Consumers desire local dairy products

If you bottle it, make it, or package it, will they come? New research indicates a demand and willingness to pay extra for locally produced, high-quality dairy products.

Photo (by Phil Durst): Shopper at Farmer’s Creamery, Mio
Photo (by Phil Durst): Shopper at Farmer’s Creamery, Mio

Dairy market research is a necessary piece of planning for a new enterprise; yet it is not something that most dairy operations have expertise in. Fortunately, new research by the Atlantic Corporation, funded by the U.S. Department of Agriculture, provides dairy market data from a summer 2019 survey of 20,000 consumers in the U.S., including approximately 400 in Michigan.

The work evaluated consumer preferences for various dairy product features (e.g., where consumers get dairy products, if they are local, and how they evaluate them) and by asking them to assign a premium they would be willing to pay for those features. The survey designers wanted to learn more about the potential for marketing from small and medium-sized farms and small batch dairy processing.

Michigan State University Extension works across the spectrum of dairy - from production to processing and marketing, and from small dairies to the largest ones. Much of the marketing work is done through the MSU Product Center, which provides business counseling, analysis, and assistance to develop markets for new agricultural products.

In general, the Atlantic Corporation survey found that dairy products are still very popular. Nationally, 91% of surveyed consumers reported consuming milk during the previous six months and 92% had consumed cheese. Consumers were asked about their preferences for dairy products on a scale of 1 (Extremely Dislike) to 9 (Extremely Like) and the national average response was a very high 7.8. This is backed up by sales analysis showing that per capita total dairy consumption has increased.

The study also asked consumers about their willingness to pay a premium for local dairy products, with local defined as being produced and/or processed within 75 miles. In Michigan, of the 388 respondents, 261 (72%) reported they are willing to pay a premium for local milk, and they are willing to pay an average of 22% more for conventional milk. Similar numbers were reported for other processed dairy products including cheese, butter, yogurt, and frozen dairy.

Although willing to buy and pay a premium for local dairy products, many consumers were not aware of any local availability. Marketing efforts may be fruitful if they can simply raise awareness of local dairy products. Furthermore, the study results suggest that marketing efforts targeting young consumers (under 35 years old) are more likely to generate returns, as this group showed a greater willingness to pay for local products than older consumers.

Other data in the report includes consumption and estimates of monthly spending by product category (milk, cream, butter, cheese, yogurt, and frozen dairy). Customers shared their perspectives on a number of industry challenges, including moderate perceptions about impacts of dairy on the environment through pollution by nutrients, pesticides, methane, habitat, and soil degradation.

The full survey results are available through the interactive tool “Dairy Market Assessment and Planning System” (DairyMAPS). For the Michigan dairy sector, having responses to 50 questions about dairy products from nearly 400 Michigan consumers could be very helpful in assessing market demand for local dairy products. The Atlantic Corporation survey was conducted pre-COVID-19 and the trends toward desiring local products and being willing to pay a premium appear to have been intensified by the effects of the pandemic. While surveys like this have value in gauging market interest and identifying niches, marketing always comes down to the consistent supply of high-quality products that meet or exceed consumer expectations.

Dairies considering adding direct consumer marketing may also be interested in the Artisan Cheesemaking Workshops offered by MSU Extension, where participants get hands-on training on the technical and business aspects of cheesemaking. Turning high quality milk into value-added products for consumers is a business choice that more are making.

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