Dairy Products Manufacturing Industry Overview

Excerpt from Dairy Products Manufacturing Report

The US dairy products manufacturing industry consists of about 1,100 companies that have combined annual revenue of about $96 billion. Major companies include Dean Foods, cooperatives such as Dairy Farmers of America and Land O'Lakes, and the US operations of France-based Danone. The industry is concentrated: the 50 largest companies account for about 75 percent of revenue.

Competitive Landscape

Changes in consumer income drive demand for various types of dairy foods. 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. The industry is capital-intensive: average annual revenue per employee is about $720,000.

Products, Operations & Technology

Major product segments include fluid milk and milk products (about 35 percent of industry revenue); cheese (35 percent); dry and condensed milk products (15 percent); ice cream and frozen desserts (10 percent); and butter (less than 5 percent). Milk products include buttermilk, cream, cottage cheese, yogurt, and dairy substitutes, such as soy milk. Most companies specialize in only one product segment, although large companies may participate in several. Because of the perishable nature of much of the products, especially fluid milk, local production is the norm. Companies receive raw milk from local producers, process it, and distribute the products to local customers. Large companies own many local plants.