The mood of US dairy executives has deteriorated, as flat growth, trade tensions, and changing consumer tastes have dampened prospects for the coming years. With regions beyond the United States experiencing growing demand, rising numbers of US dairy companies have begun to pursue exports in the past several years. Other market factors, including the move by some consumers to nondairy alternatives, will also present challenges. New McKinsey research1sheds light on the mind-sets of US dairy executives and their recent evolution as they attempt to jump-start growth.
Executives on dairy exports
In 2015, several developments in the global dairy industry suggested cause for optimism. The European Union removed its milk production quotas, and observers anticipated that a growing middle class in Asia would consume more dairy products. In our 2015 survey, 78 percent of CEOs believed that despite declining demand, the US market had ample opportunity for growth. In the ensuring years, milk supply grew faster than demand, and prices and profitability have remained depressed ever since. As a result, in 2018 63 percent of survey respondents thought the downturn was not cyclical but structural, caused by a global surplus of milk and a fast-changing consumer environment (Exhibit 1).
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