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Spreading from hippies to middle class households, organic milk sales surged. Now though, consumers are moving onward to other trendy drinks.
The Organic Milk Bubble
During 2007, you might have paid $4.40 for a half gallon of organic milk–almost double the price of conventional milk. Naturally, farmers responded. They increased the size of their herds, eliminated pesticides and antibiotics, and sent their cows out to eat the grass (for a minimum of 120 days a year).
And consumers kept on buying what they produced:
Now though the bubble has burst:
Organic Milk Markets
Just when the organic milk supply had saturated the shelves, fickle consumers left for a newer, reputedly healthier product. They believed that plant based drinks like almond and cashew milk were better for them and their kids. It also helped that they were cheaper and lactose-free. An economist might say that demand was decreasing for organic milk because a substitute product had become more attractive.
Meanwhile, the organic milk producers had unsold stock that they began using for cheese, yogurt, butter, and even skim milk powder. With prices dropping, some farmers dumped their milk and reduced the size of their herds. In other words, we have a decrease in the quantity supplied because of the decline in demand.
Trendy Food Cycles
Organic milk is not alone. Other trendy foods had similar demand and supply changes::
From: NY Times
Our Bottom Line: Creative Destruction
Explaining “creative destruction,” economist Joseph Schumpeter (1883-1950) said that economic growth depends on the pain of old industries dying and new ones taking their place. With trendy food cycles, we have a somewhat similar phenomenon. A new product is nudging the old out of the marketplace.
And, as a result, we have more almond milk.
My sources and more: Thanks to WSJ for telling the organic milk saga. I soon discovered, though, that they were not alone. Quartz and Bloomberg added much more to the story.
