22 Feb 2023 — Wellness and sustainability are becoming priorities for consumers, who are increasingly drawn toward dairy or alternative dairy products that claim to be healthier for both the customer and the environment. As the dairy world adapts to these changing needs, FoodIngredientsFirst dives deeper. We talk to key industry specialists about the growing trends, innovations and developments within the dairy solutions space and what the future may hold for dairy producers.
The main challenge the dairy industry faces today is growing competition from plant-based milk alternatives and the increasing consumer outcry against the environmental impact of dairy farming.
“The hardest lesson for the dairy industry to learn over the last few years with the rise of dairy alternatives has likely been the need to adapt and evolve in response to changing consumer preferences and demands,” observes Elodie Macariou, senior product manager at Lactalis.
“A variety of factors, including concerns about the environmental impact of dairy farming, has driven this growing trend toward plant-based alternatives to dairy products.”
With consumer demands in flux, Macariou notes the need for dairy solution providers to adapt to a more modern mindset and the trends driving dairy innovation.
“The dairy industry has had to confront the reality that it must innovate and offer new products to remain competitive.”
Dairy sets stage to compete
Morten Boesen, global cultures and dairy enzymes leader at IFF, highlights the trends the dairy industry must target to compete.
“In terms of the future of the dairy industry, there are four key lifestyle trends that must be considered when looking at new product design, development or innovation,” he explains.
“Firstly, omnipresent health and well-being, meaning consumers want to live a healthier lifestyle. Secondly, planet-first, where consumers make more conscious choices about what they eat, what it contains and where it comes from.”
IFF’s trend analysis highlights indulgence, a growing trend for consumers looking to experiment.
“Thirdly, ‘critical and ethical’: consumers are concerned about how companies behave beyond the products they sell. Finally, ‘experience amplified’, whereby consumers still want products to feel like an indulgence, enabling them to experience new tastes and textures,” he says.
Following the COVID-19 pandemic, consumers are increasingly drawn toward products that boast wellness claims.
“There’s heightened interest in solutions that enable people to adopt an all-encompassing and holistic approach to their overall well-being,” says Boesen.
“Especially after the pandemic, consumers have placed heightened importance on consuming the right nutrition to support overall health. This has resulted in dairy being a product of choice as consumers perceive it as nutritious – in the US, at least 72% of milk consumers believe that dairy positively impacts their health and well-being.”
Macariou agrees, highlighting the link between dairy products and boosting immunity.
“Functional health benefits are still a trend in the dairy space. Immunity is still top of consumers’ minds as COVID-19 has stressed people about getting sick,” says Macariou.
“Many consumers want their diet to strengthen their immune system and immunity claims are still rising in fresh dairy. Dairy products naturally have immune benefits in the milk like high-quality protein or vitamins.”
Charles Purcell, senior manager of application development food ingredients, North America at Univar Solutions, expects more outstanding wellness claims within the dairy solution.
“The specificity of formulating to specific attributes of health – whether it’s brain function or calmness – I think you’ll start seeing more launches of specific, super niche products. They’ll be laser targeted, rather than just in terms of general health,” says Purcell.
Targeted health solutions
Over time, this may trend toward increasingly specific health solutions offered in dairy.
“We expect to see some new additions to the dairy family where functionality will play a large role. This will likely be both with alternative proteins and the increased scientific understanding of the microbiome and personalized nutrition,” notes Lars Dalsgaard, senior VP of product and innovation at Arla Foods.
“When looking at the latest product trends, plant-based alternatives and fortified products targeting functional benefits have also been growing segments.”
Maracriou has noticed a similar potential for targeted nutrition in the dairy solutions space.
“We also see great opportunities in the rise of personalized nutrition,” she says.
“One food or nutrient can not benefit the health of everybody. Numerous innovations can be launched to target specific population groups, from babies and children to seniors who represent a big target with enormous potential.”
Dairy proteins could easily be targeted toward specific consumer groups, notes Maraciou.
“As an example, protein content combined with claims around immunity and healthy aging can be particularly appealing to seniors.”
However, alternative dairy is proving competitive when it comes to health claims. “Globally, improved digestive health is the single most important perceived health benefit of dairy alternatives,” says Candace Smith-Lee, senior scientist of beverages at ofi.
“That’s ahead of naturalness and protein delivery and seems to suggest that people who are lactose intolerant are driving this market. Once health benefits are considered, the next most important factors pushing alt-dairy are taste and texture, followed closely by sustainability.”
As a result of this friction, hybrid diets are beginning to emerge, notes Gert van den Hoven, cheese expert at DSM.
“We’re seeing more and more that consumers are adding plant-based cheese alternatives to their diets but still keeping dairy-based cheeses.”
Consumer demand for functional benefits is pushing innovation within the dairy solution space.
“Functional health claims continue to drive innovation beyond immunity. Dairy can bring added value with other health claims such as digestive or bone health,” says Macariou.
“However, while many countries are going through a period of inflation, dairy products must remain accessible and reassert their role in affordable nutrition.”
On-pack health benefits with specific claims are also proving attractive.
“Consumers are generally especially drawn toward anything with a health benefit or wellness claim on the packaging,” says Purcell.
