SIC 2023

This classification covers establishments primarily engaged in manufacturing dry, condensed, and evaporated dairy products. Included in this industry are establishments primarily engaged in manufacturing mixes for the preparation of frozen ice cream and ice milk and dairy and nondairy base cream substitutes and dietary supplements.

NAICS Code(s)

311514 (Dry, Condensed, and Evaporated Dairy Product Manufacturing)

Industry Snapshot

The dry, condensed, and evaporated dairy products sector of the highly regionalized dairy industry embraces both small family operations and multinational giants, reporting sales in the billions of dollars. The spectrum of products produced by this industry is just as broad, ranging from retail staples like canned, evaporated milks, which have been familiar on market shelves for more than a century, to sophisticated milk protein ingredients that are constantly being refined in research laboratories for new food uses. With products as comforting as mother's milk and as baffling to consumers as the sodium caseinates that appear on the labels of the latest sports drinks, it was a $9.6 billion industry by the 2000s.

Organization and Structure

From World War II, a dwindling number of dairy farms have supplied the raw milk from which dry, condensed, and evaporated milk products are processed, but the farms have become much larger. Huge dairy farm cooperatives combined with operations that processed the raw milk to produce branded consumer products and milk ingredients marketed to food and animal feed processors. Darigold Inc. was the largest Pacific Northwest cooperative in the early 1990s.

The small companies that had pioneered condensed and evaporated milk technology and production in the nineteenth century were still in business more than 100 years later, producing the same products with which they had started out—and many, many others. Borden, Inc. and Pet, Inc. had grown into diversified giants ranked in the top 50 food companies nationwide. Pharmaceutical companies also reached into this dairy food category with their infant formulas. There was always room, though, for smaller companies, often specializing in milk ingredients like whey proteins and ice cream/yogurt/milkshake mixes.

Background and Development

Removal of all or part of the water from milk not only reduces transportation costs and makes handling easier, but it also allows unrefrigerated storage of sterilized or dried products for prolonged periods. Such products may be intended for consumer use or as ingredients in diverse processed foods.

The Federal Drug & Cosmetic Act has established Standards of Identity (SID) for milk products which define what can be packaged under a given product name. The Food and Drug Administration (FDA) designates food ingredients to be generally recognized as safe (GRAS) when extensive past use has not shown any harmful effects.

Dry Milk. Marco Polo, it is said, encountered sun-dried milk in his travels through Mongolia in the thirteenth century. It remained for later scientists to develop commercial production processes. An early patent for a commercial process to manufacture dried milk was granted in 1855. Technological advances since then have enabled a wide variety of manufactured milk products with applications in frozen dairy desserts, ice cream, frozen soft and hard yogurt, bakery goods, confectionery products, dry mixes, soups, animal feeds, and countless other nutritional and functional uses.

Nonfat dry milk (NDM) results when both fat and water are removed from milk. Lactose (milk sugar), milk proteins, and milk minerals are present in the same relative proportions as in fresh milk. Moisture is not more than 5 percent by weight, and fat content is not more than 1.5 percent by weight unless otherwise indicated. In the 1990s, nearly a billion pounds of NDM were being produced every year.

Dry whole milk results from the removal of water from milk. It contains not less than 26 percent milk fat and not more than 4 percent moisture. Dry buttermilk is made by removing the water from buttermilk derived from butter manufacture. It has not less than 4.5 percent milk fat content and not more than 5 percent moisture.

Milk Proteins. Derived through various processing steps from skim milk, milk proteins are used as ingredients in a wide range of food products both for their nutritional value and for their functionality. Casein, milk's principal protein, has been commercially isolated from skim milk since 1900. There are two basic types, depending on the coagulating agent used to precipitate the casein from the milk: lactic (acid) casein and rennet casein. Most acid caseins intended for food applications were converted to caseinates by dissolving the acid casein curd with water and dilute alkali and then drying the solution. Sodium caseinate is generally recognized as safe (GRAS).

