This week our peers gathered to discuss the latest in the dairy industry at Dairy Forum 2017. The International Dairy Foods Association event brings together farmers, processors, regulators and dairy executives to network and examine industry trends — and there’s a lot to talk about.
Peer Innovation and Consumer Demand
Here on the blog we’ve discussed how market trends and consumer demand can often dictate what manufacturers produce and how they produce it. Examples include the growing gluten-free market and the demand for flavor variety in alcoholic beverages.
But supply and demand is a reciprocal relationship. Dairy manufacturers today must also be aware of peer innovation that drives consumer demand (and competition). Many times outsiders can interrupt a market with a new product or innovation that creates a new demand. It’s happened before and it may be happening again.
How Chobani Shook Up the Yogurt Market
When Chobani first got started, major players in the dairy industry didn’t really bat an eye. In 2005, the company’s founder and CEO Hamdi Ulukaya bought an old Kraft Foods plant in upstate New York. That’s around the time I met him.
Ulukaya was born into a dairy-farming family in a small village in Turkey. He wondered if the style of yogurt he grew up with back home would do well in the American market, and he decided to turn that vision into a reality.
I had the opportunity to visit with Ulukaya at the original Chobani plant and taste the product in those early days in the company’s history. Having worked with a variety of major dairy companies in my career, I knew those big brands weren’t going to sit around and let this newcomer savor every slice of the pie — but that didn’t stop Chobani from becoming a market “interruptor.”
In an industry with juggernauts like Yoplait and Dannon, Chobani quickly made a name for itself with its Greek yogurt, even after those major players followed suit.
The Rise of Kefir, Probiotics and Yogurt Drinks
As much as dairy products seem like a static commodity, the industry is always changing. Probiotic drinks, drinkable yogurt and kefir — a creamy, cultured fermented milk drink — are growing more popular in the U.S. market.
Kefir was among the top searched terms on Google last year, as consumer interest in “functional foods” grows. But are probiotic drinks like kefir the new dairy industry interruptor?
The top executive at Lifeway, a U.S. supplier of kefir and cultured dairy products, says yes. Lifeway CEO Julie Smolyansky is confident that kefir can be “the next biggest food thing” and that it can compete with and even “take over some of the Greek yogurt space.”
Plus, drinkable yogurt options have been steadily taking up more space on grocery store shelves, too, including products from Chobani, Dannon and Yoplait, among others. While these products aren’t exactly brand new, their popularity isn’t slowing. The multimillion-dollar market for yogurt drinks grew 62 percent between 2011 and 2016 — with continued growth expected in 2017.
Millennial consumers are also driving the growth of premium yogurt products. The demand for unique, gourmet flavors — like bhakti chai and blackberry serrano — is helping push brands like Noosa into the top-10 yogurt producers nationwide. Low-fat options are less of a priority as these buyers crave more rich, tasty products made with wholesome ingredients.
Spoonable to drinkable yogurt is just one example of an ongoing trend in the dairy industry, but regardless of your market segment, the moral of the story remains the same: It’s important to listen to your customers and pay attention to market demand, but don’t forget the importance of forward thinking and innovation (big or small) within your own organization. Complacency can be your worst enemy.
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