U.S. consumers are drinking less milk each year, but overall, dairy sales are on the rise. Cheese, butter, and yogurt are driving this growth, along with new dairy-based products that cater to convenience, health, and snacking trends.

According to market research firm Circana, the refrigerated dairy aisle was the largest category in retail grocery over the past year, with $76 billion in sales. Over the last three years, dairy retail sales have grown by 15.4 percent, or $10.1 billion.

A new report from CoBank’s Knowledge Exchange indicates that the outlook for retail dairy sales remains strong, with more room for growth as consumer preferences and purchasing behaviors evolve. Cheese and butter have significant potential, and dairy products designed to meet the growing demand for healthy, protein-rich snacks represent a new growth opportunity.

“Dairy products have diverse applications, and innovative dairy processors are leveraging this to their advantage,” said Corey Geiger, lead dairy economist with CoBank. “The healthy snacking category is a growing megatrend that dairy products can capitalize on with a range of conveniently packaged solutions, from low-fat cheeses and specialty yogurts to functional dairy drinks.”

Cheese continues to anchor the dairy category, with annual sales rising. Per capita cheese consumption in the U.S. has doubled over the last 20 years, reaching 40 pounds in 2022. This is still below per capita consumption in many European countries, suggesting ample room for growth. Innovation in the cheese sector is being driven by expanded flavor varieties to reach more consumers as U.S. demographics shift. Hispanic-style cheese has been the fastest-growing category in recent years.

Butter has experienced a resurgence in the U.S., with per capita consumption increasing by 43 percent over the last 25 years. While American butter brands traditionally feature 80 percent butterfat, European-style butter with 83 percent butterfat has steadily gained market share. U.S. consumers are increasingly purchasing butter with 83 percent butterfat, and domestic manufacturers are retooling production lines to meet this demand.

Yogurt has evolved from a morning meal to an anytime snack or healthy dessert. Per capita consumption in the U.S. has grown 142 percent over 25 years, with Greek yogurt leading the category growth. Yogurt brands are also capturing new sales as consumers use weight-loss drugs. Danone attributes increased demand for its high-protein, low-calorie yogurts, at least in part, to consumers managing their weight or well-being.

Most U.S. consumers view dairy products as staples, which has boosted sales of private-label products. Private label sales are outpacing premium brands in 10 of the 15 dairy categories tracked by Circana. Store brand options gaining significant traction include yogurt, cream cheese, and cream.

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