---
title: "Why the dairy industry is failing"
url: https://modern-mba.com/case/milk
sector: "Food & beverage"
sector_url: https://modern-mba.com/sector/food-and-beverage
aired: 2025-02-15
published: 2026-08-27
updated: 2026-08-28
reading_time_minutes: 16
charts: 20
video: https://www.youtube.com/watch?v=gtxNdoIg4g0
author: "Yishan Lin"
author_url: https://www.linkedin.com/in/yishanlin/
publisher: Modern MBA
license: "© Modern MBA, all rights reserved. Quote and cite with credit and a link; republishing needs written permission."
---

# Why the dairy industry is failing

Oatly went from $30 million of revenue to $783 million and from $1 million of operating income to a $344 million loss. Its shares went from $24.46 to $0.66. Vegans blame subsidies. But the subsidized industry Oatly wanted to replace is worse: the average US dairy farm has made money in 3 of the last 23 years without government support, and Dean Foods — the largest milk processor in the country — went bankrupt. This case study reads Oatly, Dean Foods, and Silk against the subsidy data to show why milk destroys every processor that touches it.

## Key figures

- **$24.46 → $0.66** — Oatly share price from its 2021 IPO to the end of 2024
- **3 of 23** — Years the average US dairy farm made money without subsidies
- **$347B vs $40B** — Subsidies to the top 20% of farms versus the other 80%

## The argument

The vegan defense of Oatly is that the game is rigged. Cow milk is subsidized in every country on earth and oat milk is not, so plant-based brands are asked to build demand, build supply, and match an artificially cheap price all at once. The first half of that is true. The conclusion is wrong.

Oatly's numbers are its own doing. Revenue went from $30 million to $783 million while operating income went from $1 million to a $344 million loss, and the shares went from $24.46 to $0.66. It committed half a billion dollars a year to owning factories on every continent on the assumption that 20–30% growth would hold, then growth fell to low single digits. It also excluded distribution from cost of sales, which the beverage industry includes; add it back and 2022 gross margin was 2.6%. Marketing ran 40% to 55% of revenue.

But the industry Oatly wanted to replace is not worth capturing. Milk is a political product: retailers sell it below cost to pull people through the door, politicians need it cheap, and the squeeze lands on producers and processors. Excluding subsidies, the average American dairy farm has been profitable in 3 of the last 23 years, and Dean Foods — the largest processor in the country, owner of the biggest brands — went bankrupt anyway. The subsidies do not reach processors. They reach farmers, and mostly the biggest: $347 billion to the top 20% of farms against $40 billion for the rest. Oatly is a processor.

## Charts

### Five years up, five years gone

Valuation in billions of dollars. Impossible Foods ran the same arc — $5B in 2019, $8B in 2020, $4B in 2021.

|  | Oatly | Beyond Meat |
| --- | --- | --- |
| 2019 | $0.2B | $2.0B |
| 2020 | $2.0B | $4.0B |
| 2021 | $10.0B | $7.0B |
| 2024 | $0.4B | $1.4B |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-1 · Sources: https://modern-mba.com/case/milk#sources

### Oatly is a penny stock

Adjusted closing price per share since the June 2021 IPO. There has been no recovery in any half-year since.

|  | US dollars |
| --- | --- |
| Jun 2021 | $24.46 |
| Dec 2021 | $7.96 |
| Jun 2022 | $3.46 |
| Dec 2022 | $1.74 |
| Jun 2023 | $2.05 |
| Dec 2023 | $1.18 |
| Jun 2024 | $0.94 |
| Dec 2024 | $0.66 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-2 · Sources: https://modern-mba.com/case/milk#sources

### Nobody in plant-based makes money

Operating margins of the two listed leaders. Beyond Meat got worse every single year.

|  | Oatly | Beyond Meat |
| --- | --- | --- |
| 2020 | −14% | −13% |
| 2021 | −33% | −39% |
| 2022 | −55% | −83% |
| 2023 | −49% | −97% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-3 · Sources: https://modern-mba.com/case/milk#sources

### The vegan tax on milk

Average nationwide price per gallon, 2024. Oat milk costs 70% more than the product it is replacing.

|  | US dollars |
| --- | --- |
| Cow milk | $4.10 |
| Almond milk | $6.56 |
| Oat milk | $6.97 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-4 · Sources: https://modern-mba.com/case/milk#sources

### And on meat

Average nationwide price per pound, 2024. Impossible costs almost twice what ground beef does.

|  | US dollars |
| --- | --- |
| Ground beef | $5.35 |
| Beyond Meat | $6.70 |
| Impossible | $9.32 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-5 · Sources: https://modern-mba.com/case/milk#sources

