Market Watch Diary: Per Capita Yin and Yang

September 29, 2013 07:59 PM
JerryDryer blue

The latest per capita consumption data from USDA affords us a fresh opportunity to look at the yin and yang of milk usage. This product-by-product review gives us a good look at where milk has been used and my take of likely future uses.

In a nutshell: The beverage milk business continues to falter and the cheese market goes flat, while the butter and yogurt categories register handsome gains.

Yin and yang aptly describe the trends between the beverage milk category and the yogurt category. While the per capita usage of milk has declined more than four percentage points in just the past five years, yogurt usage has increased about 20%.

The volume of milk going into yogurt has, in fact, increased more than 20%. Five years ago, Americans consumed about 3.6 billion pounds of yogurt, and it took about 3.6 billion pounds of milk to make that yogurt.

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The arrival of Greek-style yogurt, however, changed the equation. It takes about 3 lb. of milk to make a pound of Greek yogurt, which now controls about one-third of the category sales. Last year, nearly 8 billion pounds of milk were committed to yogurt production.

In other words, the volume of milk directed to yogurt plants more than doubled in just five years. The only possible downside: Some of this yogurt is displacing fluid milk.

A growing number of consumers are putting yogurt instead of milk on top of breakfast cereal, according to consumer research. Other research shows that yogurt is the new breakfast, displacing both the cereal and the milk for a growing number of time-pressed consumers.

Low-fat and nonfat yogurts also control a whopping 97% of the yogurt business. Additional protein neatly replaces the fat and it gives yogurt a texture that consumers find acceptable, even enjoyable. Not so, apparently, when the fat is removed from milk meant for drinking.

So, where is all the fat (not being used in yogurt) going? Much of it ends up in a churn. Per capita butter consumption has increased by nearly one full pound in the past five years. On average last year, every man, woman and child consumed 5.6 lb. of butter versus just 4.7 lb. in 2007.

This 19% increase translates into more than 300 million additional pounds of butter usage each year.

Cheese, often the poster child of successful dairy sales, isn’t doing so well. Per capita consumption totaled 331⁄2 lb. in 2012, 331⁄2 lb. in 2007 and something less than that during each of intervening years.

Thanks to consumers in Mexico, the Middle East, along the Pacific Rim and elsewhere, the U.S. cheese business remains robust. Almost 6% of the cheese produced here is consumed in another country.

U.S. cheese consumers are clearly shifting gears, too—preferring smaller quantities and higher quality, such as one slice of sharp Cheddar instead of two slices of American cheese on their burger.

It is just one more serving of yin and yang in the dairy business.

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