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The Milk Industry’s Dilemma Over Substitutes

11/23/2018

There are some important lessons to be learned from the plight of the dairy industry.  The principal problem of suboptimal margins is due to a combination of over-production and under- consumption. The former is generally associated with subsidies and a lack of discipline with regard to regulating production.  Perhaps the fact that a high proportion of milk production is derived from small farms supplying processing and marketing cooperatives has contributed to the disequilibrium between supply and demand. Each individual unit must maximize production to support a family.

 

Under-consumption is the second component and is clearly the result of substitution of alternatives to liquid milk. We have witnessed the rise of vegetable-derived milk substitutes which have gained market share at the expense of conventional milk.  This is partly due to lactose intolerance and the fact that consumers frequently try and then enjoy, flavored substitutes.

Milk producers in England face a specific challenge following the introduction of the Oatly product, introduced and aggressively promoted by a company in Sweden which coined the promotional theme “Milk, but made for Humans” in 2014.  Although LRF Mjolk, the largest dairy cooperative in Sweden sued Oatly and won their case in court, the outcome was that the milk cooperative lost the initiative on the supermarket shelf.


AEB Egg Snack

The U.S. egg industry was challenged in the mid-1990s by the introduction of pasteurized liquid substitutes comprising albumen with synthetic yolk dispensed in gable-top screw-cap containers. These products gained a market foothold over the concern for dietary cholesterol intaske but consumers continue to buy modified egg liquid even after the “cholesterol myth” has been disproven. More recently, upstart companies have made claims to produce a scrambled egg substitute derived from beans.  The American Egg Board has performed a valuable service in promoting the nutritional value of eggs and has assisted in the development of egg-derived products suitable for bakeries, food service and consumer markets.

 

The egg industry should never take substitutes for granted. Research and development should be directed at proactively developing egg-derived foods which offer convenience, economy, safety and above all, superior taste and texture compared to substitutes.  It is only by being better than alternatives, rather than deprecating them, that the industry will progress beyond the incremental increase in per capita consumption measured as a low single digit advance each year.