Boesen has also noticed an increase in on-pack wording spotlighting specific health benefits around immunity, bone, eye, or gut health.
Consumers are proving more adventurous, exploring new flavor combinations and textures, especially within the dairy space.
“As more look for ways to integrate plant-based dairy into their diets, consumer expectation remains high regarding product taste and texture,” says Boesen.
“Ice cream, for example, is a category where consumers are open to experimenting with new flavor combinations. Taste and texture are vital to retaining a feeling of luxury, even in healthier options such as reduced sugar products,” Boesen explains.
Smith-Lee observes similar trends in plant-based dairy becoming a space for consumers to explore increasing desires for indulgent experimentation.
“Dairy alternatives are carving out an identity beyond being just a substitute. Sixty-seven percent of consumers see plant-based dairy as complementary to dairy products and 65% see it as ‘an opportunity to try something new,’” she says.
“This rings particularly true for indulgent applications including ice cream, desserts and cocoa beverages.”
Within this trend, developing extravagant tastes and textures while catering to demands for wellness and sustainability is proving challenging, says Boesen.
“Consumer expectations present dairy manufacturers with an increasingly complex challenge: how do you produce delicious dairy products that are low in sugar and high in fiber while containing a minimal amount of lactose?”
The demand for both wellness and indulgence within dairy is proving a paradox, notes Boesen.
“Topics such as sugar and salt reduction are front of mind, but consumers are unwilling to compromise on the sensory experience.”
Oat holds the lead
Oat milk has proven competitive in this space as the alt-milk vanguard. With its creamy texture and ability to froth, oat milk is well-positioned in taste indulgence while boasting a more significant association with health benefits than its dairy competition.
“Around 2014, when the oat milk industry came over from Sweden to the North American markets, they decided they didn’t want to compete head-to-head in that retail space with traditional dairy,” he continues.
“So they went straight to the specialty coffee shops and introduced their oat milk which had been specially formulated for barista type application applications.”
Purcell notes consumers flocked to oat milk as it offered all the indulgence of milk along with the “healthy halo” of being oat-based.
“That’s how they got their foothold in the North American market. ”
Ease of use provided a draw for producers as well as consumers.
“With oats, you’re doing more of an extraction of the product,” continues Purcell.
“There’s a creaminess and a smoothness that comes along inherently with the product, giving it a nice mouthfeel and texture. It’s easy to work with, as far as beverage formulation goes.”
However, Smith-Lee points out, “While oat milk has been getting a lot of attention lately, it’s almond milk that makes up the majority of sales in the plant-based dairy alternatives category.”
Expanding on this, she notes the difficulties faced by alt-milk in first attracting and then retaining consumers.
“There is still work to be done to perfect plant-based recipes to ensure consumers keep returning for more. ofi’s European research found that 8% of consumers switched back to dairy as they did not like the first plant-based product they tried,” she flags.
“Another key challenge is matching the nutritional profile of traditional dairy milk. Almond milks usually contain about 1g of protein in a standard serving, but consumers want that to be closer to milk’s 8g of protein per 240ml.”
Competition and innovation
This competition between alt-dairy and traditional dairy is driving innovation, generating a thriving start-up ecosystem focused on alt-dairy solutions.
“I’m seeing a lot of start-ups doing things just a little bit differently once they’ve produced their core milk product,” notes Purcell.
“They’re doing interesting things with proteins and alternative oils or fats. There’s a lot of innovation going on in the alternative dairy category.”
Purcell highlights how big players within the dairy industry are keen to enter the alt-dairy space but are worried about damaging their brands.
“I think that you will see some heavy hitters in the brands begin to muscle in and put their stamp on the market, but they’re also cautious. If you’ve got a brand, you certainly don’t want to put a product out there that will hurt your brand.”
Maraciou acknowledges that the dairy solution space must adapt as such to thrive in the future. Transparency may provide the solution, she notes.
“As consumers’ expectations for sustainable products are rising, dairy producers must answer this demand by providing precise figures and the measurement methodology used. As a dairy ingredients company, we must tap into this topic by delivering sustainable dairy ingredients to the food industry,” she flags.
“We must enter into a partnership relationship with our customers to reassure consumers of our corporate social responsibility and share data transparently. The demand for low carbon footprint dairy solutions is expected to rise, as food companies will call upon dairy ingredients suppliers to meet their net-zero goals.”
Dalsgaard feels that even this data may not sway consumer behavior.
“The hardest lesson has been the realization that even with science-based evidence and data, it is difficult for consumers to navigate the environmental impact of food and the nutritional differences between dairy and plant-based alternatives,” he says.
“Consumer choices are driven by many other factors and more by subjective perception.”
Van den Hoven hopes a nostalgic perception of cheese will help maintain its space as a firm favorite of the dairy world.
“While nobody has a crystal ball, I am confident that cheese will always have a place in consumers’ diets,” he says.
“Cheese is tasty, familiar and intrinsically linked to many favorite local dishes that add a welcome sense of nostalgia – essential in uncertain economic times.”
“The next few years can be exciting for the world of dairy as some key step-changing technological opportunities may become scalable,” Dalsgaard says.
“Weclosely follow current dominant consumer needs but still explore different solutions for emerging needs in this ever-changing landscape within which we operate.”
By James Davies
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