Dairy Sales Continue to Decline

The dairy category is facing challenges in 2024, stemming from issues that began in 2023. At the end of last year, dairy dollar sales in supermarkets fell by 5.1%, as reported by the International Dairy Deli Bakery Association (IDDBA).

“As deflation arrived, the year-on-year dollar performance is vastly different from what we saw throughout 2022 and the first half of 2023,” stated Whitney Atkins, vice president of marketing for IDDBA.

A report by Mike McCully of McCauley Consulting released in early 2024 indicated that milk production has decreased not only in the U.S. but also in Europe and New Zealand in recent months. However, demand has also been weak.

In the latter part of the year, milk production was 0.6% lower than the same time last year, which was worse than expected. This decline can be attributed to the U.S. dairy herd decreasing by nearly 10,000 head in 2023. Nevertheless, McCully anticipates that U.S. milk production will increase by approximately 1% in the coming year.

The report also noted that butter prices reached a historic high of $3.50 in October before falling to a more manageable $2.50 in supermarkets across the states. McCully forecasts steady prices for 2024 unless there is a significant change in either supply or demand within the category.

“The overall dairy demand outlook remains modest, with weak global demand but stronger domestic demand, particularly for cheese and butter,” he said.

Chris Mentzer, director of operations for Rastelli Market Fresh, a supermarket chain with locations in Marlton and Deptford, N.J., emphasized that despite the challenges faced by the category, dairy remains a core component for shoppers. Essential items like milk, butter, eggs, yogurt, and cheese are staples on most shopping lists.

Ups and Downs in Dairy Sales

Supermarkets have experienced varied results with dairy, some positive and some negative.

“Over the last year, we have seen an increase in sales for indulgent yogurt flavors, which customers are enjoying as desserts rather than just snacks,” said Maria Brous, director of communications for Publix Supermarkets in Lakeland, Fla. “Additionally, milk and milk alternatives have shown growth.”

One dairy item that has performed well is cottage cheese, which saw an increase of over 12% year-over-year, with a notable jump to 15.4% in the final two months of 2023, according to IDDBA. These numbers are projected to remain solid in 2024.

The rise in cottage cheese sales can be attributed to trends on social media platforms, according to Savannah Williams, client insight analyst for Circana.

Conversely, the egg category experienced the largest decline, dropping 31.5% in 2023. Predictions for the upcoming year remain uncertain after a year marked by production declines and cost increases.

“The sales pattern in eggs will be a wild ride for a while,” remarked Jonna Parker, principal of fresh foods at Circana.

Other dairy products like butter, natural cheese, and yogurt have also seen a slight uptick in recent months. However, most experts believe sales will fluctuate between the strong start of 2023 and the downturn experienced in the latter half of the year.

Despite lukewarm sales, the dairy segment remains the largest sales category in U.S. grocery stores, exceeding $78 billion. Per capita consumption of all dairy products reached 653 pounds per person in the U.S. in 2022, a remarkable 21% higher than the historical average dating back to 1975, according to IDDBA.

Cheese Industry Outlook

The Dairy Farmers of Wisconsin’s annual report projects promising growth for the cheese industry, a trend that has been consistent since 2022 when cheese consumption averaged 41 pounds per person in the U.S. before dropping slightly last year.

For 2024, the group anticipates that innovation will play a crucial role in maintaining high consumption levels, identifying five key trends: cultivating connection, creating at-home culinary experiences, mindful indulgence, a focus on global health, and flavor exploration.

Alternative Milks Take Over Dairy Cases

Mike Saccoccia, director of procurement for Dave’s Marketplace, a Warwick, R.I.-based independent chain with ten stores across the state, noted that alternative milks, including nut-based and oat-based options, continue to dominate the dairy case. He observed a shift toward smaller package sizes, as families are increasingly opting for individual milk and milk alternatives instead of larger half-gallon or gallon containers.

“It seems every family member wants to choose their preferred fat content or flavor. We are noticing more shopping carts filled with a variety of alternative options alongside traditional dairy,” he explained. “There is also a growing trend toward including DHA in organic options for improved neuro health.”

Dave’s Marketplace has also observed a rise in organic milk sales, aiming to reduce hormone consumption in diets, particularly for young children.

Mentzer pointed out that while plant-based and vegan options remain popular, inflation has dampened some sales as these items typically carry higher price tags than conventional milk.

Kyle Kirkpatrick, director of center store for dairy at The Giant Company, operator of Ahold Delhaize USA’s Giant/Martin’s supermarkets in Carlisle, Pa., noted that oat-based options are leading innovation in the alternative dairy category.

At Rastelli Market Fresh, offering sales and specials is key to boosting dairy item sales. The store frequently provides discounts, such as four yogurts for $5 or two half-gallon milks for $6.

“Offering off-brand items at lower prices has proven to be an effective strategy,” Mentzer added.