Dairy industry facing its 11th-hour problem

Alternatives, food innovations chipping away at market, Sylvain Charlebois says

There’s been a lot of talk recently about meat alternatives, but dairy alternatives are also becoming more popular. And when it comes to dairy in Canada, given our quotas and high tariffs, the stakes are significantly higher.

Dairy alternatives can be seen virtually everywhere. These specialty products are no longer confined to the dusty shelves of specialty food and health stores or located in some obscure place in a major grocery store. They are now quite visible. Rice milk, soy milk, and other substitutes like oat, almond, cashew, coconut and even hemp milk are now widespread across the country. And it’s happening fast.

Supply management in Canada allows our dairy industry to produce the milk that meets demand. Access to fresh, high-quality supplies and prices are as constant as they can get. This has been going on for almost 50 years now. Recent trade deals signed with Asia and Europe will allow more dairy products to enter the Canadian market, tariff-free. These measures created a breach in our supply management system, which is why the federal government opted to throw almost $2 billion at dairy farmers, over eight years.

But the real menace may be on the domestic front, with consumers clearly longing for choice.

Alternatives will likely chip away at some of our dairy industry’s market share. As domestic demand for milk and some dairy products drops, so will the number of farms and processing plants.

These dairy alternatives are becoming more popular. Oat milk is a good example. According to Bloomberg Business, retail sales of oat milk in the U.S. soared from $4.4 million in 2017 to $29 million in 2019, surpassing almond milk as the fastest-growing dairy alternative. The same market reaction is being reported in Canada.

Even if milk scores well on nutrition, these alternatives are getting some traction for two fundamental reasons.

The first reason is the environment. An increasing number of consumers are seeing the planet in their glass, or on their plate. A study out of the University of Oxford published in 2018 suggested that dairy alternatives come out better than cow’s milk when you look at their carbon emissions, how much land they take up and how much water they use. The study, however, does not consider the energy required to move products to points of sale. Almond milk, for example can be very taxing on the environment if purchased in Canada, as we don’t produce almonds in Canada.

The other hot-button issue is animal welfare. Most Canadians do not understand how dairy production works, and why should they? Given that many barely have the time even to cook these days, most city dwellers won’t invest the energy to visit farms and talk to farmers. Dairy farming is a mystery, really, for most of us. So, as soon as they catch a glimpse of dairy genetics and how cows are impregnated, for example, what is seen as a fairy tale about farmers quickly turns into a horror story for the uninformed consumer. In fact, 24 per cent of Canadians under 39 question the ethics of dairy farming as a practice. With Gen Z, that number goes up to 30 per cent, according to a study which will be released soon by Dalhousie University.

To make things even more complicated for our dairy sector, lab grown proteins could become a reality at some point. Some lab grown milk and dairy products are already being sold in the United States.

Oblivious to what’s happening, the Dairy Farmers of Canada are aggressively advertising these days, to show that dairy farming is ethical and responsible. Few Canadians will doubt that, but this is beside the point. In an era in which consumer choice is becoming the norm, this recent campaign signifies how out of touch dairy farmers are from consumers right now.

Dairy farming is in trouble, and our current supply management regime is not helping. The sector’s infatuation for farmgate price fairness needs to give more space to innovative solutions to make milk a pluralistic ingredient, more so than it is now. Essentially, innovation has nothing to do with what the market demands. Consumers will always look for things they know, understand, and need. Food innovation is about finding the unknown while providing an intuitive, valuable solution to a changing marketplace. So what else can we do with milk?

International markets could also use some Canadian dairy as well, but for that, our dairy programs will need some serious rethinking.