The evolving perspectives and strategies of dairy executives

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 research1 sheds light on the mind-sets of US dairy executives and their recent evolution as they attempt to jump-start growth.

Our interviews with CEOs revealed a sense of frustration over the speed of change in consumer preferences, including the emergence of natural, healthy, and socially oriented trends (Exhibit 9). Even so, executives recognize the necessity of listening to consumers and are trying to adjust strategy accordingly, with some expressing the desire to enter into a business partnership with their nondairy counterparts.

This is a great time to be innovating in the dairy industry. In order to survive and thrive today, and well into the future, the industry needs to be cognisant of a number of new trends that are likely to impact on the future production and consumption of dairy products.

As part of our futures work at Forum for the Future, we constantly scan the horizon for key trends that are going to impact businesses in the years to come. We use these insights to help businesses and industries future-proof themselves by adopting the right long-term strategies. Here are my pick of the top five trends that will be particularly pertinent to the dairy industry over the next 5–10 years.

a) Sustainable nutrition
How can we optimise health and nutritional outcomes, while reducing environmental impacts, for a global population that will reach 9–10 billion people by 2050? This is perhaps the biggest challenge.
Dairy innovation for millennials
There is a significant trend to seek natural foods that enable active and healthy lives for this new generation. This is driven by millennials in both the developed and developing world.

b) Traceability and transparency
We’re seeing a rapidly growing call for transparency across food chains and consumer access to information about the companies they buy from. Consumers also increasingly expect businesses to provide access to everything from their sourcing policies and product nutritional information, to their human rights policies.

c) A circular economy
Globally a third of all food grown is wasted. Thanks to profile-raising efforts by the likes of Love Food Hate Waste, Waste Not and Wrap UK, consumers and businesses alike are increasingly aware of the impacts of waste.

d) A net positive approach to dairy agriculture
There is increasing pressure on land to provide enough food, fuel and fibres for a growing population. At the same time key ecosystems, many of which underpin a health dairy industry, continue to decline, partly due to climate change impacts. We are reaching “peak everything” – from depletion of soil quality, to water stress, to rapid rates of extinction.