Korean dairy firms turn to OEM production to confront sluggish demand

Inside the Yonsei Dairy factory in Asan. (Yonsei Dairy)

South Korean dairy industry is increasing original equipment manufacturing (OEM) of a diverse range of products to boost sales amid sluggish demand for white milk.

Dairy companies aim to increase revenue by producing private-label (PB) products for large retailers like supermarket chains and by commissioning production for small brands primarily supplying convenience stores.

According to industry sources on Sunday, Yonsei University Milk expanded its sterilized product production facilities in the first quarter, increasing production volume by about 90 percent.

This growth results from OEM production not only of regular milk but also processed milk, soy milk, and beverages. The number of Yonsei University Milk’s clients has grown from 13 last year to 18 this year.

Yonsei Milk produces sterilized products for Seoul Milk, the largest dairy company in Korea, as well as products for Lotte Chilsung and Lara Sweet.

It believes that demand for white milk is sharply decreasing but demand for various dairy products such as low-sugar milk remains steady.

“We have introduced the nation’s first facility capable of producing 40,000 Tetra Pak products per hour,” said a company spokesperson.

Namyang Dairy Products is also focusing on OEM production.

In June, it signed an OEM contract with Shinsegae Food to produce plant-based cheddar-flavored cheese slices for the plant-based alternative food brand You Are What You Eat.

Namyang Dairy is producing processed milk as OEM for convenience stores CU and GS25 and is also producing PB milk for Emart.

Maeil Dairies, known for its strength in organic dairy product production, is contract manufacturing organic dairy products for large supermarkets.

Ildong Foodis is also reported to have established a new sterilization production plant in Chuncheon, Gangwon Province, and plans to expand into OEM in the future.