In an annual report released recently, dairy group National Foods has warned that, "the current retail milk pricing is unsustainable in the longer term given the dairy industry's costs." Aggressive discounting by supermarket retailers has placed huge pressure on the company, and forced a series of cost savings. "We have initiated a program to further reduce the company's operating overhead costs, as well as our milk input costs by working closely with our suppliers," the report continued.The dairy industry in Australia has recently been de-regulated and according to National Foods this means that, "one thing is clear… industry consolidation will occur sooner rather than later." It also means that for the coming year, the company will focus primarily on attempts to consolidate its manufacturing operations. National Foods has, however, also expressed its intention to bid for market leadership through product innovation.