Canada’s dairy sector faces uncertain future

The dairy industry is slowly being trampled by a wave of consumers who see it as one of many options, for a variety of reasons

Sylvain CharleboisThere’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 everywhere from grocery stores to coffee shops. These products are no longer confined to the dusty shelves of specialty food and health stores, or located in some obscure places in major grocery stores. They are now quite visible.

Rice milk, soy milk, and other substitutes like oat, almond, cashew, coconut and even hemp milk are widespread. It’s happened fast and their emergence certainly spells trouble for the dairy industry.

For the last 50 years, supply management has allowed Canada’s dairy industry to produce the milk needed to meet demand. It means access to fresh, high-quality supplies and prices that are as constant as they can get.

But recent trade deals with Asia and Europe will allow more dairy products into the Canadian market tariff-free. This created a breach in Canada’s supply management system, which is why the federal government is throwing almost $2 billion at dairy farmers, spread 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 the Canadian dairy industry’s market share. As domestic demand for milk and some other dairy products drops, so will the number of farms and processing plants.

Saputo recently announced the closure of two plants, in New Brunswick and Trenton, Ont. Agropur, the largest dairy co-operative in the country, faces major financial headwinds. Difficult decisions loom as the market flirts with plant-based alternatives.

According to Bloomberg Businessweek, retail sales of oat milk in the U.S. soared from US$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.

And Starbucks recently announced it will heavily promote dairy alternatives in its stores as part of its sustainability ambitions.

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

The first is the environment. An increasing number of consumers see the planet in their glass or on their plate. A University of Oxford study published in 2018 suggested that dairy alternatives rate better than cow’s milk when it comes to carbon emissions, and how much land and water they use.

The study, however, didn’t 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, since we don’t produce almonds.

But the study is helping to convince consumers to consider alternatives.

The other hot-button issue is animal welfare.

Most Canadians don’t understand how dairy production works. And given that many people barely have the time to even cook, most city dwellers won’t invest the energy to visit farms and talk to farmers. So dairy farming is a mystery.

As soon as they catch a glimpse of dairy genetics and how cows are impregnated, for example, concerns are raised for uninformed consumers. In fact, 24 per cent of Canadians under 39 question the ethics of dairy farming practices. With those in their 20s, that number goes up to 30 per cent, according to a study to be released soon by Dalhousie University.

Some of these younger Canadian adults probably believe dairy farming should be outlawed.

The dairy industry is slowly being trampled by a wave of consumers who see it as one of many options, for a variety of reasons.

To make things even more complicated for the sector, some lab-grown milk and dairy products are already being sold in the United States. Only 26 per cent of Canadians would be willing to taste a product made in a laboratory, based on a recent survey. But with clear environmental benefits and no impact on animal rights, the case for lab-grown proteins is being built.

The Dairy Farmers of Canada seems oblivious to what’s happening. The group’s aggressive advertising campaign is trying to make the case that dairy farming is ethical and responsible.

But as consumer choice broadens, this campaign shows how dairy farmers have lost touch with what buyers want.

The inability of dairy farmers to engage in new media platforms to help shape the conversation is astoundingly short-sighted. The industry has rarely shown willingness to listen to consumers and it’s paying for it now.

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

Dairy farming is in trouble and the current supply management regime is not helping. The sector’s infatuation with farm gate price fairness needs to give more space to innovative solutions to keep milk viable. 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?

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

Sylvain is a Troy Media Thought Leader. Why aren’t you?

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One Response to "Canada’s dairy sector faces uncertain future"

  1. Letters to The Editor   March 4, 2020 at 4:10 pm

    Sylvain Charlebois article is a study in contradictions. On the one hand, he acknowledges that supply management has given Canadians access to fresh, high-quality, local milk at stable prices for years. On the other, he calls for its elimination on a whim.

    He observes how urban consumers are increasingly disconnected from farmers (“dairy farming is a mystery” he notes), but chides the industry for its efforts to showcase real dairy farmers and help Canadians understand what modern dairy farming is all about.

    He describes a dairy industry that is local, ethical and responsible, then attempts to justify alternatives that would be “very taxing on the environment if purchased in Canada.”

    First and foremost, Canadian dairy farmers share consumers’ desire to be mindful of the environmental footprint of the products they consume. Good stewardship is actually one of the foundations of our national quality assurance program, proAction. Dairy farmers are also governed by extremely high standards of animal welfare, milk quality, food safety, traceability and biosecurity – a far cry from the ‘short-sighted’ industry he claims doesn’t listen to consumers.

    Supply management in dairy production is part of a desire to produce enough milk to meet the country’s needs. Our American neighbours overproduce and export dairy at a rate of 15% annually, overburdening that country’s natural resources so that products can be exported around the world. Unlike U.S. production, our model of sustainable agriculture encourages the consumption of local products while preventing food waste.

    Milk production also contributes to enriching the land, which in turn plays a crucial role in carbon sequestration. It is thus in line with the report of the Intergovernmental Panel on Climate Change published last summer, which stresses the importance of good management of agricultural and forest soils in carbon capture and the importance of avoiding soil degradation.

    As a result of producers’ ongoing efforts and research – the sorts of innovation he says are lacking – milk production accounts for only 1% of Canada’s GHG emissions. Moreover, the sector’s environmental footprint is steadily decreasing. According to the most recent environmental life cycle analysis of dairy production, Canada ranks among the best in the world. From 2011 to 2016, we have reduced the environmental impact substantially, reducing the carbon footprint of production of a glass of milk by 7%, its water consumption by 6% and its land use by 11%. It would be a mistake to believe that our commitment ends here – it endures, all while we deliver on the highest standards I noted above.

    The vast majority of Canadians believe that dairy farmers do an excellent job of producing quality milk. Moreover, 88% of Canadians believe that milk is an important food for health, including 82% of millennials, a point that is echoed by many objective research studies.

    What further illustrates the opinion of consumers is our sales. General demand for all dairy products is on the rise, contrary to what Sylvain Charlebois claims. Between 2015 and 2017, we have seen a 15% increase in total Canadian demand. Between 2013 and 2016, the demand for butterfat increased by 23% in Canada, largely due to scientific research that has shown that milk fat is not linked to the incidence of cardiovascular disease.

    Dairy production in Canada is ethical and responsible, which addresses the concerns of most Canadians. Dairy producers communicate seamlessly with consumers, particularly Millenials and Generation Z, on the various digital platforms, social media and other mediums they use.
    Whether Mr. Charlebois likes it or not, our dairy farmers have long been committed to sustainable production. Accusing them of “burying their heads in the sand” may be entertaining, but it doesn’t make it a reality.

    Pierre Lampron
    Dairy Farmers of Canada

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