2018 Domestic Dairy Sales Remain Strong, and There’s Still Hope for Second Half
Dairy sales in 2018 had been on a record pace through July, with cheese sales up 2.6% and butter sales up 1.5%. Overall, dairy sales were up 2.3% through the first seven months.
And then tariffs happened, both from Mexico and China in response to U.S. tariffs on many of their goods. Even though a tentative agreement with Mexico and Canada has been reached, there is no word yet on when Mexican tariffs will be lifted.
The good news, however, is that the expected drop in cheese sales to Mexico has not happened—at least not yet. U.S. cheese exporters have agreed to pay the difference of the tariffs of cheese going to Mexico to maintain sales and marketing relationships, says Tom Gallagher, CEO of Dairy Management, Inc.
“That can’t go on forever; maybe through the end of the year,” he says. The hope is that tariffs will be lifted soon after.
Gallagher also says U.S. fast food companies such as McDonald’s, Domino’s and Pizza Hut, have also responded to bolster sales here in the United States through food service. “The first half of the year of cheese sales in food service was excellent,” he says.
Gallagher believes the second half of 2018 could be even better as these companies have stepped up their domestic marketing efforts in a response to the crisis in exports. He believes cheese sales through the second half will be good, and butter sales will remain solid.
The U.S. Dairy Export Council (USDEC) has also stepped up its efforts in southeast Asia to bolster dairy sales. Southeast Asia has 700 million consumers, twice that of the United States. USDEC is working with pizza makers there to use more cheese on each pizza and to sell more pizza. In southeast Asia, one pizza is consumed per person every 35 days. In the U.S., pizza consumption per capita is one pizza every week. The goal is to increase cheese consumption by 30%.
KFC is also getting ready to launch dairy-based products in the region as well, which could further bolster sales, says Gallagher.