The Dairy Industry Faces Deepening Woes... Prolonged Sales Slump Causes Headaches in Raw Milk Processing

Prolonged Slump in Milk Sales Puzzles Industry
Retail Store Sales Down 6.9%
3-Year Average Growth Rate Below 1%
Raw Milk Processing Issues... Producing Formula Despite Losses

Dairy companies are consecutively raising the prices of dairy products. Namyang Dairy Products increased the prices of milk products by an average of 4.9% on the 14th. Seoul Milk also raised the prices of milk products by an average of 5.4% on the 1st. The photo shows a customer selecting products at a milk sales stand in a large supermarket in Seoul on the 15th. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Song Seung-yoon] As milk sales continue to slump, the domestic dairy industry is facing deep concerns. Since the COVID-19 pandemic, milk consumption has sharply declined, and with the ongoing low birthrate trend, the issue of raw milk processing has also become a headache.

According to the Food Industry Statistics Information (FIS) on the 18th, retail milk sales amounted to 1.0462 trillion KRW in the first half of last year, down 6.9% from 1.1244 trillion KRW in the same period the previous year. The average annual growth rate over the past three years (2018?2020) was only 0.77%, falling short of 1%. By company, during the same period, Seoul Milk's milk sales decreased by 2.4%, from 462.7 billion KRW to 451.5 billion KRW; Namyang Dairy Products dropped 7.5%, from 148.9 billion KRW to 137.7 billion KRW. Binggrae's sales fell 7.2%, from 146.8 billion KRW to 136.2 billion KRW, and Maeil Dairies saw a 14% decrease, from 134.8 billion KRW to 114.9 billion KRW.

The biggest blow came when school attendance restrictions for elementary, middle, and high schools began after COVID-19, resulting in almost no milk deliveries for school meals. Although there is hope that the situation will recover with the full reopening of schools, many schools have opted for partial attendance due to the spread of the Omicron variant, so normalization is expected to take some time.

As a chain reaction, some companies are struggling with the issue of surplus raw milk processing. Namyang Dairy Products has recently been troubled by handling surplus milk that exceeds the average yearly amount. In 2020, only 25?30% of the planned school meal supply volume was delivered, and last year about 40?50% was supplied. Although the situation is somewhat better than immediately after the COVID-19 outbreak in 2020, this year is expected to have significant variables depending on school milk supply conditions and climate changes.

Seoul Milk and Maeil Dairies are currently processing as much raw milk as possible through fresh milk production, processed milk, and powdered milk manufacturing, so they claim there is almost no surplus milk at present, but losses are inevitable. Raw milk has no storage life and must be used within at least two days, but since not all raw milk can be made into fresh milk, it is often used to produce processed milk, fermented milk, cheese, or consumed as powdered milk. However, when the same amount of raw milk is made into powdered milk, the sales price drops to about one-third compared to fresh milk. Therefore, all dairy companies are commonly producing powdered milk reluctantly while accepting losses.

With the continuing low birthrate trend causing a sharp decline in the number of newborns and a clear preference for imported powdered milk, the outlook is not bright. According to statistics from the Korea Agro-Fisheries & Food Trade Corporation (aT), the domestic powdered milk retail market size was 318 billion KRW last year, down 4.7% from 333.7 billion KRW the previous year, showing a continuous decline.

A representative from the Korea Dairy Industry Association said, "Supply-demand imbalance occurs every year, but as consumption continuously decreases, related businesses are shrinking. If consumption increased, raw milk production would also increase, but since consumption is disappearing, reduction is inevitable, and surplus milk generation is unavoidable."

This content was produced with the assistance of AI translation services.