The dairy product production industry’s global demand and dairy prices have declined due to the global economic crisis. A decline in world income and wages and increases in unemployment and supply (predominantly from milk production in New Zealand) have also contributed to a reduction in global demand and dairy prices.

Consumers in developed countries are expected to trade down to cheaper dairy products such as private labels and to reduce consumption of discretionary dairy products such as ice cream. In developing countries, dairy products are considered more of luxuries instead of necessities and as a result demand for these products has declined tremendously.

For the past ten years, consumption of consumer fluid milk has decreased due to factors such as better convenience, advertising, and better packaging from substitute beverages, an increase in soy milk consumption, and a decrease in the children population.

So what can dairy product manufacturers do to profitably increase milk revenue over the long term? Industry consolidation, product development, marketing, and health campaigns are potential measures they could utilize.

1. Industry consolidation can yield access to milk supplies at good prices, inspire continuous investment in product technology and branding, and provide lower per unit costs and production efficiency – measures that are significant to preserve and/or acquire national retailer supply contracts.

2. Constant product development can result in milk sales growth. Sales of flavored milk products with new flavors and energy boosters have been rising.

3. Pull and push marketing strategies for healthier milk products such as organic milk, reduced fat milk, and value-added milk (milk with added nutrients, vitamins, or low carbs) can also result in milk sales growth by catering to the health consciousness of consumers.

These strategies could also help counter consumer shifts from branded organic milk to either private label organic milk or conventional milk.

4. Educating consumers such as young people (main dairy product customers) and baby boomers via more health campaigns about the significance of milk and calcium could result in an increase of daily milk consumption.

By utilizing the measures above, dairy product manufacturers can also help cushion or augment the effects of oil, energy, and raw milk price fluctuations on margin. What other measures could these manufacturers employ to help generate revenue and profit growth?

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