Market Failure or Slow Transition? Lessons in Cottage Cheese
Since 2019, the public health and food innovation spaces have focused on increasing protein consumption. We can pinpoint some of this obsession to the rise in GLP-1 medication use, but health skepticism and meat affordability have played their roles in many of the high protein trends we see today. On one hand, our food industry opting into fads signals trend chasing rather than sustainable product development; on the other hand, increased attention to protein has created a marketplace opportunity, positioning dairy as a cheaper alternative to conventional meat. It is worth briefly mentioning that plant-based and protein labels tend to act as “health halos”, with consumers choosing products without truly comparing competitors because we are convinced those labels make something healthier. Despite the naivety, that thinking is starting to have long term implications for the consumption of Canadian dairy – a high protein, nutritionally advantageous addition to diets.
For the past seven years, Health Canada has been advertising the nutritional role certain dairy products can play in meeting daily dietary requirements. Among them, cottage cheese has excelled in popularity due to its protein density, mineral properties, satiety, and meal versatility, with the former two benefits partially informed by milk properties.
Cottage cheese is not the only product seeing growth due to our hyper fixation on increasing protein consumption; 2025 saw a nearly 19% increase in Greek yoghurt demand from the year before. In response to demand trends, Agropur (Canada’s largest dairy co-operative), Gay Lea (Canada’s second largest dairy co-operative), and Lactalis (French parent company but major Canadian dairy player), have announced production expansions to their production lines, specifying the Canadian demand for cottage cheese. Along with Saputo (Canada’s largest dairy processor), these companies represent Canada amongst North America’s preferred cottage cheese brands. However, changing dynamics in Canadian dairy production have shifted the supply and demand reliability for our markets.
All dairy processing, from cheese manufacture to processing milk into cartons, runs very close to capacity. It is the predictability of production and supply chain operation that allows for processing consistency, although each product responds to supply shocks differently. Fluid milk has a consistent supply and can therefore absorb shocks more easily, allowing for very little disruption in what we see in the dairy aisle; cottage cheese supplies in batches, typically every two to three weeks at a time, meaning supply shortages can be obvious to consumers depending on the severity.
In October 2025, labour disputes at an Agropur processing facility in Amqui, Québec resulted in cottage cheese shortages across eastern Canada as production stopped. While processing eventually continued at that facility, when Canadians faced empty cottage cheese shelves beginning April 2026, the cause came from the demand side. The biweekly method of supply could not keep up with how much consumers sought cottage cheese to meet protein goals. These supply bottlenecks are not a unique development for 2026, but improving the situation is not as simple as “increase cottage cheese production.” High protein processed dairy tends to be yield inefficient, meaning more fluid milk is used to make the product than the weight equivalent of the final good; Greek yoghurt, to clarify, requires six times the amount of milk as traditional yoghurt in order to achieve its protein content.
Primarily, the shortages seen across Canada have not been widespread. No brand has been singled out, either, implying somewhat of a willingness for consumers to substitute between cottage cheese sources or, potentially, between high protein dairy sources. However, the long-term threats of production constraints could start affecting an already consolidated dairy manufacturing environment, as is the fear with whey protein (which is facing similar demand-supply outpacing), with larger cottage cheese contracts becoming preferred business and smaller processors eventually forced to drop production lines. Therefore, if domestic processing becomes insufficient to meet demand, what other options exist to increase (dairy) protein availability?
Supply management is often incorrectly identified as a barrier to solution in shortages such as these. What needs to be understood is that the cottage cheese shortages we are experiencing in Canada do not come from supply-side shocks or breakdowns. At the beginning of the noticeable shortages (April 2026), Canada was already importing more dairy products from the United States than it was exporting. Trade negotiation deterioration since then has forced retaliatory tariffs on some previously CUSMA-exempt products, including cottage cheese, making reliance on our larger dairy source to help our scarcity issues more challenging going forward.
In instances of unavailability, neoclassical economics teaches us that consumers will choose the closest available substitute. If your favourite brand is missing, you choose your second favourite brand. If all cottage cheese is missing, you choose the product that can best fit the use you had in mind for your cottage cheese. Sometimes, that’s a plant-based alternative, and certain discussions believe that shortages of high protein dairy products and dairy by-products will force investment and innovation in the plant-based sector such that substitutability becomes slightly easier for consumers. Sometimes, that substitution comes from other high-protein dairy options, which may be able to partially rely on the quality of milk to expand what is available to consumers.
Dairy substitution works only if products are nutritionally and qualitatively comparable. America’s diafiltered milk being used as a cheaper substitute to milk in cheese production, as an example, could not be a viable solution to shortages because Canada’s regulatory system requires a minimum milk content for cheese production that diafiltered doesn’t meet. However, there are options for Canadian dairy farmers to improve the protein content of their own milk operations if allowed the time.
Provincial dairy boards pay farmers for their milk based on individual components (i.e. protein, fat, solids); straying outside of the quality limits can affect the payment a farmer receives and making the management changes necessary for improvement often take time to implement. In 2016, Canadian milk was in a protein surplus as butterfat was the more profitable contribution; in such a short amount of time, protein has become more desirable. Although milk protein yield is a heritable trait in cattle, genetic improvements can take a decade to become consistent herd qualities.
Increasing the protein:fat ratio in milk (i.e. a higher proportion of protein solids than fat solids) is achieved through management decisions, primarily nutritionally. The lactation cycle and milk production are sensitive to changes to diet, including feed availability and seasonal maintenance needs. Alternatively, since the payment received is based on the herd’s pool of milk, a farmer may opt to add another animal to their operation to increase gross protein levels. Regardless, operational decisions are individualistic to the farmer, their farm, and their production/business capabilities. Buying and keeping cows are expensive. So, in April 2026, dairy boards across raised their protein:fat ratio range, incentivizing farmers to increase the amount of protein produced by raising the standard where reduced cheques start.
Hiccups in the dairy supply chain are unfortunately something we will have to accept for the time being. Changes to capacity require updates to processing infrastructure and production lines, which can take years to complete; Gay Lea’s aforementioned cottage cheese expansion, for instance, is not expected to be operational until 2028. There are policy opportunities to explore, but lasting impacts on Canada’s production and processing capacity require longer timelines to realise. This is not unique to Canada, challenging our ability to use trade as a means to make up the difference. While temporarily frustrating, these shortages also provide consumers the chance to be flexible in their purchases and find new delicious high protein favourites while we wait for supply gaps to be remedied.
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