International dairy cooperative, Arla Foods, has ended the contracts of 11 dairy companies due to overproduction. With the consumer shift away from dairy products in preference for vegan and plant-based alternatives, some industry insiders predict these contract cuts could become more common within the dairy industry.
With this recent announcement, the company will cease buying dairy products from about one-third of its Wisconsin-based suppliers, which formerly produced the milk for Arla’s cheese plant in Brown County, Indiana.
A spokesperson for Arla Foods stated “increased production and market volatility” were conclusive factors in the contract cuts.
Mark Stephenson, Director of Dairy Policy Analysis at the University of Wisconsin-Madison, noted that the instability of dairy sales poses a risk for dairy farmers. Many have lost contracts with major food manufacturers, which deeply impacts these farm’s financial stability.
“It was the case that if a plant happened to drop their customers or go out of business, that you’d typically have another plant right there on the farm the following day looking for additional milk supplies, because the state was tight on milk production,” Stephenson explained. “That’s not true now, and so we find ourselves in a different kind of position, and farms need to worry about not having a home for their milk.”
Arla Foods’ move echoes the recent actions of other major dairy food producers. Grassland Dairy Producers dropped 75 independent dairy suppliers last year, and Dean Foods ended contracts with dozens of its dairy suppliers as a result of falling sales. Dean Foods later praised vegan milk brand, Good Karma Foods, saying it wants to see more of the “really, really cool” brand.
The shifting market can be accredited to a growing consumer interest in plant-based products as health-conscious consumers are becoming wary of dairy. The ethical arguments against dairy, including the impact on the environment and the animals, is also becoming of interest to these shoppers. This peak in conscious consumerism has led to the rise in “flexitarianism.” People may not be ready to go completely vegan, but they are striving to make plant-based choices more often.
By the numbers, data released this month revealed Australians purchased more than $200 million of vegan milk last year. Non-dairy yogurt sales have been forecast to hit $7 billion by 2027, while dairy yogurt sales slumped by 82 million last year. Further, a survey in April found that half of US consumers who buy dairy products also consume vegan alternatives.
“This [dairy contract cut] is something that’s a bit new to our industry, but I suspect we’ll see more of it,” predicted Stephenson.
Image Credit: Good Karma Foods