What is the Impact on Dairy Sales When Consumers are Feeling the Pinch?
Americans are feeling the financial pinch as they go into the Holiday season to pay for just about everything. According to the Federal Reserve Bank of New York, total household debt rose by 1.3% to reach $17.29 trillion in the third quarter of 2023. Also documented is outstanding credit card debt totaling $1.1 trillion at the end of the third quarter, up 17% from last year and up 34% versus two years ago.
“About 8% of accounts are delinquent 30 plus days, the most in more than a decade,” says Phil Plourd, president of Ever.Ag Insights. “Consumers have used credit to preserve spending in the face of inflation.”
Plourd also points out that restaurant traffic is sagging.
“Of course, people are going to eat and will include dairy products in their diet, but it is hard to believe demand will be great so long as consumers are feeling a general pinch,” he says.
Ben Laine, a senior dairy sector analyst with Terrain, says the levels of consumer spending on food at home compared with spending on food away from home have implications for dairy markets because people consume more dairy products when dining out or ordering takeout than when they prepare their own food.
“Looking ahead to 2024, the USDA predicts that overall food prices will increase 2.1%,” he says. “That’s slightly below the long-term average but comes in the wake of a couple of high-inflation years. Prices for food prepared at home are expected to increase by only 1% while the price of food away from home is predicted to increase by 4.4%. Even if the amount of food in each channel holds steady, the trend of a greater share of spending devoted to food away from home is likely to continue.”
Barbara O’Brien, president and CEO of Dairy Management Inc. (DMI), says that retail dairy demand, particularly domestically, is looking good.
“Some real shining stars for dairy are cheese, yogurt and even cottage cheese which is up double digits,” she notes. “Cream is doing really well, too.”
Kerry DeLaney with General Mills dairy business shared his company’s vision and commitment to driving growth in the yogurt category. He said they are planning to launch a new high-protein, low-sugar yogurt product in 2024 and shares that yogurt overall is in a “really, really good position.”
