Could there be an industry more stable and wholesome than milk? Apparently, in today’s age of sudden disruption, even this mainstay faces some big challenges.
Once a staple of American households, dairy milk has fallen off in popularity in recent years, as more and more people opt for plant-based alternatives. It’s a shift that has taken a toll on the dairy industry, with US milk sales dropping by 6% in 2018 alone and 18% since 2010, according to the US Department of Agriculture. Sales for plant-based beverages, on the other hand, have grown about 14% in the past two years, market research shows.
As milk consumption continues to decline, some dairy producers are struggling to stay afloat, including a couple of major players that have filed for bankruptcy. Experts say this shift underscores how fast disruption in the 21st century can upend even the most long-standing businesses.
The solution, industry watchers say, is to adapt quickly to meet customers’ shifting demands. “How are you leveraging what your product is in an innovative way that is still appealing to your consumer?” says Tyler Howells, managing associate with Korn Ferry’s Agribusiness practice in North America. “That’s what companies need to figure out.”
In other words, businesses can no longer afford to keep all of their eggs in one basket. Leaders who want to thrive in this hyperchanging economy will need to be agile as well as cultivate innovation, experts say. And that means investing more in research and development than they may have in the past. “They have a lot of options to capture the dairy market,” says Marlys Aukee, advisory lead for Korn Ferry’s Agribusiness practice in North America. Indeed, some producers have started looking at how they can use dairy milk as an ingredient in other products, like protein powders or snacks, she adds.
To be sure, changing consumer behavior isn’t the only thing that’s disrupting the dairy milk industry. Analysts attribute much of the decline in milk sales to lower US milk prices, which have dipped thanks to a supply glut triggered by changes in the global milk industry. What’s more, the crop of dairy farmers continues to dwindle: nearly 3,000 US dairy farms shuttered operations in 2018, a drop of about 6.5%, according to data from the USDA. “The dairy industry has been facing some headwinds for a while now,” Howells says.
Still, how much leaders invest in their organization’s future growth is proving to be a key differentiator. Transformation has become the status quo for businesses today, and those transformational companies that have seen the highest growth invested 78% more new money in R&D than those with smaller financial gains, according to research from the Korn Ferry Institute.
But it isn’t enough to just pour more into R&D, experts say. Leaders will also need to bring in the right talent, many of whom may come from outside of the industry. “Attracting, engaging, and developing diverse employees serves to drive innovation,” Aukee says.