Dairy Ingredients Market By Type (Milk Powder, Whey Ingredients, Milk Protein Concentrates, Milk Protein Isolates, and Others), By Source (Milk and Whey), By Application (Bakery & Confectionery, Dairy Products, Convenience Food, and Others), By Region, By Competition Forecast & Opportunities, 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 87.35 Billion
CAGR (2026-2031)	6.22%
Fastest Growing Segment	Milk Powder
Largest Market	Asia Pacific
Market Size (2031)	USD 125.46 Billion

Market Overview

The Global Dairy Ingredients Market will grow from USD 87.35 Billion in 2025 to USD 125.46 Billion by 2031 at a 6.22% CAGR. Dairy ingredients comprise concentrated components derived from milk, including milk powders, whey proteins, lactose, and caseinates, which are utilized to enhance the nutritional profile and functional properties of diverse food and beverage products. The market is primarily driven by the escalating global demand for protein-fortified nutrition, particularly within the infant formula and sports nutrition sectors, alongside the critical role these ingredients play in improving the texture, stability, and shelf-life of processed foods such as bakery and confectionery items. These fundamental drivers ensure sustained industrial application distinct from transient consumer fads.

However, the sector faces a significant challenge regarding supply chain volatility and fluctuating raw milk availability, which can unpredictably impact pricing and delivery timelines for manufacturers. Geopolitical trade tensions and shifting import regulations also pose risks to the consistent movement of these commodities across borders. According to the U.S. Dairy Export Council, in 2024, the total value of United States dairy exports rose 2% to $8.297 billion, illustrating the market's economic resilience despite these ongoing logistical and production constraints.

Key Market Drivers

The expansion of the specialized sports and performance nutrition sector is significantly reshaping the Global Dairy Ingredients Market, as manufacturers increasingly prioritize advanced formulations to meet the needs of athletes and active lifestyle consumers. This sector drives substantial demand for specialized whey protein isolates, hydrolysates, and bioactive components known for their rapid absorption and muscle-recovery benefits. Consequently, major ingredient suppliers are witnessing robust growth in their nutritional divisions, validating the shift from commoditized powders to high-value performance solutions. According to Glanbia plc, February 2025, in the '2024 Full Year Results', Glanbia Nutritionals revenue increased by 14.0% in 2024, a surge largely attributed to strong volume growth within its protein solutions business. This trend underscores the critical role of performance-focused dairy fractions in generating high-value revenue streams for the industry.

Rising global demand for high-protein and functional food formulations further accelerates market development, pushing producers to innovate beyond traditional applications. This driver fuels the production of sophisticated milk protein concentrates (MPCs) and functional caseins utilized in medical nutrition, fortified beverages, and clean-label products. According to Fonterra Co-operative Group, September 2024, in the 'FY24 Annual Results', sales of the company's high-protein milk protein concentrate increased by 26% during the fiscal year, reflecting this intensified appetite for functional wellness ingredients. The overall momentum in the specialized ingredients space is evident across major industry players. According to Arla Foods, in 2025, the company's dedicated ingredients division reported that revenue rose 5.4% to EUR 1,015 million in 2024, confirming the sustained commercial expansion of value-added dairy solutions.

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Key Market Challenges

Supply chain volatility and fluctuating raw milk availability constitute a formidable barrier to the expansion of the global dairy ingredients sector. Manufacturers of concentrated derivatives, such as whey protein and caseinates, rely heavily on a consistent inflow of raw milk to maintain operational efficiency and meet the stringent volume requirements of large-scale infant formula and sports nutrition entities. When raw material input becomes unpredictable due to climatic variances or logistical disruptions, ingredient processors face escalating production costs and an inability to fulfill long-term contracts. This instability forces end-users to hesitate in expanding product lines or to seek alternative non-dairy substitutes to mitigate risk, thereby directly stifling market volume growth.

This impact is particularly acute when major export regions experience production deficits, creating a ripple effect of supply insecurity across the global value chain. According to Dairy Australia, in 2024, the national milk pool is forecast to decline to 8.3 billion liters due to persistent weather and economic constraints. Such fluctuations in primary feedstock availability inevitably lead to price instability for processed ingredients, discouraging the sustained industrial application that is essential for the market's long-term economic development.

Key Market Trends

The adoption of regenerative agriculture and low-carbon ingredient claims is becoming a decisive competitive differentiator, moving beyond corporate responsibility to become a core value proposition for ingredient suppliers. This trend is characterized by the implementation of data-backed farming practices designed to quantify and reduce the carbon intensity per unit of production, directly supporting the Scope 3 decarbonization targets of major food conglomerates. Suppliers are leveraging these verified metrics to secure long-term contracts with sustainability-conscious brands. According to Synlait Milk, September 2024, in the 'Integrated Climate Report 2024', the company reported that Scope 3 on-farm emissions per kilogram of milk solids were 9.2% lower in FY24 compared to the FY20 baseline, demonstrating the tangible commercial and environmental impact of these upstream interventions.

