So much has changed in the dairy industry in the past two years that it can be difficult to assess. As we planned for 2022, my team sat down with several executives from our dairy processor member companies to get their perspectives. What we learned was fascinating.
Two years of impressive growth
Taken together, 2020 and 2021 are two of the strongest years on record for dairy sales. We saw per-capita dairy consumption set another record last year, according to the USDA, and both retail and foodservice sales for dairy remain above pre-COVID levels in 2021. Many executives expect 2022 to continue the positive trends, but inflationary pressures and supply chain challenges threaten dairy’s resurgence.
Investment continues unabated
Rather than let the pandemic slow their plans, dairy companies are growing in smart ways. The collective U.S. dairy industry is at this very moment leveraging more than $2 billion building and expanding new plants and facilities.
The collaboration between Glanbia Nutritionals, Select Milk Producers and Dairy Farmers of America with their new, state-of-the-art MWC plant in Michigan is Example A of this growth. California Dairies Inc.’s investment in a new ultra-high-temperature and extended-shelf-life milk processing facility means what was once considered a pipe dream — exporting U.S. fluid milk to Asia — is a reality. Leprino Foods is investing nearing $900 million in an 850,000-square-foot facility in Texas to meet rising global demand for its pizza cheese. Kansas Dairy Ingredients, meanwhile, is expanding its footprint through investments in niche markets such as flavored butters and cream cheeses.
Headwinds growing stronger
Yet the next three quarters will be filled with uncertainty as the world deals with a supply-demand mismatch. Executives tell us labor shortages are keeping them up at night.
Steadily increasingly costs for inputs and major challenges moving products through sea and land ports threaten our competitiveness. At any given time in recent weeks, between 70 and 90 cargo ships were anchored outside the ports of Los Angeles and Long Beach waiting to unload thousands of containers. Industry estimates say the United States is unable to fulfill 22% of agricultural foreign sales due to a host of issues, including ships departing without export cargo due to long delays at ports.
Meanwhile, wholesale prices for everything have climbed 8.6% year-over-year, increasing costs of goods ranging from semiconductors to salt.
Business as usual won’t cut it
Our industry has shown itself to be resilient during the pandemic, and we are working with our dairy industry leaders to position dairy for the future. The International Dairy Foods Association (IDFA) recently completed a 14-month strategic planning process to better position our industry for future challenges and opportunities.
We determined that as the advocate for our IDFA members, we needed to focus our priorities through the lens of enhancing our global competitiveness. As a result, we’ve incorporated four new priorities into our organization: accentuating dairy’s role in nutrition, health and wellness; building dairy’s case as a leader in sustainability; attracting and maintaining a stable, inclusive workforce; and better integrating technology and innovation throughout the dairy supply chain to move our dairy industry forward. Our efforts on these additional areas will become more apparent in our legislative and regulatory advocacy, as well as membership programming, knowledge resources, and strategic partnerships.
It takes good people
Dairy executives are more focused on people and talent than ever before, which led IDFA to develop its well-regarded People Strategy. IDFA’s partnership with McKinsey and Company offered compelling proof points to our efforts.
McKinsey’s 2019 analysis found companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile. In the case of ethnic and cultural diversity, top-quartile companies outperformed those in the fourth one by 36% in profitability.
With points like these in mind, IDFA launched the Dairy Diversity Coalition to increase diversity, equity, and inclusion in the dairy industry. With 2022 just around the corner, we will work with our members to remain globally competitive by developing the workforce of the future and empowering and supporting diversity across roles.
Michael Dykes, D.V.M., is president and CEO of the International Dairy Foods Association, Washington, D.C.