As the new year of 2025 begins, the dairy industry is becoming busier. Starting in 2026, the free trade agreement (FTA) will take effect, allowing milk from the United States and Europe to enter the domestic market tariff-free. There is only one year to respond to this. The dairy industry has quickly mobilized to prepare countermeasures, focusing on diversification and premiumization.
According to the dairy industry on the 7th, as competition intensifies one year ahead of the complete opening of the milk market, industry players are struggling to strengthen their competitiveness. The price competition for dairy products, including white milk, has virtually been given up, and there is a prevailing atmosphere to expedite premiumization strategies. Considering the situation of the Ministry of Agriculture, Food and Rural Affairs, milk producers, and the dairy industry, it has been calculated that drastically lowering the price of raw milk is impossible at this time.
Last year, the price of raw milk was frozen for the first time since 2017. However, the domestic price of white milk remains relatively high compared to other countries. According to the cost comparison site Numbeo, the average price of milk (based on 1 liter) in South Korea is $2.12, ranking 6th in the world. This is higher than in major countries like Switzerland (13th at $1.89), Japan (43rd at $1.41), and the United States (73rd at $1.06), which are known for having expensive prices.
This is because the price of raw milk, the raw material for white milk, is itself expensive. The cost of feed for the cattle is an issue. Since most of the feed is reliant on imports, the competitiveness of raw milk prices naturally declines. According to the Ministry of Agriculture, Food and Rural Affairs, feed costs account for 59.5% of raw milk production costs.
A representative example of the drive for premiumization in milk is Seoul Dairy. Seoul Dairy plans to completely change its production to 'A2 milk,' which is considered premium milk. A2 milk is obtained from cows that possess A2 protein and is easier to digest. Seoul Dairy has set a primary goal of achieving a 100% A2 milk ratio by 2030. The company plans to convert all its production lines to A2 milk to ensure that all farms of Seoul Dairy cooperative members produce A2 raw milk.
Maeil Dairies is finding its path by developing a variety of products. Representative products include plant-based beverages, such as Almond Breeze, Amazing Oat, and Maeil Soymilk. Additionally, the company is focusing on expanding various businesses, including the adult nutrition product 'Celex.' As a result, the proportion of the dairy processing sector in Maeil Dairies' total sales has steadily decreased, dropping from 62.04% in 2022 to 61.52% in 2023, and recording 60.7% based on the third quarter of last year.
Namyang Dairy, now part of Han & Company, is also in a similar situation. Namyang Dairy reported a return to profitability in the third quarter of last year and has planned to solidify its foundation while preparing for the tariff-free era with health functional foods and protein beverages. The health functional food brand 'Inner Care' and the protein beverage 'Take Fit' are representative examples.
Food industry experts evaluate the movements of the dairy sector, such as business diversification and premiumization, positively. Moon Jeong-hoon, a professor of agricultural economics and rural sociology at Seoul National University, noted that "the direction of going toward alternative milk or attempting to process raw milk in various ways is correct," adding, "We must overcome the situation with new dairy products and high-quality products that adults can enjoy deliciously."
A dairy industry representative mentioned, "We must abandon the notion of competing on price to survive," adding, "We are finding ways to survive by approaching consumers with fresh, high-quality milk and developing a variety of products that meet consumer needs, such as processed milk."