Dairy Ingredients Market Size & Outlook, 2025-2033

Dairy Ingredients Market Overview

The global dairy ingredients market size was valued at USD 83.34 billion in 2024 and is projected to reach from USD 87.55 billion in 2025 to USD 129.84 billion by 2033, growing at a CAGR of 5.05% during the forecast period (2025-2033). A key driver of the market is the rising demand for protein-rich and functional foods.

Key Market Insights

• Asia-Pacific dominated the dairy ingredients industry and accounted for a 39.6% share in 2024
• Based on product, the milk powder segment leads the market with the largest revenue share of 45% in 2024.
• Based on form, the powder form dominates the market.

Market Size & Forecast

• 2024 Market Size: USD 83.34 billion
• 2033 Projected Market Size: USD 129.84 billion
• CAGR (2025-2033): 5.05%
• Largest market in 2024: Asia-Pacific
• Fastest-growing market: North America

Consumers are increasingly focusing on health, fitness, and nutrition, boosting the popularity of milk proteins like whey and casein in sports nutrition, weight management, and meal replacement products. The surging urban population and changing dietary patterns, especially in developing economies, are driving the consumption of processed and convenience foods that use dairy powders, creamers, and emulsifiers.

Additionally, the rise of clean-label trends has led to increased demand for organic and natural ingredients, encouraging manufacturers to offer non-GMO and additive-free formulations. These ingredients are also gaining traction in infant nutrition and geriatric health applications due to their high bioavailability and nutritional value. These factors collectively contribute to the expanding global footprint and usage of dairy-based components across various food and beverage sectors.

Market Trend

Technological Innovations

Technological advancements are reshaping the global market by enhancing product quality, safety, and efficiency in processing. Innovative technologies such as membrane filtration, high-pressure processing (HPP), and UV light sterilization are replacing traditional thermal methods to retain the nutritional profile of dairy products. These technologies ensure better functionality and bioavailability of proteins and other nutrients in dairy powders.

• For instance, in July 2025, the U.S. Food and Drug Administration granted clearance for Tamarack Biotics’ TruActive UVlight process. This nonthermal method targets pathogens while preserving key enzymes and proteins in powdered dairy ingredients like whey protein concentrate and lactoferrin, offering greater nutritional retention versus traditional heat pasteurization.

Such technological milestones not only improve safety and shelf life but also open new applications in clinical nutrition, sports supplements, and infant formulas, driving market expansion.

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Market Driver

Globalization of Dairy Trade

The globalization of dairy trade has significantly propelled the global market by facilitating cross-border supply and demand. Leading dairy-producing nations such as New Zealand, the U.S., and the European Union are exporting large volumes of milk powders, whey proteins, and casein to regions like Asia-Pacific, the Middle East, and Africa.

• For instance, according to the Dairy Companies Association of New Zealand (DCANZ), over 95% of New Zealand’s milk production is exported, with China being its top market. Additionally, the U.S. Dairy Export Council reported record dairy exports in 2023, totaling over 2 million metric tons.

Such developments ensure consistent supply, competitive pricing, and growing market penetration in emerging economies, thus fostering the expansion of the global industry.

Market Restraint 

Lactose Intolerance and Allergen Concerns 

A significant restraint in the global market is the surging prevalence of lactose intolerance and milk protein allergies. According to the National Institutes of Health (NIH), nearly 65% of the global population has a reduced ability to digest lactose after infancy. This is particularly common in regions such as Asia and Africa, where dairy consumption is traditionally lower. 

Additionally, milk is recognized as one of the top allergens, leading many consumers to avoid dairy-based products altogether. These health concerns are prompting a shift toward plant-based alternatives, limiting the growth potential for conventional ingredients in certain demographic segments and forcing manufacturers to explore allergen-free formulations. 

 Stiff Competition from Plant-based Alternatives  

The expanding popularity of plant-based alternatives such as oat, almond, soy, and pea protein is curbing growth in traditional dairy ingredient demand, particularly in beverages, desserts, and other formulated foods. Food and beverage applications dominate consumption, with increasing consumer demand for ethical, allergen-friendly, and climate-resilient proteins fueling innovation and investment. 

