September 12, 2017

The Shift Toward Butterfat Continues

 |  By: Fran Howard

Some consumers are taking to heart recent studies that have shown that all fat is not created equal, and that some fat, such as that found in whole-fat dairy products, is beneficial to health. It appears that some consumers have even switched to higher-fat dairy products, according to Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill.

Last year, sales of whole milk rose 5.4% to 15.4 billion pounds, and since 2014, sales of whole milk have risen 10%, according to data recently released by USDA’s Economic Research Service. “Based on the latest growth rates, whole milk sales could surpass sales of reduced-fat 2% milk in 2017,” Ledman says.

Despite the good news on whole milk sales, total fluid milk sales continue to decline. Last year, total fluid milks sales fell 0.7% to 49.7 billion pounds, compared to 2015 levels. That said, Ledman notes that last year’s decline was half that of 2015’s drop, bolstered by growing sales of both whole and flavored milks.         

Flavored milks, a smaller category than whole milk, rose 3.1% last year, compared to 2015 levels, setting record sales of 4.61 billion pounds. In contrast, skim milk sales fell 11.1% to just over 5.05 billion pounds, compared to year-earlier levels. Skim milk sales last year were 21% lower than 2014 sales, according to ERS data.

“One consequence of growing whole milk sales is that less butterfat is available for other uses,” Ledman says. “Whole milk contains 3.25% butterfat, and last year’s greater sales of whole milk means an additional 26 million pounds of butterfat was consumed as fluid milk, compared to 2015. However, when changes in sales of other milks are factored in, the entire fluid milk complex consumed 17.3 million pounds more butterfat in 2016 than the year before.” When the additional 17.3 million pounds of butterfat is converted into a butter equivalent, it equates to 21.6 million pounds of butter, or 1.2% of total U.S. butter production in 2016, according to Ledman.

“Monthly fluid milk sales through June 2017 indicate that the trend toward whole milk consumption has continued into 2017,” Ledman says. And that means, more butterfat is being used by bottling plants and diverted away from other products, particularly butter.

Mimicking the shift toward whole milk sales, regular ice cream posted its strongest sales since 2010, topping 4.24 billion pounds, while low-fat and non-fat ice cream sales continued to decline. At 2 billion pounds combined, sales of low-fat and non-fat ice creams fell 1% and 6.7%, respectively, from 2015 levels.

“The same shift can be seen in yogurt sales,” says Ledman. “Total yogurt sales—until just recently the growth darling of the dairy case—fell for the second consecutive year, but demand for whole-milk yogurt products appears to be growing.”

Yogurt sales last year totaled 4.44 billion pounds, a drop of 3.9% from 2015 and down 6.2% from 2014’s peak of 4.74 billion pounds. According to Mintel research, however, the number of whole milk yogurt products on grocery store shelves has increased by 2,675% over the past decade.

As consumer demand for full-fat dairy products—including butter—continues to grow, butter churns, once thought to be the market of last resort, could compete more fervently with other markets for milk, Ledman adds.