The Rabobank report titled Milk protein scarcity challenges Australian dairy’s cheese-centric model, has revealed that as the industry is facing a contracting milk pool that is limiting the availability of milk protein.
While Australia’s dairy industry has built a relatively stable and resilient model around cheese as a core product this now sits at a “critical inflection point.”
Domestic cheese demand remains stable and is an important base for the dairy sector.
Cheese remains a staple in people’s diets in Australia with per capita consumption at around 10 kilograms annually. The domestic cheese market exceeds 270000 tonnes with growth mainly driven by retail, where volumes have increased from 130,000 tonnes to 202,000 between 2015 and 2025.
While Australian dairy cheese production remains important pricing for suppliers is under pressure.
However, according to the report: “While retail has gained share, strong competition in supermarkets from private label, major branded players, and retailers is exerting pressure on margins.”
The report also reveals that the category is maturing despite the compressed margins and limited pricing power. Consumer demands remain constrained by decline in household income and rising food prices which means they are prioritising affordability.
There is also the impact of GLP-1 which is expected to restrict food consumption over time, which could impact on processed cheese such as slices, snacks and high-fat spreads and drips.
However, the demand for high protein dairy products is providing processors with another avenue to monetise milk production beyond cheese, the report said.
This reflects a broader global trend as consumers prioritise protein for health, weight management and healthy ageing. The report highlighted the growth of yogurt and cottage cheese as well as high-protein milk products.
Premium protein products also offer greater value than traditional cheese production.
The report said: “This means the next wave of value creation will depend on how effectively it monetises increasingly scarce milk protein through greater processing capability and product optimisation.”
It added: “Future competitiveness will depend on protein optimisation, processing flexibility, whey valorisation, high-protein dairy innovation, specialty ingredients and selective participation in cheese markets.”