### Revenue grew 26x and the losses grew faster

Oatly revenue and operating income in millions of dollars. The losses arrive exactly when the factories do.

|  | Revenue | Operating income |
| --- | --- | --- |
| 2014 | $30M | $1M |
| 2015 | $39M | $0M |
| 2016 | $43M | $0M |
| 2017 | $58M | −$1M |
| 2018 | $118M | −$10M |
| 2019 | $206M | −$31M |
| 2020 | $421M | −$47M |
| 2021 | $643M | −$207M |
| 2022 | $722M | −$352M |
| 2023 | $783M | −$344M |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-6 · Sources: https://modern-mba.com/case/milk#sources

### Half the company is sales and admin

Oatly revenue against SG&A spend, in millions of dollars. It never grew into the overhead it built.

|  | Revenue | SG&A |
| --- | --- | --- |
| 2019 | $206M | $93M |
| 2020 | $421M | $167M |
| 2021 | $643M | $354M |
| 2022 | $722M | $412M |
| 2023 | $783M | $373M |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-7 · Sources: https://modern-mba.com/case/milk#sources

### It won the shelf and still lost money

Oatly sales by channel. Two thirds is retail — people asking for it by name and buying it by the box.

|  | Retail | Foodservice |
| --- | --- | --- |
| 2021 | 65% | 35% |
| 2022 | 64% | 36% |
| 2023 | 65% | 35% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-8 · Sources: https://modern-mba.com/case/milk#sources

### Milk is a worse business than every other drink

Trailing-twelve-month margins for the global dairy companies against the non-dairy beverage giants. Perishable and essential against shelf-stable and optional.

|  | Gross margin | Operating margin |
| --- | --- | --- |
| Global dairy | 35% | 10% |
| Global non-dairy | 47% | 25% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-9 · Sources: https://modern-mba.com/case/milk#sources

### Oatly was worse than the industry it was disrupting

The same comparison with Oatly added. It makes its product from oats, water, oil, and enzymes — no cows required.

|  | Gross margin | Operating margin |
| --- | --- | --- |
| Global dairy | 35% | 10% |
| Global non-dairy | 47% | 25% |
| Oatly | 19% | −44% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-10 · Sources: https://modern-mba.com/case/milk#sources

### The gross margin was cooked

Oatly excluded customer distribution from cost of sales, breaking beverage convention. Adding it back gives the real number.

|  | As reported | With distribution added back |
| --- | --- | --- |
| 2021 | 24.0% | 16.4% |
| 2022 | 11.0% | 2.6% |
| 2023 | 19.0% | 12.8% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-11 · Sources: https://modern-mba.com/case/milk#sources

### It spends like a fashion brand

Oatly SG&A as a percentage of revenue against the industry. Once everyone sold oat milk, the marketing had to sell Oatly specifically.

|  | Percentages |
| --- | --- |
| 2020 | 40% |
| 2021 | 55% |
| 2022 | 52% |
| 2023 | 53% |
| Global dairy | 27% |
| Global non-dairy | 26% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-12 · Sources: https://modern-mba.com/case/milk#sources

### Twenty years and milk barely moved

Average nationwide retail price via the Bureau of Labor Statistics. Chicken doubled. Milk did not, because retailers price it as a loss leader.

|  | Milk, per gallon | Chicken, per pound |
| --- | --- | --- |
| 2004 | $3.23 | $1.03 |
| 2006 | $3.00 | $1.06 |
| 2008 | $3.68 | $1.31 |
| 2010 | $3.32 | $1.28 |
| 2012 | $3.58 | $1.48 |
| 2014 | $3.82 | $1.54 |
| 2016 | $3.29 | $1.46 |
| 2020 | $3.54 | $1.62 |
| 2022 | $4.22 | $1.83 |
| 2024 | $4.10 | $2.06 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-13 · Sources: https://modern-mba.com/case/milk#sources

### A century of promotion and the decline never stopped

Milk consumption per capita in the United States, in pounds. School mandates, Got Milk, and fast-food cheese deals did not reverse a single decade.

|  | Measures |
| --- | --- |
| 1950 | 335 lbs |
| 1970 | 275 lbs |
| 1990 | 235 lbs |
| 2000 | 215 lbs |
| 2008 | 181 lbs |
| 2010 | 177 lbs |
| 2012 | 169 lbs |
| 2014 | 158 lbs |
| 2016 | 153 lbs |
| 2018 | 145 lbs |
| 2020 | 141 lbs |
| 2022 | 130 lbs |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-14 · Sources: https://modern-mba.com/case/milk#sources

