Grocery Chains Are Bottling Their Own Milk, And That's A Surprisingly Big Deal

The American dairy industry has been in decline for a number of years, but COVID-19 has actually lead to an increase in sales. So when Kroger, Walmart, and Albertsons announced they had built their own milk-bottling plants and would be skipping over the existing wholesale distribution network altogether, it didn't just get the dairy industry's attention, it all but shattered the hope that things might be turning around.

As written in a paywalled story by The Wall Street Journal, the U.S. milk industry is worth an estimated $40 billion, but milk (particularly in recent years) has been sold as a loss leader, meaning that stores sell it at a loss in order to get people in the door to buy the more expensive stuff. The problem is that, faced with a multitude of beverage options (including non-dairy milk) and a decline in the popularity of cereal, sales (until recently) have tanked.

Declines in milk purchasing creates surpluses, and middlemen wholesalers don't just buy less milk, they also pay less for what they do buy. That arrangement has gotten so bad for farmers that perfectly good milk is being dumped out, cattle herds are being sold or slaughtered, and farms are going bankrupt.

Stores like Walmart bottling their own milk is only going to make the situation worse. Having no middleman means that dairy farmers have fewer places than ever to sell their milk, and those lucky enough to be selling to companies like Walmart, Albertson's, and Kroger will be forced to accept even less for their milk than they were before. With fewer milk buyers comes less control over income levels, and that's a bad situation for everyone except the stores actually selling you your milk. It's also a difficult position for a shopper to be in, as milk is a staple item that people don't go out of their way for. If you're interested in helping out America's dairy farmers and don't have the ability to buy milk directly from them at a farmer's market, your best move at the moment is to pick a non-store brand. It's still not great for the individual farmer, but it's generally better for the industry, and it might help prevent the kind of corporate takeover that has become so common in the United States.