• This trend represents a long-term challenge in mature markets where flexitarian habits are common. According to TheGoodFoodInstitute, plant-based milk accounted for about 14% of total milk category dollar sales in 2024. This demonstrates meaningful share but not category dominance.  

 While the shift towards plant-based options presents a significant competitive challenge for dairy ingredient producers, it also highlights the imperative for strategic adaptation and diversification in product offerings to capture evolving consumer preferences and maintain market relevance. 

Market Opportunity

Government Initiatives and Subsidies

Government support through subsidies and policy frameworks plays a crucial role in enhancing dairy ingredient production, innovation, and exports. Countries across North America, Europe, and the Asia-Pacific are actively promoting domestic dairy industries to ensure food security and global competitiveness.

• For instance, the USDA’s Dairy Business Innovation Initiatives (DBI), with a new round of funding in FY2025, has allocated $11.04 million to help regional dairy businesses modernize, innovate, and diversify their product offerings. These grants support processing equipment upgrades, marketing of specialty dairy products like lactose-free powders, and R&D for value-added ingredients.

Similarly, India’s Animal Husbandry Infrastructure Development Fund (AHIDF) aims to enhance milk yield, processing capabilities, and rural employment. Such initiatives open up long-term opportunities for manufacturers in this market by improving infrastructure and encouraging innovation.

Regional Analysis

Asia Pacific is experiencing rapid expansion in the global market, fueled by rising urbanization, growing middle-class incomes, and evolving dietary preferences toward protein-enriched and convenience foods. Increasing awareness regarding the health benefits of dairy proteins is driving their incorporation into infant nutrition, bakery, and sports nutrition segments. Moreover, rapid growth in food processing industries and cold chain logistics infrastructure supports large-scale adoption of these ingredients. The region also presents significant opportunities for innovation in dairy-based beverages and snacks tailored to local taste preferences.

China's market is witnessing rapid growth due to rising health consciousness and the surging demand for high-protein food products. Urban consumers are turning to whey protein supplements, while infant formula demand remains robust. For example, Yili and Mengniu are expanding their portfolios in this market. Additionally, the Chinese government’s support for domestic dairy modernization is driving investments in processing and advanced ingredient manufacturing.

India's dairy ingredients industry is expanding, supported by the country’s status as the world’s largest milk producer. The growing demand for functional products like flavored milk powders, ghee, and paneer boosts the market growth in this region. Companies like Amul and Parag Milk Foods are innovating with value-added dairy segments. Moreover, government initiatives like the Rashtriya Gokul Mission support dairy productivity, enhancing raw material availability for ingredient manufacturing.

North America Dairy Ingredients Market Trends

The North American market is witnessing robust growth due to increasing demand for high-protein and low-carb diets, driving the consumption of whey protein concentrates and isolates. Growth in the functional food and beverage sector and the rising popularity of clean-label and organic ingredients are also key factors. Technological innovations in dairy processing, such as ultrafiltration and enzymatic modification, are enhancing ingredient quality and expanding application scope. Additionally, the surging elderly population is boosting demand for dairy-based nutritional supplements and meal replacements.

The U.S. dairy ingredients market benefits from a strong export-oriented production base and booming functional food demand. Key players like Dairy Farmers of America and Land O’Lakes supply ingredients for the bakery, confectionery, and sports nutrition sectors. The rise of high-protein snacks and RTD beverages has increased whey and casein usage. Moreover, USDA support for innovation and sustainability initiatives in this sector is encouraging R&D in specialty and value-added ingredients in this field.

Canada's market for dairy ingredients is driven by the country's robust dairy farming sector and growing demand for high-protein food products. Canadian manufacturers like Saputo Inc. are investing in whey protein and specialty dairy powders for sports and infant nutrition. Additionally, Canada's Clean Label trend is pushing companies to adopt minimally processed ingredients. Government regulations like supply management, however, shape production and pricing strategies across provinces.

Europe Dairy Ingredients Market Trends

Europe remains a mature yet dynamic global market driven by strong demand for value-added dairy proteins and milk powders across the bakery, confectionery, and infant nutrition industries. Consumer preference for natural, traceable, and minimally processed dairy products supports growth in organic and grass-fed ingredients in this sector. Regulatory emphasis on product safety and sustainable sourcing is encouraging manufacturers to adopt advanced processing methods. Moreover, innovation in lactose-free and reduced-fat products is expanding the consumer base, especially among health-conscious and lactose-intolerant individuals in the region.