### Half the dairy farms in America are gone

Number of milk farms in the United States. Output hit records over the same decade — family operations replaced by corporate herds.

|  | Counts |
| --- | --- |
| 2014 | 44,809 |
| 2015 | 43,584 |
| 2016 | 41,819 |
| 2017 | 40,219 |
| 2018 | 37,468 |
| 2019 | 34,817 |
| 2020 | 31,652 |
| 2021 | 29,842 |
| 2022 | 27,932 |
| 2023 | 26,290 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-15 · Sources: https://modern-mba.com/case/milk#sources

### Subsidies are awarded on size, not need

US farm subsidies awarded in billions of dollars, 1995 to 2023. The bottom 80% of farms split $40 billion between them.

|  | US dollars |
| --- | --- |
| Top 1% of farms | $101B |
| Top 5% of farms | $231B |
| Top 10% of farms | $296B |
| Top 20% of farms | $347B |
| Bottom 80% of farms | $40B |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-16 · Sources: https://modern-mba.com/case/milk#sources

### Without subsidies, milk loses money

Average profit per hundredweight sold, excluding subsidies, 2024. Cotton and peanuts are worse. Rice and soybeans are the exceptions.

|  | US dollars |
| --- | --- |
| Rice | $247 |
| Soybeans | $39 |
| Corn | $12 |
| Milk | −$4 |
| Wheat | −$76 |
| Oats | −$139 |
| Peanuts | −$193 |
| Cotton | −$243 |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-17 · Sources: https://modern-mba.com/case/milk#sources

### Dean Foods proved scale works, right up until it did not

Margins at the largest milk processor in America through the 2000s. Consolidation delivered exactly what it promised.

|  | Percentages |
| --- | --- |
| 2002 | 26% |
| 2003 | 26% |
| 2004 | 24% |
| 2005 | 25% |
| 2006 | 25% |
| 2007 | 27% |
| 2008 | 23% |
| 2009 | 28% |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-18 · Sources: https://modern-mba.com/case/milk#sources

### The biggest processor in the country went bankrupt

Dean Foods revenue and operating income in billions of dollars, to the 2019 filing. It owned Horizon, TruMoo, DairyPure, and Land O'Lakes milk.

|  | Revenue | Operating income |
| --- | --- | --- |
| 2009 | $11.0B | $0.6B |
| 2010 | $10.8B | $0.3B |
| 2011 | $9.7B | −$2.0B |
| 2012 | $9.3B | $0.3B |
| 2013 | $9.0B | $0.1B |
| 2014 | $9.5B | $0.1B |
| 2015 | $8.1B | $0.1B |
| 2016 | $7.7B | $0.3B |
| 2017 | $8.0B | $0.1B |
| 2018 | $7.8B | −$0.3B |
| 2019 | $7.3B | −$0.4B |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-19 · Sources: https://modern-mba.com/case/milk#sources

### The winners are conglomerates and farmer co-ops

Highest-grossing dairy companies in the world, 2023, in billions of dollars. Three of these are owned by the farmers themselves.

|  | US dollars |
| --- | --- |
| Dairy Farmers of America | $25B |
| Land O'Lakes | $19B |
| Saputo | $11B |
| Nestlé | $11B |
| Lactalis | $10B |
| Danone | $7B |
| Prairie Farms | $4B |

Source: Modern MBA, “Why the dairy industry is failing”, aired February 2025. Chart: https://modern-mba.com/case/milk#chart-20 · Sources: https://modern-mba.com/case/milk#sources


