Tennessee Value-Added Dairy: State of the Industry, Consumer Perceptions, and Investment Opportunities

Value-added dairy enterprises (VAD) may increase profits and supplement a dairy farmer’s income. Three studies were developed to assess Tennessee (TN) VAD, describe the VAD product consumer market, and assist current (C) and prospective (P) VAD with decisions before entering or expanding an operation. A 50-question in-person survey was administered to C and P VAD (n = 9 and n = 7, respectively) from June 2020 to September 2021. Surveys results showed that fluid products (n = 17) and cheeses (n = 13) were the most common. Most C and P VAD were financially sound (< 40% debt to asset ratio), with four making a profit, and three not breaking even. Most C VAD income came from farming activities, while most P VAD income came from off-farm. To assess consumer familiarity and attitudes toward purchasing farmstead milk (FSM), a 90-question online consumer survey was distributed through Qualtrics from March to May 2021 to adult Tennessee residents who at least occasionally consumed dairy products and were a primary household food shopper. 817 completed surveys were obtained. Respondent age and local foods purchase frequency impacted FSM familiarity and purchase likelihood. Other impacts were farm background, marriage, locations, gender, and dairy foods budget. Younger respondents with a local foods preference were more likely to be familiar with and purchase FSM. An excel-based decision-making tool to gauge initial investment, processing time, and a profitability timeline for a VAD enterprise was designed and validated using seven scenarios against four equipment options. Scenarios tested change in herd size (69, 462, and 690 cows), average daily production per cow (22, 28, and 33 kg), and herd percentage processed (7, 61, 100%). Nine of 28 options had < 8 hr processing time and ≤ 20 yr profitable timeline. Scenarios with 69 head or 7% of herd used were not profitable. A profitable projected timeline for feasible scenarios was 5.13 ± 2.10 yr and net-present value was $1,964,448 ± 1,128,623. This study provided information about TN VAD enterprises, consumer familiarity and preferences for FSM, and a financial feasibility analysis tool for those entrepreneurs interested in a TN VAD.