Simultaneously, the commercialization of precision fermentation and animal-free dairy proteins is revolutionizing the availability of high-value bioactives by decoupling production from traditional milk volume constraints. This technological advancement addresses the chronic supply-demand imbalance for specialized proteins, such as lactoferrin, offering a scalable alternative to extraction from bovine sources that is immune to climatic or herd-related disruptions. According to Dairy Business Middle East & Africa, March 2024, in the 'Triplebar, FrieslandCampina Ingredients partner in lactoferrin production through precision fermentation' article, FrieslandCampina Ingredients initiated a strategic partnership to ramp up supply capacities via fermentation to address a global lactoferrin market projected to exceed $1.2 billion by 2030. This shift marks a fundamental transition toward hybrid sourcing models to secure high-margin functional ingredients.

Segmental Insights

The milk powder segment creates the fastest growth trajectory within the global dairy ingredients market due to its extensive application in the infant formula and confectionery industries. Manufacturers increasingly utilize whole and skimmed milk powders for their superior shelf stability and logistical efficiency compared to liquid alternatives. This growth is further supported by rising consumer demand for fortified food products in emerging economies where fresh milk availability remains limited. Adherence to international quality standards established by the Codex Alimentarius Commission facilitates seamless global trade, ensuring that milk powder remains a preferred ingredient for standardized industrial production.

Regional Insights

Asia Pacific holds the leading position in the global dairy ingredients market, supported by extensive consumption across the food and beverage sectors. This dominance is largely attributed to rising disposable incomes and urbanization in China and India, which fuel demand for processed foods and nutritional supplements. The region sees substantial utilization of milk powders and whey proteins, particularly within the bakery and infant formula industries. Additionally, growing health awareness prompts consumers to seek protein-fortified products, encouraging local and international manufacturers to scale operations within this high-growth environment to satisfy regional requirements.

Recent Developments

• In November 2024, Arla Foods Ingredients launched a new whey protein hydrolysate specifically designed for the medical nutrition market. The ingredient, branded as Lacprodan DI-3092, was developed to address the taste challenges typically associated with peptide-based nutritional products while delivering a high protein density. It enables manufacturers to create ready-to-drink and ready-to-mix medical feeds that are both palatable and effective for patients with impaired digestion or absorption. This innovation underscores the company's commitment to advancing the Global Dairy Ingredients Market by providing high-quality protein solutions that improve patient compliance and clinical health outcomes.
• In July 2024, Leprino Foods Company announced a strategic global partnership with Fooditive Group to commercialize non-animal casein produced via precision fermentation. Through this collaboration, the company secured exclusive worldwide rights to manufacture and market this alternative protein for use in cheese applications, as well as non-exclusive rights for other food categories. The partnership aims to deliver a sustainable ingredient that replicates the functionality, texture, and taste of traditional animal-derived casein. This initiative allows the major dairy manufacturer to expand its portfolio with innovative, environmentally friendly solutions that cater to evolving consumer preferences for sustainable food products.
• In July 2024, Fonterra formed a collaborative partnership with Nourish Ingredients to accelerate the development of dairy products incorporating fermentation-derived fats. This joint venture combines the co-operative's extensive dairy manufacturing expertise with the partner's scientific capabilities in creating animal-like fats through precision fermentation. The collaboration focuses on exploring applications across categories such as cheese, cream, and butter, utilizing specialty fat ingredients to enhance taste and mouthfeel. This move aligns with the company's strategy to leverage science-led innovation to meet the growing global demand for sustainable and texturally appealing nutritional solutions in the Global Dairy Ingredients Market.
• In April 2024, FrieslandCampina Ingredients introduced a new range of microencapsulated algae-based Omega-3 powders, known as Biotis DHA Flex Powders. These ingredients were engineered to facilitate the creation of high-quality food, beverage, and supplement products with plant-based DHA, specifically catering to the vegan and vegetarian segments. The advanced microencapsulation technology ensures superior sensory properties and stability, effectively addressing common formulation challenges such as oxidation and off-flavors. This product launch highlights the company's focus on expanding its functional portfolio within the Global Dairy Ingredients Market to meet consumer demand for sustainable ingredients that support brain, eye, and immune health.

Key Market Players

• Arla Foods amba
• Dairy Farmers of America
• Sodiaal Co-operative Group
• Fonterra Co-Operative Group Limited
• Royal Friesland Campina
• Kerry Group PLC
• Kanegrade Ltd
• Volac International Ltd
• Hoogwegt International BV
• Saputo Inc.

By Type	By Source	By Application	By Region
Milk Powder Whey Ingredients Milk Protein Concentrates Milk Protein Isolates Others	Milk and Whey	Bakery & Confectionery Dairy Products Convenience Food Others	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Dairy Ingredients Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Dairy Ingredients Market, By Type:

• Milk Powder
• Whey Ingredients
• Milk Protein Concentrates
• Milk Protein Isolates
• Others

• Dairy Ingredients Market, By Source:

• Milk and Whey

• Dairy Ingredients Market, By Application:

• Bakery & Confectionery
• Dairy Products
• Convenience Food
• Others

• Dairy Ingredients Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE