As milk consumption has fallen, the industry shows clear signs of struggle.

The US dairy industry, the largest in the world, is under severe pressure as the consumption habits of Americans change.

Borden Dairy Co. recently filed for bankruptcy protection citing unbearable debt, the second major US dairy to do so in as many months. Borden produces nearly 500 million gallons of milk each year for groceries, schools, and other customers. It employs 3,300 people and runs 12 plants across the US.

American refrigerators are increasingly stocked with juice, soda and milk substitutes made from soy or almonds. At the same time, protein bars, yogurts and other on-the-go breakfasts have replaced the traditional morning bowl of cereal. That has hammered traditional milk producers like Borden, which was founded in 1857.

The amount of liquid milk consumed per capita in the US has tumbled more than 40% since 1975. Americans drank around 24 gallons a year in 1996, according to government data. That dropped to 17 gallons in 2018.

As milk consumption has fallen, dairy farms have closed their doors. In court filings, Borden says 2,730 US dairy farms have gone out of business in the last 18 months alone. The remaining farms can command higher prices, but that pinches Borden, which can’t charge consumers more because of pressure from big competitors like Walmart. Walmart opened its own milk processing plant in Indiana in 2018.

“Despite our numerous achievements during the past 18 months, the company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry (…) These challenges have contributed to making our current level of debt unsustainable,” said Borden CEO Tony Sarsam in a prepared statement. 

“While milk remains a household item in the United States, people are simply drinking less of it (…) In parallel, since the turn of the century, the number of U.S. dairy farms has rapidly declined,” said Chief Financial Officer Jason Monaco in court papers.

The company said it had net sales of $1.2 billion in 2018, but that resulted in a net loss of $14.6 million. From January 2019 through December 7, Borden reported a net loss of $42.4 million, according to its bankruptcy filing, CNN Business reports. In its Chapter 11 filing in Delaware, Borden Dairy listed assets and liabilities of between $100 million and $500 million. The case is Borden Dairy Co., 20-10010-CSS, U.S. Bankruptcy Court for the District of Delaware.

In an attempt to revive sales last year, it announced a relaunching of its iconic mascot Elsie, the smiling cow that first appeared on milk cartons in the 1930s. It also released new products like gingerbread-flavoured eggnog and Kid Builder, a children’s milk with higher levels of protein and calcium designed to compete with Fairlife, a trendy milk brand made by Coca-Cola Co. Borden said sales rose, but not enough to offset broader trends in the industry.

Dean Foods, the nation’s largest milk producer, filed for bankruptcy protection in November. Both they and Borden are based in Dallas. The two companies controlled about 13.5% of US milk sales last year, according to Euromonitor, a consulting firm. Like Dean, Borden says it will continue to operate during its restructuring. Late last month, a Texas federal bankruptcy court allowed Dean access to $850 million in debtor-in-possession financing.

A shift in the industry

According to Live Kindly, consumers may be reducing their cow milk consumption, but they’re not foregoing dairy altogether. They’re purchasing dairy-free options en masse. While milk sales drop, the vegan milk market is booming — sales were up nine percent in 2018 and are expected to exceed $34 billion by 2024.

Fluid dairy-free options dominate the vegan category, but other categories are catching up quickly. Dairy-free ice cream is on the uptick with brands like Magnum, Ben & Jerry’s, and Halo Top all launching and expanding their offerings. IKEA recently launched a vegan strawberry soft-serve.