## Takeaways

1. The plant-based bubble inflated and burst in five years. **Oatly** went from a **$0.2 billion** valuation in 2019 to **$10.0 billion** in 2021 and back to **$0.4 billion**; **Beyond Meat** went **$2.0B**, **$7.0B**, **$1.4B**; **Impossible Foods** went **$5B**, **$8B**, **$4B**. Nothing about the products changed. The story did.
2. **Oatly** shares have gone one direction since the IPO: **$24.46**, **$7.96**, **$3.46**, **$1.74**, **$2.05**, **$1.18**, **$0.94**, **$0.66**. At that equity value the company cannot raise another war chest except through debt, which is why the strategy is now cost-cutting rather than growth.
3. Nobody in the category makes money. Operating margins ran **−14%** and **−13%** for **Oatly** and **Beyond Meat** in 2020 and **−49%** and **−97%** by 2023. **The Very Good Butchers** posted **−256%**, **−420%**, **−264%**, and **−313%**. **Meatless Farm** posted **−208%** and **−183%** before it stopped reporting.
4. The vegan tax is real. Cow milk averages **$4.10** a gallon nationwide against **$6.56** for almond and **$6.97** for oat; ground beef runs **$5.35** a pound against **$6.70** for **Beyond Meat** and **$9.32** for **Impossible**. Every plant-based brand is priced against a floor it cannot reach.
5. **Oatly** grew revenue **$30M**, **$39M**, **$43M**, **$58M**, **$118M**, **$206M**, **$421M**, **$643M**, **$722M**, **$783M** — and operating income went **$1M**, **$0M**, **$0M**, **−$1M**, **−$10M**, **−$31M**, **−$47M**, **−$207M**, **−$352M**, **−$344M**. The losses arrived exactly when the factories did.
6. Selling out of every drop was never the problem. **Retail** was **65%**, **64%**, and **65%** of sales across 2021 to 2023 — people were buying it by the box, not by the splash at a coffee shop — and the company still lost money on all of it.
7. Milk is structurally a worse business than every other drink. Global dairy companies run **35%** gross and **10%** operating margins against **47%** and **25%** for the non-dairy beverage giants, and **6%** net against **12%**. Milk is perishable, refrigerated, and essential. Soda, energy drinks, and alcohol are shelf-stable and optional.
8. **Oatly** was worse than both. Against dairy's **35%** gross and **10%** operating and non-dairy's **47%** and **25%**, Oatly posted **19%** gross and **−44%** operating — while making its product from oats, water, oil, and enzymes rather than from cows.
9. And that 19% was flattered. **Oatly** excluded customer distribution from cost of sales, breaking beverage convention. Add it back and reported gross margins of **24%**, **11%**, and **19%** become **16.4%**, **2.6%**, and **12.8%**.
10. Marketing is the other hole. **Oatly's** SG&A ran **40%**, **55%**, **52%**, and **53%** of revenue against **27%** for global dairy and **26%** for non-dairy. When Oatly was the only oat milk it advertised the category; once **PepsiCo**, **Coca-Cola**, and **Nestlé** shipped their own, it had to advertise itself as the expensive one.
11. Consumers do not reward milk with price. The nationwide average went **$3.23** a gallon in 2004 to **$4.10** in 2024 — roughly flat in real terms — while chicken went **$1.03** to **$2.06**. Retailers price milk as a loss leader and put it at the back of the store, because it is the only product guaranteed to pull a household in multiple times a week.
12. Meanwhile Americans keep drinking less of it. Per capita consumption has fallen every decade since the school-milk mandates: **335** pounds in 1950, **275**, **235**, **215**, **181**, **169**, **158**, **145**, **130** by 2022. A century of federal advertising, Got Milk, and fast-food cheese partnerships did not reverse a single decade.
13. Production went the other way. The US made **201 billion** pounds of milk in 2013 and **226 billion** in 2022, a record, into falling demand — because subsidies reward volume. When prices rise farmers milk more cows to earn more, and when prices fall they milk more cows to cover the shortfall.
14. So the farms disappear instead. The country went from **44,809** dairy farms in 2014 to **26,290** in 2023 — nearly half gone in a decade — while output hit records, as family operations were replaced by corporate herds that processors prefer because it is one pickup instead of ten.
15. Subsidies do not save the small farm; they are awarded on acreage and production. From 1995 to 2023 the top 1% of farms took **$101B**, the top 5% **$231B**, the top 10% **$296B**, and the top 20% **$347B**, against **$40B** for the remaining 80%. Dairy is only the fifth most subsidized commodity at **$8B**, behind corn at **$48B**.
16. **Dean Foods** is the whole argument in one company. The largest milk processor in America ran margins of **28%** in 2009 and rode them down to **20%** by 2019 as retailers used private-label milk as a loss leader, with revenue falling **$11.0B** to **$7.3B** and losses at the end. It owned **Horizon**, **TruMoo**, **DairyPure**, and **Land O'Lakes** milk, and it went bankrupt anyway — which is what happens to a processor when the subsidy stops at the farm gate.

## Common questions

### Why did Oatly fail?

Over-expansion into a ceiling. Oatly committed roughly half a billion dollars a year to building its own factories on five continents on the assumption that 20–30% annual growth would continue, then growth fell to low single digits by 2023. It also excluded distribution costs from cost of sales, which inflated its reported gross margin — add them back and 2022 gross margin was 2.6% rather than 11%. Sales and marketing ran 40–55% of revenue because once PepsiCo, Coca-Cola, and Nestlé shipped their own oat milks, Oatly had to justify being the most expensive brand in a commoditized category. Operating losses went from $47 million in 2020 to $207 million, $352 million, and $344 million, and the shares fell from $24.46 to $0.66.

