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Welcome to Dairy 2.0

Dairy innovation is taking a new direction. The last two decades have seen product developers focus on low/no-fat and on attempting to shoehorn into dairy products ingredients such as plant sterols, omega-3s and others, in order to offer medicalised benefits. But this period is over. The new direction is what some companies are calling “Dairy 2.0”, says New Nutrition Business.

This useful new term can be credited to Philipp Siebrecht, group brand manager at Emmi, Switzerland’s biggest dairy group and one of Europe’s more innovative dairy companies.

Dairy 1.0 – the first revolution in dairy products – was a reactive one. It began with an effort to counteract the negative image promoted by health professionals of dairy being a high fat and therefore “unhealthy” category. Recipes were reformulated to make them low- or no-fat. This became an industry standard.

Dairy drinks and spreads then became the carrier of choice for functional ingredients – probiotics, plant sterols, omega-3. It was the added ingredients providing the health benefit, rather than a “whole dairy food” product format.

In Dairy 2.0, the new generation of dairy innovation focuses less on ingredients and “dairy as a carrier” and more on format, usually in the form of companies taking traditional regional dairy products and reinventing them to suit the tastes of different markets, and different consumers. The emphasis is on ingredients and benefits that are a “natural fit” for dairy or are naturally present – such as protein.

We’ve attempted to summarise Dairy 1.0 and Dairy 2.0 in the table on page 3 (which is still a work-in-progress). Examples of Dairy 2.0 in action include:

1. Greek yoghurt. An entrepreneur took an everyday product from Europe and presented it as new and exciting to consumers in the US market under the brand Chobani. The Greek segment has grown to about $1.5-billion (€1.15-billion) in the US or about one-third of the entire yoghurt market, from essentially nothing five years ago. Naturalness, a more satisfying texture than the yoghurt types Americans had been accustomed to, a focus on great flavours and the perceived benefits of a naturally high protein content have all contributed to the Greek success story.

2. Kefir originated in Eurasia, where its digestive health benefits have been known for centuries, and was introduced to Americans by Lifeway Foods, which has created a successful business with $100-million (€77-million) in sales in 2012. It has succeeded thanks to naturalness, a focus on making kefir acceptable to consumers to whom it was a totally unknown concept, using sampling and education and a range of good flavours and convenient formats.

3. Quark, a soft fresh cheese, is commonplace in many parts of northern Europe. In the last 12 months, its all-natural, high-protein, low-fat credentials have produced 100% growth in some markets. But it’s a little-known product in the UK, where the Lake District Cheese Company has launched the UK’s first quark brand. Among a small but growing proportion of weight managers quark has acquired a reputation as an allnatural and naturally healthy dairy food to use in home cooking. Its naturally high protein content gives it a positive image.

4. Skyr is a thick fermented dairy product that is traditional in Iceland. Like Greek yoghurt it’s high in protein and calcium. It has become a hit product in Denmark and other Nordic countries and is also rapidly growing sales in the US. Naturalness, a more satisfying texture than other dairy snacks thanks to its naturally high protein content, a focus on great flavours, the perceived benefits of protein content, using sampling and education to reach consumers are all contributing to skyr’s growth in the new markets in which it can be found.

5. Cottage cheese is another traditional naturally high-protein, low-fat dairy food that some brands are attempting to reinvent. The underlying strategy and marketing principles adopted for the reinvention of cottage cheese are the same as for the product types above.

6. Bubble tea is massively popular with teens in many parts of Asia and in the major cities of Australia and New Zealand. Originating in Taiwan in the 1980s, it consists of a tea base mixed with fruit or milk – and what makes it so appealing to younger drinkers is that it contains chewy balls made of tapioca which are sucked up through a large straw.

Arla Foods has brought the product from Asia to Denmark and – with the help of teenagers – has worked to make this new and unfamiliar product type (in the eyes of the Danish teens) interesting and exciting.

The company has also followed both its own corporate principles of “Closer to Nature” – and the principles of Dairy 2.0 – by re-formulating bubble tea to have only natural ingredients.

This editorial from New Nutrition Business’s magazine was first published in its July 2013 edition.


About New Nutrition Business

Julian MellentinNew Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.

The strategies and success factors it  has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the United States to Australia and from Sweden to South Africa.

New Nutrition Business is headed by executive director Julian Mellentin (right), one of the world’s very few global specialists in the business of food, nutrition and health.

He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace. See www.new-nutrition.com

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