Butter sales are surging, cheese sales are growing moderately and Australians are turning away from sweetened yoghurt in favour of unsweetened yoghurt.
But milk sales in supermarkets are flat, up just 0.4 per cent in the year to   March, while the dollar value of milk sales has fallen slightly. 
A major report on the health of the Australian dairy industry, which includes a comprehensive focus on consumer preferences, again confirms the sharp rise of infant formula sales.
Domestic supermarket volume sales of infant formula jumped more than 37 per cent in the year to   January, with the value of sales soaring 45 per cent to $396 million, according to Dairy Australia's latest "Dairy Situation and Outlook" report.
Dairy Australia senior analyst John Droppert said that over the past three survey years volume supermarket sales of butter had grown by 6.4 per cent, 6.3 per cent and 3.6 per cent.
"It has been a surge and the manufacturers are pretty happy with it. It's taken product away from the export market," he said.
"We've spent most of the last couple of years calling it the MasterChef effect."
While dairy spreads continue to surge, with annual supermarket sales of $421 million, the booming infant formula category could soon overtake it.
With annual sales soaring to $396 million infant formula sales had "taken off', Mr Droppert said.
"It's a big success story and it's a big success story for the companies like Bellamy's and like A2 that have got in early and have established a brand and a point of differentiation," he said.
But despite the surging consumer demand for dairy products like infant formula, butter and traditional yoghurt, and more than $2 billion of supermarket milk sales in a year, things seem far from healthy in parts of Australia's dairy industry.
Some dairy farmers in Victoria, Tasmania and South Australia are facing losses of more than $150,000 for the 2015-16 year, based on the sudden cutbacks in milk payments announced recently by some dairy processors, according to Dairy Australia
Dairy Australia warned that "following a challenging dry season, many farmers in southeastern Australia are staring down the barrel of significant financial losses", with some estimating the statewide losses at tens of millions of dollars.
This would include Victorian farmers who could already be facing the following challenges; debt levels of many hundreds of thousands of dollars, crippling water costs in northern Victoria and high costs for feed.
This has led to the lowest confidence levels in years among Victorian dairy farmers, and the outlook for them and South Australian and Tasmanian dairy farmers "looks particularly tough" in the short to medium term, the report said.
Mr Droppert warned that the financial challenges facing farmers would continue in the near term, warning of a "weak" outlook for farm gate milk payments to farmers.
"Recovery in the global market remains unlikely until 2017, which will see cash flow challenges through spring presenting a significant hurdle for many farms," he said.