First Research US Industry Profile

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Dairy Products Manufacturing
SIC Codes: 2021, 2022, 2023, 2024, 2026
NAICS Codes: 3115
Last Quarterly Update: 7/1/2019
Companies in this industry manufacture dairy-based products from raw and processed milk, along with dairy substitutes. Major companies include Dean Foods, Dairy Farmers of America, and Land O'Lakes (all based in the US), as well as Danone and Groupe Lactalis (France); Fonterra Co-operative Group (New Zealand); Koninklijke FrieslandCampina (the Netherlands); Meiji (Japan); and Nestlé (Switzerland).
More than 850 million metric tons of milk are produced annually, according to the Food and Agriculture Organization of the United Nations. India, Pakistan, the European Union, the US, New Zealand, and Brazil are seeing the most growth in world milk production. Most increased dairy trade is expected to be met by supplies from New Zealand, Mexico, the EU, and Argentina. Demand for milk and milk products is growing in developing nations in East and Southeast Asia due to rising incomes, population growth, and urbanization.
The US dairy products manufacturing industry includes about 1,700 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $120 billion.
Competitive Landscape
Competition in the dairy product manufacturing industry is evolving as small upstart companies have introduced new higher-margin products that are taking market share from major producers. This trend, which is occurring throughout the food manufacturing sector, is pressuring industry leaders to acquire rivals and create new brand extensions that are more in line with consumers’ current tastes.
Ongoing consolidation has helped large manufacturers cut costs and operate more efficiently. Companies that have access to capital for technology and equipment are able to grow at scale by automating more of their production.
Dairy product manufacturers compete with companies that produce other types of foods and beverages, especially those that make dairy alternatives such as almond and soy milk, which have gained popularity in recent years. They also compete with retailers that have their own dairy manufacturing facilities.
Trade policy has a strong impact on dairy producers' ability to compete internationally. Tariffs and quotas significantly increase the cost of imported dairy items in some markets, and they can also influence world market prices. Dairy producers with access to low-cost labor and materials have advantages over those that do not. Because of the perishability of milk and many other dairy products, imports and exports are mainly cheeses. Imports make up less than 3% of the US market. Major sources are New Zealand, Italy, Ireland, Canada, and France. Exports, which primarily go to Mexico, Canada, China, South Korea, and Japan, account for about 5% of US production.
Demand for dairy products is driven by consumer tastes, disposable income, and population growth. The profitability of individual companies depends on efficient operations and marketing, as milk is a commodity product. There are few economies of scale in the manufacturing process, which is why small companies can effectively compete with large ones in local markets. However, economies of distribution favor large manufacturers. Many segments of the US dairy products industry are highly concentrated. The 50 largest fluid milk producers, for example, account for about 90% of segment revenue.
Competitive Advantages:
Product Development — Small dairy manufacturers may compete for market share by launching new product lines that sell at higher price points than those of major brands. Companies often develop these new items in response to current consumer trends, such as rising demand for healthy and all-natural products.
Efficient Distribution — Large dairy producers have increased profitability by creating more efficient distribution networks that can transport larger volumes of products to customers at lower cost. Technology advancements such as fleet management software and energy-efficient refrigerated trucks have enabled companies to improve the reliability of their expanded distribution operations. Smaller companies that lack the resources to regularly upgrade their fleets and technologies may struggle to compete on a similar scale.
Targeted Marketing — Dairy product manufacturers often focus their marketing efforts to reach specific subsets of consumers. Many companies have developed promotions and advertising campaigns that target key demographic groups such as children, seniors, or women. Manufacturers may also create special packaging or entire product lines designed to appeal to a particular type of consumer.
Companies to Watch:
Danone is the #1 maker of fresh dairy products worldwide. It manufactures dozens of global and regional yogurt brands, including top-sellers Dannon and Activia, functional brands like Actimel and DanActive, and Greek yogurt brands Oikos and Danio.
Dean Foods is the largest milk bottler in the US. The company markets fluid milk, ice cream, cultured dairy products, and other items under more than 50 local, regional, and private-label brands, including Dairy Pure, Borden, Pet, Country Fresh, Meadow Gold, and TruMoo. Dean Foods owns and operates a number of smaller regional dairy companies and distributes products from regional manufacturing facilities across the US.
Fonterra Co-operative Group markets milk and value-added dairy products through its principal marketing arms, New Zealand Milk Products (NZMP) and Fonterra Brands. While NZMP is the world's #1 supplier of industrial dairy ingredients, Fonterra Brands produces fluid milk, yogurt, cheese, and ice cream for consumers. Fonterra represents some 11,000 dairy farmers who supply the cooperative with 15 billion liters of milk each year.
Groupe Lactalis is the largest dairy enterprise in the world, producing 13.6 million liters of milk a year. The world's leading cheesemaker, the company also sells butter and cream. Lactalis operates some 230 industrial sites, which support distribution in 150 countries.
Products, Operations & Technology
Major product segments include cheese (about 40% of US industry revenue), fluid milk and milk products (30%), and dry and condensed milk products (less ... plus:
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