factors are expected to lead to increased industry revenue, which is anticipated to rise at an annualized rate of 0.9% to $116.1 billion over the five years to 2026.