Casein has a higher Protein Efficiency Ratio (PER) than vegetable proteins. Under the Code of Federal Regulations, "if the protein efficiency ratio of protein is equal to or better than that of casein, the U.S. Recommended Daily Allowance (RDA) is 45 grams." However, if the PER is lower than that of casein (2.5), then 65 grams of protein are required to meet the U.S. RDA. Because of its high protein quality and content, low lactose, and bland flavor, casein is used in nutritional supplements. Nutritional foods commonly formulated with casein include high-protein beverage powders, fortified cereals, infant formulas, and nutrition bars. Products incorporating casein for its functional properties of imparting texture, viscosity, emulsification, and opacity included coffee creamers, soups, sauces, ice cream, whipped toppings, yogurt, and salad dressings.

Whey seemed to have been the "forgotten" milk protein until April 1971, when representatives of 56 firms gathered to consider the potential of these milk solids that remain after cheese manufacture. Warren S. Clark, Jr., executive director of the American Dairy Products Institute, wrote in the Encyclopedia of Food Science and Technology, "In no area of the modern dairy industry have changes of a technical nature been as innovative and rapid as in the whey products segment." The Food and Drug Administration affirmed the safety of whey products and their manufacture in 1984 with a declaration of common and usual names for diverse whey products ("Whey," "Reduced Minerals Whey," and "Whey Protein Concentrate") and by granting them GRAS status.

Evaporated Milk. When Gail Borden returned to the United States from England in 1851, it was on a ship that had to carry cows to provide milk for the immigrant children on board. There was no way to carry fresh milk on a long sea voyage without it spoiling. Five years later, in 1856, Borden was granted patents in the United States and England for the preservation of milk after it had been evaporated in a vacuum. The method used no added sugar, but sweetened condensed milk was to be Borden's first commercial product in 1861.

Thirty years later, the Helvetia Milk Condensing Company began production of the world's first unsweetened evaporated milk in 1885, calling it Highland Evaporated Cream after the plant's home in Highland, Illinois. The company was later to change its name to Pet, Inc.

Evaporated milk is a canned whole milk concentrate with a specified quantity of added vitamin D. Vitamin A may also be added. Related products are evaporated skimmed milk, evaporated low fat milk, evaporated filled milk, and evaporated goat milk.

Dairy and Non-Dairy Creamers. Health-conscious consumers in the 1990s regarded non-dairy creamers as cholesterol free and, therefore, better for you than milk-based products. Nestle's Carnation, which introduced Coffee-Mate in 1961, added Coffee-Mate Lite in 1989 and again extended this top-selling non-dairy creamer line in 1992 with Hazelnut, Irish Creme, and Amaretto flavored powders. Pet, Inc. also marketed a non-dairy creamer.

Infant Formulas. Infant formulas that approximate human milk are fed to infants all over the world, sometimes as their sole source of nutrients during the first months of life. Such products were unknown until the twentieth century, when they became a reliable alternative to breast-feeding. In the London of the early 1800s, only about 10 percent of infants not breast-fed lived past their first birthdays.

In the United States, the Infant Formula Act of 1980 and its 1986 amendments very specifically govern the manufacture of commercial infant formulas. The Act authorized the FDA to implement quality control regulations and recall procedures, labeling and nutrient requirements, and requirements for exempt infant formulas. Additionally, infant formulas must satisfy Federal Food, Drug and Cosmetic Act regulations dealing with foods for special dietary use, good manufacturing practices, and canned foods (for liquid infant formulas only).

The stringent regulations governing infant formulas have included setting maximum levels for 29 nutrients and minimum levels for 10. Labels were required to include a nutrient declaration; "use by" date information; a statement such as "use as directed by a physician"; a warning statement of the consequences of improper preparation; preparation and use directions that included pictograms if appropriate; and more. All of these requirements had long been standard practices of its member manufacturers, according to the Infant Formula Council.

Infant formulas were a $1.9 billion business in the 1990s, presenting their products as the best substitute for mother's milk. Yet, the industry was mired in federal and state price-fixing investigations. Antitrust inquiries were directed at contracts awarded to the three top producers under the Special Supplemental Food Program for Women, Infants and Children (WIC), designed for low-income families. Although federally funded, WIC was administered by the states, which were paying full retail prices for formula because there was no competitive bidding.

In the early 1990s, Abbott Laboratories, which marketed infant formulas through its Ross Laboratories unit, and Bristol-Myers Squibb, whose infant formulas were sold through its Mead Johnson Nutritional Group, shared 85 percent of the market. American Home Products accounted for about 9 percent of the market, selling through Wyeth-Ayerst Laboratories. The other major producers were Nestle's Carnation unit and Gerber, which marketed a Bristol-Myers product.

