Walmart's new Georgia Milk Plant Will Change Dairy in the Southeast.

Walmart built a fluid milk processing plant in Fort Wayne, Indiana in 2018 to produce their "Great Value" fluid milk for the Walmart stores and "Member's Mark" fluid milk for Sam's Club.  The new plant provided significant capacity and low-cost production.  The raw milk is delivered to the plant from nearby large producers.  The finished product is delivered by Walmart's own fleet of trucks.  It also brought bankruptcy to two milk processors that depended on the volume of Walmart's "Great Value" and "Member's Mark" private labels.

Construction of another new fluid milk plant was recently announced.  It will be built in the south of Georgia, roughly 15 miles from the Florida border.   It will service the southeast Walmart and Sam's Club facilities.

The finished "Great Value" and "Member's Mark" milk will be primarily delivered in Florida, Georgia, Alabama, and South Carolina.  The Southeast and Florida Federal Orders are more than 80% fluid milk, so this new plant will have a major impact on milk producers in Florida and Georgia.

Why did Walmart choose this area?  There is a large population base in the area, and the southeast dairy milk processing is largely fluid milk. Florida is a difficult market to service due to its long distance from top to bottom with major cities in the far south.  Population data for the four southeast states is shown in Table I.  The four states in the southeast make up 15% of the U.S. population.  Combined, the yearly population growth rate in these four states is 1.3% compared to the entire U.S. growth rate of just .5%.

Per capita consumption of fluid milk is decreasing by about 2% annually.  The population increase in the southeast states will largely off set the decrease in per capita consumption, keeping the total demand in this area nearly constant.

Table I - Population Growth in the Southeast

Walmart's profile shows that they like a limited number of suppliers that are close to their plant, lowering transportation costs to get the raw milk to the plant.  Because the border to Florida is so close, some producers may be located in Florida, but because the milk is shipped (marketed) in Georgia, it would be included included in the Southeast Federal Order volumes, not the Florida Federal Order.

Currently there is limited fluid milk production in this area which the new plant will cure, but it will still result in the closing of existing processing plants.  That will lower the already declining milk production in the Florida Federal Order.

Chart I below shows the milk production in Georgia and Florida.  Florida has been declining while Georgia has been increasing.  With the new plant, this trend will accelerate.  

Chart I - Milk production in Georgia and Florida

Additional increases in productivity will result from an increase in milk per cow.  Florida herds have the lowest milk productivity of any major milk producing state.  The herds that will surround the new Walmart plant will be large.

Chart II - Milk per Cow

Where might the next Walmart fluid milk processing plant go?  Table II below lists the population of the four largest states.  Another new fluid milk plant could go to or near to these states.

California certainly has the population, but their growth rate is negative, and the state is primarily a cheese producing state.  

Texas is the second largest state in the U.S. and has a population growth rate of 1.6%, but they are also primarily a cheese producing state.

New York is losing population but does have a strong fluid milk business.

Table II - Population in the Four Largest States

Walmart is the largest grocery provider in the U.S.  When they make a supply change, it changes everything!