Domestic consumption of white milk is rapidly declining due to low birth rates, changes in food culture, and the rise of alternative beverages. As growth in the core dairy processing business slows, the industry is seeking new avenues through dining, processed foods, and exports.
According to the Dairy Promotion Association, per capita consumption of white milk fell to 22.9 kilograms last year, down 9.5% from 25.3 kilograms the previous year. This marks the lowest level since the late 1980s. While milk consumption has been decreasing annually since 2001, this is the first time it has dropped nearly 10% in just one year. The burden of raw milk prices has eased somewhat, as the association decided not to negotiate raw milk prices this year, keeping the price for drinking milk at 1,084 won per liter for the third consecutive year. However, the obligation to purchase a certain amount of raw milk remains a significant burden despite the decline in consumption.
The background to this situation is the mandatory raw milk purchase quota system introduced in 2002, which requires dairy companies to buy a specified amount of raw milk. The issue lies in the fact that, despite changes in consumption patterns, the distribution of raw milk is still primarily focused on white milk. Currently, the quota allocates 88.5% for drinking milk and only 5% for processed milk. Meanwhile, demand for processed milk products such as fermented milk, cheese, cup coffee, and protein drinks is increasing. In fact, while consumption of white milk decreased last year, processed milk consumption rose to 6.4 kilograms per person, a 33.3% increase from the previous year. Industry voices are growing louder in calling for reform of the quota system to align with changing consumer trends.
The influx of imported milk also poses a challenge. Since January, U.S. milk has been entering the market duty-free, and tariffs on EU milk will be completely eliminated in July. According to the Korea Customs Service, the import volume of sterilized milk last year reached 50,800 tons, more than double the 23,000 tons imported in 2021. Price-competitive imported milk is expanding its influence, particularly in the business-to-business (B2B) market, including cafes and bakeries.
Dairy companies are responding by diversifying into dining, exports, and product portfolios. Maeil Holdings reported dairy processing sales of 1.09 trillion won last year, roughly on par with the previous year's 1.09 trillion won, while its dining segment, which includes operations like Paul Bassett and Crystal Jade, saw sales rise to 213.6 billion won, an increase of 7.7 billion won from last year.
Binggrae is accelerating its efforts in overseas markets. Although domestic sales of refrigerated products have declined, exports increased to 72.8 billion won, up from 71.1 billion won the previous year. Binggrae is expanding sales of Melona and banana-flavored milk in the U.S., China, and Vietnam and established a subsidiary in Australia last December. Namyang Dairy Products achieved a turnaround with sales of 914.1 billion won and an operating profit of 5.1 billion won last year, attributed to a 25.6% increase in the share of other segments, including Chocoemong and Take Fit.
An industry insider stated, "The decline in white milk consumption is not a temporary phenomenon but a structural change. It is time to reorganize the raw milk supply structure and overall business portfolio to align with consumer trends."
* This article has been translated by AI.
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