In June 1992, after a two-year investigation into the three biggest producers, the Federal Trade Commission charged them with price-rigging, contending that they had rigged contracts awarded under the federally-funded Special Supplemental Food Program for Women, Infants and Children. This program accounts for approximately one of every three cans of formula sold. The cost to the government was estimated at $25 million. Mead-Johnson and American Home, while admitting no wrongdoing, agreed to settle. Abbott Laboratories initially planned to fight the charges in federal court. The Wall Street Journal quoted Duane Burnham, Abbott's chairman and chief executive officer: "We have competed responsibly, aggressively, and completely within the law." In May 1993, however, Abbott Laboratories agreed to pay more than $140 million to settle a number of suits filed against the company nationwide and consolidated in Florida to simplify proceedings. The Federal Trade Commission's actions against Abbott remain in place.

Value of shipments in this industry was expected to increase to $8.1 billion in 1997, over 1996 shipments of an estimated $7.9 billion. Value of imports dropped from $345 million in 1989 to $247 million (forecast) in 1993, but increased to $383 million by 1995. Exports jumped from $519 million in 1994 to $583 million in 1995.

In the mid-1990s the dairy industry was witnessing the highest raw milk and milkfat prices in history due to low grain yields, high feed costs, and high demand for dairy products. According to Dairy Foods, despite a subsequent increase in retail dairy prices, however, most dairy categories posted good growth for 1996 as consumers continued to eagerly patronize dairy products.

Dry whole milk production during March 1996 totaled 10.6 million pounds, down 39 percent from 1995. Production of nonfat dry milk during March 1996 was 110 million pounds, down 7 percent from March 1995. Canned milk production during March 1996 totaled 35 million pounds, down 27 percent from March 1995.

Current Conditions

In the late 1990s, 213 establishments participated in this industry. More than 17,800 people were employed in 2000, helping contribute to the $9.60 billion value of shipments. The majority of the value was derived from dry milk products and mixtures, including infant formulas. The second largest sector was dairy product substitutes, followed closely by canned milk products, including condensed and evaporated milk.

Research and Technology

Evaporation and Drying. Water is removed from milk either by evaporation, in which heat is applied under a vacuum, or by drying. Spray drying has been the more widely used method for preparing dried milk products. In this process, the condensed fluid milk is pumped from the vacuum pan while it is still hot and atomized in the heated air of the spray dryer either by the centrifugal force of being discharged from a rapidly turning disk or by being forced through a narrow nozzle. Drying is almost instantaneous.

Roller drying has rarely been used to dry milk for human use. In this process, condensed milk is fed between a pair of heated rollers and adheres to them in a thin film. The dried milk is scraped off by a sharp blade and hammered into uniform, fine particles. In addition to roller and spray drying, these products could be made by foam or freeze drying. It was also possible to make them more readily soluble; such products were called "instantized."

Ultra-High Temperature Processing. Ultra-high temperature processing, which produced liquid soft-serve ice cream and yogurt mixes with a 90-day shelf life, six to nine times that of standard processing, enabled food service distributors in the 1990s to compete with local and regional dairies with a full line of dairy products. Until then, the dairies had a tight hold on this lucrative segment of the dairy industry, selling to giant fast food outlets like McDonald's as well as mom-and-pop stores.

Further Reading

Cremeans, John E., ed. Handbook of North American Industry. Washington: Bernan Press, 1999.

"Dairy Speaks': The Big Picture: Higher Prices, But Higher Demand," Dairy Foods, 15 October 1996.

O'Donnell, Claudia, D. "The Right Mix: At Rich Products, R&D Is Incorporated Into Every Phase of the Business," Prepared Foods, March 1996.

Rice, Judy. "Conquering a Critical Control Point." Prepared Foods, October 1996.

Rickard, Leah. "Price Hikes, Baby Boom Nurture Formula Sales." Advertising Age, 10 April 1995.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from .

United States Census Bureau. "Manufacturing-Industry Series." 1997 Economic Census. Washington, D.C.: GPO, 24 August 1999.

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