Record Decline in White Milk Consumption... Dairy Industry in Crisis, No Breakthrough in Sight

Per Capita White Milk Consumption Drops to 22.9 kg, Lowest Since Late 1980s
Duty-Free Imports Expand, Inventories Continue to Grow
Maeil Dairies Sees Decline in Operating Profit
Namyang Dairy Products Returns to Profit but Remains Weakened

The domestic milk industry is struggling. With milk consumption plummeting, dairy companies are seeing stagnant or declining sales, and their profitability is deteriorating rapidly. Companies are seeking breakthroughs by moving away from a 'white milk-centered' business model and expanding into premium products, non-dairy items, and overseas markets.

According to the Financial Supervisory Service's electronic disclosure system on March 23, Maeil Dairies posted sales of 1.8435 trillion won and operating profit of 60 billion won last year. While sales rose by 1.8% compared to the previous year, operating profit decreased by 14.7%. Operating profit fell from 72.2 billion won in 2023 and 70.3 billion won in 2024 to 60 billion won last year.

Photo by Yongjun Cho jun21@

Of total sales, the dairy processing segment (milk, powdered milk, fermented milk) accounted for approximately 1.0977 trillion won (59.5%), while other segments, such as coffee, soy milk, grain beverages, health, and functional foods, represented about 745.8 billion won (40.5%). This means that nearly 40% of total sales are already generated from non-dairy processing businesses. However, profitability in these segments remains limited. During the same period, operating profit from the dairy processing segment was about 39.6 billion won, while the non-dairy (other) segment contributed approximately 20.3 billion won.

The share of the dairy processing segment decreased from 79.4% (55.9 billion won) in 2024 to 66.0% last year, while the non-dairy processing segment expanded from 20.5% (14.4 billion won) to 33.9%. Although the dairy processing segment, which accounts for a large portion of sales, still generates most of the profit, profitability is weakening as both raw milk prices rise and consumption declines. In particular, the fact that raw milk accounts for about 68% of total raw material costs is cited as a significant burden.

Namyang Dairy Products has seen a clear decline in sales. Last year, sales amounted to 914.1 billion won, down from 952.7 billion won in 2024. Operating profit turned positive at 5.1 billion won, but considering the operating losses of 71.5 billion won in 2023 and 9.8 billion won in 2024, this is only regarded as a 'basic recovery of fundamentals.'

The root cause of this crisis lies in declining milk consumption. According to the Korea Dairy Committee, per capita consumption of white milk last year was 22.9 kg, a 9.5% decrease from 25.3 kg the previous year. This marks the lowest level since the late 1980s, when white milk consumption first began to rise significantly. The per capita white milk consumption steadily decreased from 26.6 kg in 2021 to 25.3 kg in 2024, and the decline accelerated last year.

Overall milk consumption last year was 4.25 million tons, up from 3.89 million tons the previous year, but this figure includes fermented milk and cheese. Consumption focused on white milk continues to decline. The industry notes that while increased consumption of processed dairy products like fermented milk and cheese partially offsets the drop in white milk, it is not enough to compensate for the loss. With a shrinking consumer base due to falling birth rates, and the rapid spread of alternatives such as protein drinks and plant-based beverages, demand for traditional milk is decreasing.

The problem is that declining demand is directly translating into inventory burdens. While 7,000 to 8,000 tons is considered an appropriate level of stock, last year inventories exceeded 10,000 tons every month. In particular, as of June last year, powdered milk inventories reached 13,001 tons, an increase of over 80% from the same period the previous year. Maeil Dairies’ inventory assets last year stood at about 234.9 billion won, up from approximately 205.7 billion won in the previous year. Namyang Dairy Products also saw inventory assets rise from 156.7 billion won to 163.2 billion won, an increase of about 6.5 billion won (4.1%). Since milk is a perishable product that cannot be stored long term, surplus raw milk is processed into whole or skimmed milk powder for storage. The less milk is consumed, the more powdered milk inventories accumulate.

The distribution structure is also criticized for its high costs. In Korea, milk is sold through a multi-level distribution network, passing from dairy processors to agencies, then to large supermarkets and convenience stores. Due to the short shelf life, daily delivery and shelving are required, leading to high logistics and labor costs.

Price competitiveness is also lagging. According to the Korea Agro-Fisheries & Food Trade Corporation, imports of UHT milk surpassed 10,000 tons for the first time in 2019 and continued to rise, reaching 51,000 tons last year. UHT milk, with its long shelf life and low price, is spreading mainly in the business-to-business (B2B) market, including cafes and bakeries. Imported UHT milk is sold at about 60% of the price of domestically produced fresh milk.

Adding to this, the era of 'duty-free imported milk' has begun this year, increasing pressure on the industry. Tariffs on U.S. milk have already been eliminated, and from July, European milk will also be duty-free. The industry believes that as price competition intensifies, domestic milk demand is likely to shift quickly to imported products.

In order to survive, the dairy industry is accelerating diversification. Maeil Dairies is expanding its portfolio with plant-based beverages (Amazing Oat) and protein products (Selecs). The protein market is growing rapidly and emerging as a new source of revenue. Namyang Dairy Products is strengthening its premium strategy by launching more high-end products that emphasize the image of 'fresh domestic milk.' At the same time, it is targeting overseas markets to reduce dependence on domestic sales.

An industry official said, "The question is no longer how to sell more milk, but how to survive without milk," adding, "Dairy companies are reorganizing their business portfolios in order to survive."

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