Page 36 - Food&Drink magazine April-May 2023

DAIRY BUSINESS
‘Drinking’ milk here to stay
The liquid ‘drinking’ milk market remains of key importance to Australia’s dairy sector, with improved domestic retail pricing and opportunities for further export growth. Rabobank Australia senior dairy analyst, Michael Harvey, explains.
THE liquid milk category
– which in recent years had struggled with a number of challenges including discounting by retailers – is a major ‘pillar’ for Australia’s dairy sector, accounting for thirty per cent of milk production and generating more than A$4 billion in revenue annually.
And this is important not only for revenue generation, but also strategically for supply chain efficiency, helping to support the Australian dairy value chain and lead to stable farmgate milk prices over multiple seasons for milk suppliers servicing the drinking milk market.
Drinking milk, a staple
product in the consumer basket, will remain a large and important category for Australian milk utilisation.
Australia’s domestic drinking milk market is, however, very mature with falling domestic consumption.
But this is being offset by growing exports of liquid milk.
DOMESTIC MILK MARKET
As we begin 2023, the market is experiencing a structural increase in consumer prices across the dairy aisle, led by drinking milk in particular. This has been driven by dairy processors passing through record-high farmgate milk prices and higher supply chain costs, along with tight supply
due to declining Australian milk production.
An extended period of industry-related disruption and low margins is slowly coming to an end.
For dairy farmers, higher consumer prices for milk and dairy products across supermarket aisles is welcome news. It will solidify the end of frustrations over the discounting of drinking milk.
Additionally, it will ensure higher and more stable returns for the market and mitigate
the potential volatility in returns in other channels – both onshore and offshore – for those with access to the drinking milk market.
Domestic consumption of
36 | Food&Drink business | April/May 2023 | www.foodanddrinkbusiness.com.au