Several large retailers have entered into product streams that are beyond their typical products or services for vertical integration.
Walmart, Kroger and Albertsons have entered the milk business bottling business. They all use low priced milk as a loss leader to get customers in the doors, hoping that they will buy more than just milk. “There are retailers who prefer to have really aggressively low prices on milk because it’s a great way to get people in the stores,” said Tony Sarsam, Borden’s former chief executive.
The grocers move into bottling is a major threat to the purveyors of the national brands. So this will negatively impact the new owners of Deans Foods and Borden which are two of the largest bottlers of milk, were sold in 2019 after filing for bankruptcy.
At the farm level, about 3,300 dairy-cow herds disappeared in 2019, according to the U.S. Department of Agriculture, following low milk prices, tensions with export customers and processing-plant closures across the country. Wisconsin alone lost about 600 herds over the 12 months up to June 1, the cows typically either sold to another farmer or sent to slaughter. The state led the nation in farm bankruptcies last year; as annual per capita U.S. milk consumption has dropped about 40% over four decades.
Costco is also willing to go to extreme lengths to keep its roasted chickens at $4.99. For the past few years, it’s been recruiting farmers for this moment: The official opening of a sprawling, $450 million poultry complex of its very own in Nebraska.
How food and dairy get to our stores is rapidly changing, we will have to see if it is for the better or worse.