WASHINGTON—Consumer trends and federal regulation of milk in school meal programs have dried up some demand for beverage milk.

A Dec. 19, 2017, report by the American Farm Bureau Federation notes that prior to the 1980s more than half the milk regulated by the U.S. Department of Agriculture’s Federal Milk Marketing Order program was in beverage milk production. By 2015 only 33 percent of milk in the program was in fluid milk. During that time per-capita consumption of beverage milk declined by 25 percent to approximately 18 gallons per person per year.

The AFBF report cites as contributing factors milk price volatility; imitation “milk” products such as those that are coconut- and almond-based; bottled water products; reduced consumption of ready-to-eat cereals; and legislation limiting school milk options.

“There are a lot more beverage options available today in addition to fruit juices and soft drinks, which have always competed with milk,” explained Tony Banks, a commodity marketing specialist for Virginia Farm Bureau Federation. “Additionally, local and federal regulations limiting milk choice in schools have helped drive down consumption.”

From 2012 to 2016 annual conventional milk sales declined by more than 4 billion pounds, or about 8 percent, the report notes, citing USDA Agricultural Marketing Service data. Organic milk sales captured some of that market, increasing by 20 percent.

Using Bureau of Labor Statistics average milk prices of $3.45 per gallon, the AFBF reported the decline in fluid milk sales represents an annual decline of $1.7 billion—and an $884 million annual drop in farm-level dairy cash receipts. It also has resulted in lower U.S. average milk prices.

Today’s consumer, the report notes, “obtains breakfast items on the go, reducing the consumption of ready-to-eat cereals, and (is) increasingly turning to alternative plant-based beverages. As these consumption trends continue to grow, innovation in the dairy case is needed to get dairy products in the hands of the on-the-go consumer and recapture lost market share.”

The decline in conventional milk consumption was largest in reduced-fat non-flavored milk such as 2 percent, 1 percent and skim. From 2012 to 2016, skim milk sales declined by 36 percent; 2 percent milk sales declined by 13 percent; and 1 percent milk sales declined by 6 percent. Current sales of flavored reduced-fat milk, including fat-free flavored milk, are in line with 2012 levels but have rebounded from the 2015 lows.

Coinciding with shifting consumer preferences to full-fat dairy products, sales of whole milk were up approximately 7 percent, and flavored whole milk sales were up 18 percent after 2016.

“Consumer preferences are moderating a bit,” Banks noted. “Not only are we seeing an increase in sales for whole milk, but demand is increasing for other full-fat dairy products, including butter, cheese and yogurt.”

The Healthy, Hunger-Free Kids Act of 2010 reauthorized funding for school lunch programs but limited the types of milk schools could serve to nonfat white and flavored milk and 1 percent white milk. By 2012 low-fat flavored milk was no longer an option in school meal programs.

Recently introduced legislation and an interim final rule seek to reverse that trend by allowing schools to offer low-fat flavored milk, in addition to the current offerings, to participants in the federal school lunch and breakfast programs through the 2018-2019 school year.

The complete AFBF report is available at fb.org/market-intel/trends-in-beverage-milk-consumption.

Media: Contact Banks at 804-290-1114 or Pam Wiley, VFBF communications, at 804-290-1128.