WASHINGTON—As U.S. consumers drink less milk, other products in the dairy aisle are capturing their attention—fueling new growth and opportunity for dairy farmers.

According to sales data from market research firm Circana, the refrigerated dairy aisle remains the largest category in retail grocery—generating $76 billion in sales over the last year. Over the last three years, retail dairy sales have increased by 15.4% or $10.1 billion.

“Dairy is the champion of the grocery store,” said Cory Geiger, lead dairy economist with CoBank’s Knowledge Exchange program. He added that dairy’s three-year growth rate continues to outpace liquor, the second-highest category of retail sales.

A new CoBank report reveals a promising outlook for retail dairy sales, with the number of pounds of dairy products sold growing 7.7% over the past decade.

“This underscores the increasing demand for dairy products despite the inflation of retail food prices over the last four and a half years,” noted Tony Banks, senior assistant director of agriculture, development and innovation for Virginia Farm Bureau Federation.

“But the dairy industry shouldn’t rest on its laurels,” Geiger noted. “Consumers’ tastes and purchasing patterns continue to evolve, and that means dairy processors, manufacturers and marketers need to innovate.”

Private labels are outpacing brands in 10 out of 15 dairy categories, including yogurt, cream cheese, cream and creamers, the report notes.

The report also identifies cheese, butter and yogurt as fueling category growth, along with emerging dairy products designed to capitalize on a rising demand for healthy, protein-rich snack products.

Over the last 25 years, per capita consumption of butter increased 43.2%, cheese increased 45.8% and yogurt consumption increased 142.4%, according to the U.S. Department of Agriculture.

While U.S. cheese consumption stands at a record 40 pounds per capita per year, European consumption patterns show there is still room for growth.

Globally, the cheese snack market is projected to exceed $75 billion this year, with North America making up almost 24% of that share with new flavors and formulations driving growth.

And new product launches of snack cheeses are booming in major U.S. dairy product export markets—growing 152% since 2019, according to the U.S. Dairy Export Council.

“U.S. dairy exports have continued to grow over the past 25 years,” Banks noted. “While U.S. dairy exports once presented a marketplace for surplus milk and product production, exports are now a major source of dairy demand for U.S. farmers and the industry.”

CoBank notes an additional opportunity for innovation in the lactose-free product category—offering dairy processors the chance to reach the 120 million Americans who cannot enjoy traditional dairy products due to some form of lactose intolerance.

“Additional lactose-modified product development could provide an opportunity for the dairy industry to at least slow the decline of fluid milk sales—opening the fluid and other dairy product markets to over a third of the U.S. population,” Banks said.

Geiger added that the “future looks bright” for the dairy industry. Most U.S. consumers purchase dairy, and when asked about their future intentions, 90% said “they have no plans to cut back.”

To read the full report, visit cobank.com.

Media: Contact Dave Harding, CoBank Knowledge Exchange, at 262-825-7926; or Banks at 804-290-1114.