Germany's dairy ingredients sector is driven by strong consumer demand for high-protein foods and clean-label dairy products. With Germany being one of Europe’s largest milk producers, companies like DMK Group and Meggle leverage domestic supply to produce whey proteins and milk powders for infant formula, sports nutrition, and bakery sectors. The rising popularity of lactose-free and organic dairy ingredients is also reshaping market strategies in the country.

The UK's dairy ingredients market is experiencing growth due to increasing demand for fortified dairy in health-focused segments such as sports nutrition and elderly care. Key players like Arla Foods and First Milk are expanding whey protein production to meet rising exports and domestic consumption. Additionally, consumer preference for sustainably sourced and minimally processed ingredients is prompting innovation in functional dairy formulations and hybrid dairy-plant-based blends.

Product Insight

The milk powder segment holds a significant share in the global market due to its long shelf life, ease of transportation, and versatility in application. Widely used in infant formula, confectionery, bakery, and dairy products, milk powder offers a convenient alternative to liquid milk. Its nutritional content, including proteins, calcium, and vitamins, enhances product value. Emerging economies are witnessing growing demand for milk powder, driven by rising packaged food consumption and limited cold chain infrastructure.

Form Insight

The powder form dominates the market owing to its superior storage stability, extended shelf life, and ease of incorporation in various food applications. It is preferred by manufacturers across the bakery, infant nutrition, and functional food sectors due to its consistency and cost efficiency. Powdered ingredients are easy to transport and store, making them ideal for large-scale production. Technological advancements in spray drying and dehydration processes are further boosting the quality and demand for powder-based ingredients.

Application Insight

The dairy products segment holds a dominant share in the global market, driven by the surging consumption of products such as recombinant milk, yogurt, cheese, and butter. These products utilize various ingredients like milk powder, casein, and whey for improved texture, nutrition, and shelf life. Growing demand for high-protein dairy items and the expansion of value-added dairy lines are further boosting ingredient usage in this segment, particularly in emerging markets with rising urbanization and dietary shifts.

Distribution Channel Insight

The direct/B2B sales segment plays a vital role in the market, catering to large-scale food and beverage manufacturers. These direct transactions allow for better pricing, bulk procurement, and long-term supply agreements. Leading producers in this industry maintain strong relationships with multinational food companies, ensuring consistent demand. This channel ensures product customization, technical support, and timely delivery, making it the preferred mode of distribution for major players across the bakery, infant formula, dairy processing, and nutrition industries.

List of key players in Dairy Ingredients Market

1. Arla Foods
2. Fonterra Co-operative Group Limited
3. FrieslandCampina
4. Saputo Inc.
5. Kerry Group plc
6. Glanbia plc
7. Lactalis Ingredients
8. Agropur Cooperative
9. Hilmar Cheese Company, Inc.
10. Nestlé S.A.
11. Royal DSM
12. Ingredia SA

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Recent Developments

• August 2025 – In the first quarter of fiscal 2026, Saputo expected to benefit from recent improvements in global dairy ingredients market prices, including firmer commodity pricing, signaling positive momentum for its ingredients business.
• August 2025 – FrieslandCampina ended its precision fermentation investments, opting to shift focus back to its core dairy operations. The company noted intensified competition and limited economic viability in that technology.
• August 2025 – Fonterra agreed to sell its global consumer business, including its ingredients operations, to Lactalis for NZ$3.845 billion. Fonterra will continue supplying dairy ingredients to the divested business under long-term agreements, and the deal is subject to shareholder and regulatory approval.
• May 2025 – Fonterra raised the lower end of its annual earnings forecast, driven by strong gains in its ingredients channel and consumer operations. The share price rose ~0.9% following the announcement.
• May 2025 – Arla Foods Ingredients introduced a novel “Maximum yield, no acid whey” processing concept, aiming to eradicate acid whey and improve sustainability and efficiency in dairy production.
• April 2025 – Arla Foods Ingredients unveiled a strategic U.S. expansion, entering a contract manufacturing agreement with Valley Queen (South Dakota) to ramp up high-protein dairy ingredient production.