Surging demand for dairy fats is tightening supply of cream

(Bloomberg) — Americans would like another scoop of ice cream.

Surging demand for dairy fats is tightening supply of the cream used to make the frozen treat, as well as butter. That’s boosting costs during the peak summer season. After decades of eating less ice cream, U.S. consumers are no longer shying away from higher-fat dairy products, pushing wholesale prices up even as the cost of skim milk declines.

“Americans are finally falling in love with dairy fat again,” said Ted Galloway, vice president at Galloway Co., a producer of frozen dairy mixes in Neenah, Wis., that is seeing double-digit volume growth this year. The company is the largest U.S. producer of sweetened condensed milk.

While some ice cream makers are seeing profit margins erode on higher costs, improved demand for cones and cups is driving growth for retailers like Baskin-Robbins, which runs the biggest franchise of ice cream shops.

Chocolate Shoppe Ice Cream, with four stores and a manufacturing plant in Madison, Wis., will see sales volume jump as much as 20 percent this year to a record, even after boosting prices to its wholesale customers by 10 percent, said CEO Dave Deadman.

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