Why are the world’s leading dairy companies talking more about profitability than productivity these days?
For a long time, the dairy sector operated on a fairly simple principle – more milk means more income. Consequently, for many decades the main issues centred on productivity: how to get more milk from a cow, how to increase yield per hectare, how to raise larger herds and how to make more efficient use of available resources. However, it appears that the global dairy sector is gradually shifting its priorities.
This spring, the consultancy firm McKinsey & Company published its eighth annual survey of dairy industry executives, titled “The Dairy Industry’s 2026 Playbook: Protect Margins, Pursue Growth”. The survey involved more than two hundred dairy industry executives from the United States and Europe, and was supplemented by forty-one in-depth interviews with top-level executives. The aim of the study was to understand the key challenges and opportunities that dairy sector leaders see today.
The results give pause for thought. The vast majority of those surveyed do not mention the need to produce more milk. Instead, the focus is much more frequently on maintaining profitability. At first glance, this may seem like a minor difference in wording. However, it actually indicates a very significant shift in thinking. When a sector is focused on productivity, the main question is how to increase production. When a sector is focused on profitability, the main question becomes how to create more value from every kilogramme of milk produced. These are not the same thing.
More milk does not necessarily mean more money earned
The last few years have been a mixed bag for the dairy sector. Milk production has grown in many regions of the world. Investments were made in new farms, modern technologies, more productive genetics and more efficient feed. However, costs have also risen. Energy, logistics, construction, equipment and labour have all become more expensive. Regulatory requirements have also tightened in many countries. As a result, a significant proportion of companies in the dairy sector found themselves in a situation where turnover was rising, but profitability was not. It is precisely this trend that a McKinsey study has revealed.
A large proportion of the executives surveyed indicated that their main priority for the coming years is not faster growth, but safeguarding margins. In other words, the sector is beginning to realise that it is not just the volume of milk produced that matters, but also how much money remains after all costs have been covered.
Is the era of productivity coming to an end?
Certainly not. Productivity remains one of the most important factors in the competitiveness of dairy farming. However, attitudes towards what we generally refer to as productivity are changing. Until quite recently, productivity was usually measured in kilograms of milk per cow. Today, a much broader system is increasingly being used.
How much milk does one employee produce? How much does it cost to produce one kilogram of milk? How many lactations does a cow spend in the herd? How much feed is required per kilogram of milk? How much time does the management team spend on firefighting, and how much on strategic management? These questions are becoming no less important than milk yield. Essentially, productivity is increasingly understood as the ability to manage the entire system effectively, rather than simply maximising a single indicator.
Protein – the new driver of growth
The survey revealed another interesting trend. When industry leaders were asked which consumer trend currently has the greatest influence on the dairy market, the most frequently cited answer was not sustainability, plant-based products or animal welfare. Protein came out on top. Demand for high-protein products is growing worldwide. Consumers are increasingly looking for foods that help them feel fuller for longer, support physical activity or promote healthy ageing.
Consequently, the dairy sector is increasingly investing in products where the focus is not on the quantity of milk, but on its composition and the value it delivers. This is an important signal for dairy producers too. In the future, competitive advantage may be determined not only by production volume, but also by the ability to adapt to changing market needs.
Technologies that help generate revenue
The McKinsey study also devotes considerable attention to artificial intelligence. However, it is interesting to note that most industry leaders view artificial intelligence not as a trendy technology, but as a tool for making better decisions. Today, farms and processing plants collect vast amounts of data. However, simply collecting data does not in itself create value.
Value is created when data helps to identify a problem more quickly, forecast results more accurately, or make a more economically beneficial decision. Consequently, the success of technology implementation is increasingly determined not by the amount of equipment, but by the ability to use it to increase profitability.
What does this mean for Lithuanian dairy farms?
The Lithuanian dairy sector frequently discusses milk prices, production costs or the need for investment. These are important issues. However, global trends suggest that in future, these alone may not be enough. Today, global dairy leaders are increasingly asking not “how can we produce more milk?”, but “how can we retain greater value from every kilogram of milk produced?”.
This difference may seem minor, but it is precisely this that is changing investment decisions, breeding strategies, the choice of technology and the entire philosophy of farm management. Perhaps this is why the most important question for the dairy sector today is no longer how much milk we will produce tomorrow. The most important question is becoming how much value we will be able to create from the milk we are already producing.
