German dairy industry: Volatility is the new normal

By Nicolas Wüthrich and Tobias Kramolowsky

The German dairy industry has reached an inflection point. Fluctuating raw material prices, ever faster structural change, growing margin pressure in the commodity business, and AI-driven technology transformation are changing the rules of the game. Drawing on our industry expertise and in-depth analysis of the market, we have formulated six hypotheses for how we think the German dairy industry could develop in the coming years. They highlight what companies should do now to secure or strengthen their competitive position.

Hypothesis 1: Volatility is the new normal

The producer price for milk in Germany is subject to ever more violent cyclical fluctuations. At the end of 2025, the price of raw milk plummeted by over 30% within just four months – falling much slower in the south of Germany than in the north. There are multiple root causes behind this. Contrary to what the forecasts anticipated, there is a significant oversupply of raw milk in the market today. Roughly 50–60% of milk production costs are taken up by feed costs. Those costs are extremely sensitive to geopolitical trade restrictions. Energy costs, too, have rocketed again lately, with European gas prices rising more than 38% in a single day at one point. Because about half of the milk produced in Germany is destined for export, the market is directly affected by geopolitical risks. This makes it all the more important for companies to develop forecasting excellence and speed as core strategic competencies – and build up a solid equity base that can cushion against fluctuating earnings. Roland Berger supports businesses with that by providing industry expertise and the AI-powered planning models necessary to manage volatility in a proactive manner.

Hypothesis 2: Market consolidation continues

The German dairy industry is consolidating at pace. The number of dairy farms fell from around 94,000 in 2010 to about 50,000 in 2024 – a decline of more than 55% in just 13 years. At the same time, total milk production has remained stable at around 32 million tons. On the processing side, the number of dairies has nearly halved. Landmark mergers, such as the planned tie-up between Arla Foods and DMK to form Europe’s largest dairy cooperative, are emblematic of this dynamic. Our analysis reveals that companies need to be turning over at least EUR 250 m to remain relevant in the food retail sector long term and to have the necessary bargaining power. But size alone is not enough. Equally crucial is to have a clear point of differentiation via a regional background or a unique product offering. Roland Berger helps companies develop and implement growth strategies, identify M&A opportunities, and adopt the right strategic positioning.

Hypothesis 3: Growth demands realignment

The margins speak for themselves: While commodity dairies often achieve EBIT margins below 2%, specialized dairies with differentiated products can reach 5–10% or more. The biggest potential for growth clearly lies outside the saturated mass market: Functional dairy products like protein drinks are growing globally at 6–8% annually on average. Companies must actively develop new growth segments. Dairies operating on a national level should aim for an export share of 30–50% as a strategic objective. Germany is already a leader in cheese exports. Our experts develop bespoke go-to-market strategies for industry players and identify differentiation potential in attractive product segments.

Hypothesis 4: The key to success is to be entrepreneurial and act fast

The industry’s financial structure reveals a striking difference: Privately owned dairies that are run on an entrepreneurial basis have equity ratios of 40–60%, whereas cooperatives often operate with equity ratios as low as 15–25%. Even though cooperatives process some 60–65% of Germany’s raw milk supply, their obligation to accept the milk from cooperative members and their decision making by committee – where decisions can often take months or even years – make them so much less flexible. Successful dairies are therefore the ones that foster a culture of acting fast and being proactive: They actively optimize structures within their production operations and organization when business is good, rather than waiting for trouble to strike. Speed is a strategic advantage in a competitive landscape. Roland Berger helps companies develop agile organization structures and decision-making processes.

Hypothesis 5: Milk remains a core protein with strong relevance

For all the hype around plant-based alternatives, animal milk remains the dominant protein in the German diet. With sales of EUR 30 bn in 2025, Germany is one of Europe’s largest dairy markets. Only about 4% of the total market is made up of plant-based alternatives today. From a nutritional perspective, cow’s milk has a clear edge: With about 3 g of protein per 100 ml, it is significantly superior to oat milk, which contains about 1 g per 100 ml. Nearly three-quarters of German consumers prefer natural ingredients – a trend that further favors animal milk over ultra-processed plant-based products. Dairy companies should proactively focus on their core business and clearly communicate the obvious nutritional benefits. At the same time, they should continuously monitor what’s happening in the plant-based alternatives market. Roland Berger helps companies strategically develop commercialization potential along the entire dairy value chain.

Hypothesis 6: AI will transform all areas of the business

Artificial intelligence is still in its infancy in the dairy industry: Just 15–20% of German food companies are actively using AI. Yet the potential is huge: AI-powered planning and logistics can cut costs by 10–15% in the dairy value chain. Businesses that fail to invest now risk being left behind. A gradual, targeted transformation is the right approach: Start in areas where AI applications are mature and systematically unlock efficiency potential in production, supply chain, and procurement. Roland Berger provides specific AI tools – including our RfP Comparison & Negotiation Agent and our Smart Inventory Optimizer – and supports companies on their journey toward becoming data-driven organizations.

Growth is possible – even in volatile times

The German dairy industry is undergoing a period of profound change. Alongside the undeniable threats, there are also attractive opportunities – if you are prepared to act decisively now. Successful, future-proof dairy companies build volatility into their strategy, combine critical mass with genuine differentiation, and consistently develop new growth areas. Roland Berger supports companies across the dairy industry with integrated consulting expertise – from strategy and operational transformation to specific digital solutions – and can even provide interim management experts to come in and help deliver sustainable change.

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