February 28, 2005 - Author: William A. Knudson and H. Christopher Peterson, The Hale Group, Technical and Market Advisors
Milk production is an important economic activity in the states of Michigan, Wisconsin and Ohio. In 2003, total farm income from milk production in Wisconsin was $2.8 billion, $794 million in Michigan and $584 million in Ohio (National Agricultural Statistics Service, p.6). This rapid opportunity assessment analyzes several economic and demographic changes in the U.S. and how the fundamental forces have created a number of demand drivers for agri-food products. These drivers are convenience, ethnicity, indulgence, value and wellness. The impact of these drivers on the fluid milk, cultured
products, cheese, butter, ice cream, and cream industries are then discussed. Overall, there appears to be several opportunities for new products, and other innovations in the dairy industry.
This analysis is primarily a market analysis of some of the product sectors of the dairy industry. Other factors such as the capital requirements, necessary management skill sets and other very important aspects of a successful enterprise are not explicitly considered. Cooperatives are a very important marketing institution in the dairy industry.
Compared to other agri-food sectors where cooperatives are not as important dairy farmers have more access to consumer markets and control more of the product. This enhances the ability of farmers acting collectively to enter into new markets for develop innovations in the industry.
Nonetheless, it is important for a entrepreneur in the industry, whether a individual, cooperative, or processor to carefully consider the market. To be successful many manufacturing processes require economies of scale, per unit costs that decline as output increases. The implication of this is that a market needs to be of a certain size in order for a new product introduction to be successful. Also, a supply chain needs to be identified and as well as potential collaborators and competitors. This could be accomplished through the use of an exhaustive business plan, or other analytic device.