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Recent trends in the retail dairy market have thrown the industry into a frenzy, with worry about the future of dairy at an all time high. The short story, the industry faces waning demand for traditional milk products due to shifting eating and purchasing habits, entrants of dairy alternatives claiming additional health benefits, and increasing dietary restrictions in certain demographic groups. A recent white paper by McKinsey and Company, in collaboration with the International Dairy Foods Association (IDFA), highlights these headwinds, but offers up some solutions and paths towards growth and profitability for dairy operators. While the white paper paints a bleak picture for the industry, it does still see upside if manufacturers are willing to search for it.

Most dairy industry professionals are aware of the ever growing changes in the dairy marketplace of recent years. “A look at the US Market tells a cautionary tale; from 2015 to 2019, top dairy products experienced sales declines, including cheese (-1.4 percent), milk (-4.9 percent), and yogurt (-2.3 percent),” write the authors of the paper. This decrease in demand has led to operators being forced to innovate and sustain growth in different ways. Top Dairy CEO’s have dumped capital and resources into gaining competitive advantage through manufacturing efficiencies and product innovation, but rarely do companies site consumer insight capabilities as a competitive advantage. This, as McKinsey argues, is the key to domestic growth. The large-scale data that is available to the industry, paired with advanced data analytics techniques, can allow dairy manufacturers, and the food service industry as a whole, the ability to segment and target customers on a whole new level. Being able to understand these target consumers and create products to match their desires is critical in the growth of the industry. McKinsey also  suggests more tailored and numble supply chains to help serve this new demand. These techniques are applicable to the Food industry as a whole. As consumers start to leverage more technology, operators have the ability to do so as well and can now reach the consumer in a larger variety of ways. To not take advantage of this ability is falling behind on your competitors and leaving your target consumer unsatisfied with their experience.

Click below to read the full white paper!