Markets

Local demand for dairy keeps growing

By Sofia Omstedt

DEMAND FOR dairy products has increased steadily across Australia, as evidenced by the numbers from the 2017–18 season currently rolling in.

Australians are buying more milk and over the past ten years milk sold in supermarkets has increased close to 24 per cent.

This results from population growth and our large appetite for milk. Australians consume more milk per capita than most other comparable developed countries; this can partly be attributed to our love of coffees.

Fresh white milk is considered Australia’s largest and most mature dairy segment and represents 78 per cent of total liquid milk sales.

Supermarket milk sales increased 1.1 per cent in volume in 2017–18 which is in line with a conservative long-term growth rate.

In 2011–12 close to half (47 per cent) of all milk sold in supermarkets was modified skim or low-fat. Today two thirds of milk sold in supermarkets is full cream milk.

Consumer preferences have shifted significantly over this time in favour of full cream milk, as consumers want ‘natural products’ and have a greater appreciation of the benefits of dairy fats.

In 2017–18 full cream milk sales increased 4.4 per cent by volume and 3.7 per cent by value, largely at the expense of modified skim or low-fat varieties.

Over the same period modified milk varieties contracted 4.8 per cent in volume and 6.4 per cent in value, indicating a drop in average price in addition to total volume.

While sales of fresh white milk continue to grow at a conservative rate, supermarket sales of non-dairy ‘milks’ have increased.

In 2007–08 sales of these beverages represented 5.6 per cent of total milk sales, with soy beverages making up close to 85 per cent of these sales.

Consumers who drink non-dairy alternatives seem open to substituting between varieties and since 2007–08 sales of soy beverages have decreased while those made from almonds have grown in popularity.

In 2017–18 sales of non-dairy alternatives represented 7.6 per cent of total milk sales in supermarkets by volume, and 12 per cent of total value. These substitutes are substantially more expensive than milk and purchase data suggests customers are more likely to purchase when they are offered as part of a promotion.

Supermarket sales of butter declined in 2017–18 due to a sharp spike in sales price. After a prolonged period of higher global butter prices, Australian prices eventually followed and in 2017–18 the average per-kilo price of butter reached $12.08, up 35 per cent compared to last year.

Despite this large spike, sale volumes only fell 6.3 per cent while sale values increased 26.9 per cent. The largest drop in volume came from large pack sizes, while sales of smaller pack sizes increased.

Supermarkets tended to increase the price on larger pack sizes while keeping the price constant on smaller ones and consumers proved willing to opt for a smaller pack in response to the higher price.

Total blends sale volumes grew 3.8 per cent as some customers chose to substitute butter for blends.

While many farmers in drought-affected regions continue to battle with the ongoing challenges of this season, it’s worth noting that domestic demand for dairy remains strong.

Australia may be a land of volatility in weather, feed prices, politics and Prime Ministers, but Australians continue to love dairy products.

• Sofia Omstedt is an industry analyst with Dairy Australia.