South Korea shifts dairy industry toward processing amid declining consumption and rising imports

South Korea plans to reduce the volume of raw milk allocated for drinking and increase its use in the production of cheese, butter, milk powder and other processed dairy products. The decision comes amid declining domestic demand for drinking milk and intensifying competition from imported dairy products.

According to the Dairy Promotion Board, the volume of raw milk allocated for drinking in 2027–2028 will decrease by 26 thsd tons, from 1.941 mln to 1.915 mln tons. Meanwhile, the volume of milk allocated for processing will increase by the same amount, from 109 thsd to 135 thsd tons. Dairy farmers and industry representatives reached the agreement after 11 rounds of negotiations.

The changes are driven by declining consumption of drinking milk. In 2025, raw milk utilization in this segment totaled 1.608 mln tons, compared with 1.753 mln tons in 2021, representing a decline of 8.3%. Meanwhile, South Korea’s dairy product imports increased by 14.8% in 2025 to 2.428 mln tons in raw milk equivalent. Cheese and butter imports grew particularly rapidly, rising by 21.9% and 32.9%, respectively.

Despite the shift toward processing, domestic producers face strong competition from imported dairy products. Increasing cheese, butter and milk powder production does not guarantee higher sales if Korean products are less competitive than foreign alternatives in terms of price or product range. Moreover, expanding milk powder production without sufficient demand could lead to inventory accumulation and additional costs for processors.

To adapt to changing market conditions, South Korean dairy companies are expanding their portfolios of value-added products, including fermented milk drinks, desserts, protein products and specialized nutrition. At the same time, companies are developing export markets. However, industry representatives emphasize that stabilizing the dairy market will require combining adjustments to raw milk production volumes with measures to stimulate demand for domestically produced dairy products.

Tags: South Korea, dairy products