Demand for Dairy Products Remains High

C-stores realize good margins on dairy, and milk alternatives liven up the category.

November 03, 2021

A glass of milk

ALEXANDRIA, Va.—U.S. dairy products are in high demand, according to the U.S. Department of Agriculture, despite labor shortages and lack of truck drivers and milk plant operators, reports Farm Progress.

If vaccination progress continues to reduce cases of COVID-19, the world economy should show improvement, which would boost world demand for dairy products, said Bob Cropp, University of Wisconsin-Madison dairy economist, to Farm Progress.

Dairy exports in August were 13% higher than a year ago, marking the seventh straight month of growth. Compared with a year ago, nonfat dry milk-skim milk powder exports were 15.4% higher, dry whey products 9.2% higher, cheese 18.1% higher and butterfat 150.5% higher, according to USDA.

The U.S. is also producing more milk than one year ago. April through June was 3.7% higher than a year ago, but production has started to slow. July’s production was up 1.9%, but August was up just 0.6% and September was 0.2%.

The USDA is predicting that the growth in milk production for 2022 may be no more than 1.5% with an increase of just 1.2% over 2021. High feed costs as well as increased labor and other input costs will likely encourage heavier culling of lower-producing cows. The high cost of building materials also will dampen dairy expansion decisions.

With per-capita consumption continuing to decline and tough competition from larger retailers, the fluid milk category remains a challenging one for convenience store operators. Still, the segment shouldn’t be overlooked, owing to its good margins, promising outlook for emerging better-for-you products and the opportunity to cater to consumers searching for a convenient shopping experience.

The demand for plant-based milks, including oat milk, soy milk, coconut milk and almond milk, also has intensified, with many consumers pouring these options in their coffee or on their cereal every morning.

“The Plant Based Foods Association reports that milk has the largest growth of all plant-based alternatives, at $2 billion in 2019,” Jayme Gough, research manager, NACS, told NACS Magazine. “That’s probably because an estimated 30 million to 50 million Americans are lactose intolerant.”

TXB Stores, with 45 locations in Texas and Oklahoma, sells cartons of almond milk in markets “where the customer base is looking for this type of dairy alternative,” Russia Abdelbary, senior category manager, TXB Stores, shared with NACS Magazine. “We’re data driven and always use market and consumer insights, combined with our internal data, to make changes to our assortments.”

Rutter’s, the Altoona, Pennsylvania-chain with 78 outlets, keeps Silk Almond Creamer on store coffee bars because customers want it. “While last year was challenging, we are looking to continue to provide new and innovative items for our customers in 2021,” said Chad White, foodservice category manager, Rutter’s.