### Is it true that plant-based milk is unfairly disadvantaged by subsidies?

Partly. Cow milk is propped up by school-lunch mandates, minimum price supports, the Milk Income Loss Contract, Dairy Margin Coverage, and taxpayer-funded promotion through Dairy Management Inc. Oat milk gets none of that, which is why it can only ever be a premium and never the floor. But the subsidies flow to farmers, not processors, and they are awarded on acreage and production — the top 20% of farms collected $347 billion from 1995 to 2023 against $40 billion for the other 80%. Oatly buys oats, oil, and enzymes and processes them, which makes it a processor. Handing it every dairy subsidy would not change the economics of the position it occupies.

### Why is milk such a bad business?

Because its price is political rather than economic. Consumers watch the price of milk more closely than bread, eggs, or meat, so supermarkets sell it at or below cost as a loss leader and place it at the back of the store. Politicians need it cheap, retailers need it cheap, and the pressure lands on farmers and processors. Milk is also perishable and needs refrigeration, so it has to move fast, and cows produce year-round rather than on a harvest cycle, so supply cannot be throttled. Excluding subsidies, the average American dairy farm has been profitable in only 3 of the last 23 years.

### What happened to Dean Foods?

It bet on consolidation and got commoditized. As the largest dairy processor in the US it expected scale to deliver a cost advantage no rival could match, and through the 2000s it ran the best margins in the industry. Then the Great Recession made retailers desperate for foot traffic, and they found it in private-label milk sold at a loss. The gap between Dean's branded milk and store-brand milk widened every year while Dean still had to pay farmers the government-set floor price. Revenue fell from $11.0 billion in 2009 to $7.3 billion in 2019 and margins fell from 28% to 20%. Horizon, TruMoo, DairyPure, and Land O'Lakes were not enough, and the company filed for bankruptcy in 2019.

### Who actually makes money in milk?

Conglomerates and farmer co-ops. The largest dairy companies in the world are Dairy Farmers of America at $25 billion, Land O'Lakes at $19 billion, Saputo and Nestlé at $11 billion each, Lactalis at $10 billion, Danone at $7 billion, and Prairie Farms at $4 billion — and three of those are co-ops owned by the farmers themselves, whose economics rest on collecting subsidies rather than on selling another gallon. For everyone else, a milk brand only works as one line in a large processed-food portfolio, carried for shelf coverage rather than for profit. That is why Silk ended up inside Danone.

### Did Silk do any better than Oatly?

Slightly, and it still could not command a premium. As the first nationwide soy, almond, and cashew milk brand, Silk grew revenue from $1,821 million in 2010 to $4,198 million in 2016 at operating margins of 6.9%, 8.7%, 7.9%, 6.2%, 7.8%, 8.6%, and 9.6% — better than Oatly ever managed, but below the dairy companies it competed with, and this was during a period when retailers were too busy fighting over private-label cow milk to bother with plant-based store brands. Danone acquired Silk in 2016 and it stopped reporting separately.

## Discussion

- The vegan defense is that cow milk is subsidized everywhere and oat milk is not, so plant-based brands must build demand, build supply, and match an artificially cheap price at once. The first half is true; the case says the conclusion is wrong. Where exactly does the argument break?
- Oatly grew revenue from $30 million to $783 million while operating income went from $1 million to a $344 million loss. What kind of growth is worth having, and how would you have known the difference at $200 million?
- It committed half a billion dollars a year to owning factories on every continent on the assumption that 20–30% growth would hold. When is vertical integration the right call, and what should trigger you to stop?
- Subsidy makes the incumbent product artificially cheap. If you cannot change the policy, what are your actual options as a challenger?
- You are running Oatly in its best year. What do you do differently, knowing what the growth assumption is about to do?

## Sources

Oatly revenue, operating income, SG&A, gross margin, and channel mix from Oatly Group AB 20-F filings and quarterly reports; share price from Nasdaq closing data; Beyond Meat, Very Good Butchers, and Meatless Farm margins from company filings; Dean Foods and Silk figures from Dean Foods Company 10-K filings through 2019; per-capita consumption, milk production, farm counts, price per hundredweight, and profit per hundredweight from USDA; subsidy totals by crop, program, and farm decile from the Environmental Working Group farm subsidy database, 1995–2023; retail prices via the Bureau of Labor Statistics; global dairy and non-dairy beverage margins are trailing-twelve-month composites of the public companies shown

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/milk](https://modern-mba.com/case/milk), or watch the episode at https://www.youtube.com/watch?v=gtxNdoIg4g0.