Trends shaping the dairy Ingredients market

Credit: Pexels. Anna Shvets
Cheese Evolution: Health Trends and Rising Demand
The dairy ingredients market is witnessing significant shifts driven by evolving consumer preferences and regional dynamics. In the U.S., the growing focus on health and wellness has boosted demand for cheese, with natural ingredients and protein content emerging as key purchasing drivers. Approximately 30% of consumers prioritise “natural/made with real ingredients,” while 22% are influenced by “high in/source of protein” claims. Additionally, 13% of consumers are drawn to cheeses fortified with functional ingredients like probiotics, vitamin D and omega-3s, creating opportunities for premium, health-focused products.
Globally, cheese remains the leading processed dairy product in Europe and North America, with per capita consumption continuing to rise due to its prominence in diets. In Asia, butter dominates processed dairy consumption, driven by strong demand, while skim milk powder (SMP) is poised for rapid growth in Africa. Meanwhile, global milk production is projected to grow at 1.5% annually over the next decade, with India and Pakistan expected to contribute over 32% of the increase by 2032.
Urbanisation and rising incomes are reshaping dietary habits in Southeast Asia, where fast food consumption, including cheese-laden products like burgers and pizzas, is driving cheese demand in non-traditional markets. This trend underscores the expanding role of processed dairy in global diets, closely tied to income growth, urbanisation and evolving consumer lifestyles.
Dairy production: Efficiency and Sustainability Driving Growth
The dairy ingredients market is closely tied to evolving milk production trends, with efficiency and sustainability shaping the future of the industry. Global milk production is projected to grow at 1.5% annually, reaching 1,039 million tons by 2032, outpacing other major agricultural commodities. Yield growth is expected to play a larger role in production increases than herd expansion, driven by advancements in milk production systems, improved animal health and feed efficiency and genetic enhancements. India, the largest milk producer, continues to lead global growth, supported by small-scale producers integrated into cooperatives for processing and distribution. Production gains in India stem from a combination of increased yields and growing numbers of milking cows and buffaloes. Meanwhile, Sub-Saharan Africa and major producers like Pakistan are also contributing to herd and yield growth, although yields remain relatively low in these regions. Conversely, the European Union faces declining milk production due to fewer herds, slower yield growth and a shift toward organic and non-conventional systems. While organic dairy production is increasing, its lower yields and higher costs require significant price premiums.
New Zealand, despite accounting for only 2.5% of global milk production, remains a key player due to its export-oriented model and cost-efficient grass-based systems. However, growth is constrained by environmental regulations, land availability and methane pricing under climate change policies, limiting milk production growth to 0.4% annually over the next decade.
The steady increase in milk production, combined with advancements in yield efficiency and a growing focus on sustainable practices, serves as a critical driver for the dairy ingredients market. As consumer demand evolves, the market is poised to capitalise on these trends, catering to both traditional and emerging needs across the globe.
AI revolutionising dairy ingredients and functional food fnnovation
Artificial intelligence (AI) is transforming the dairy industry by addressing key challenges and driving innovation in both production and product development. Companies like Cainthus, Moo-ID and Stellapps are leveraging AI to improve cattle health monitoring, identification and supply chain efficiency. In India, MoooFarm, in collaboration with Microsoft, has developed a machine learning platform to assist dairy farmers with cattle identification and disease management, helping to enhance production levels and quality.
Beyond dairy production, AI is reshaping the functional food market. By analysing vast datasets of food compositions, health outcomes and consumer preferences, AI identifies effective ingredient combinations for health benefits such as boosting immunity, improving digestion, or supporting brain function. This technology also enables the development of personalised nutrition plans by factoring in individual dietary preferences, genetic data, and specific health goals, creating tailored functional foods, snacks, supplements and meals that address unique consumer needs.
AI-driven solutions are not only optimising dairy production processes but also responding to the growing demand for health-conscious and functional food products. This dual impact underscores AI as a critical driver of innovation and efficiency in the dairy ingredients market, paving the way for smarter, more personalised food systems.