Dairy Report: Creativity, Clean Labels Drive Innovation
It’s no secret that plant-based foods and beverages have seen rapid growth over the past few years.
According to Statista, the market for milk alternatives in the United States is valued roughly at $3.1 billion, while other non-dairy products continue to gain traction. Given the staying power of these dairy-alternatives, retailers are looking to strike a balance between traditional dairy and the growing non-dairy category.
For grocers and suppliers alike, the competition has driven newfound innovation in the dairy aisle. At Southeastern Grocers (SEG), officials with the regional grocer said they are committed to offering its shoppers a broad range of options.
“While we have observed a shift towards plant-based milk and other dairy alternatives, preference for these products has stabilized,” said Tracy Aquila, vice president of Dairy & Frozen at SEG. “Customers are still seeking these options, but value is a top consideration. While traditional dairy products still hold a significant market share, the rise of plant-based options has prompted the industry to adapt and innovate within the dairy category.”
SEG has debuted a flurry of private label dairy products in recent months that offer shoppers unique items that differentiate that category.
A newer item, SEG’s Carolina Reaper Cheese, is available in slices and shreds. Last year, the company earned 12 awards at the World Dairy Expo Championship Dairy Product Contest for unique items that include Soft Jalapeño Cream Cheese Spread, Soft Strawberry Cream Cheese Spread and several ice cream flavors such as Banana Foster and Coconut Almond Fudge from its Prestige private brand.
“We approach our private label development with a people-first mentality,” said Aquila. “We regularly introduce limited-time offerings and seasonal items to our line of own brand products. These special offerings help keep our own brand offerings, and the dairy category, fresh and exciting for shoppers and ensures that our private label selection remains dynamic for customers who seek variety and novelty.”
Innovative flavors and flavor concepts are key for differentiating in the dairy category, and a number of up-and-coming flavors have proven to be successful. Per SPINS data, sweet cream, mango and pumpkin/pumpkin spice are emerging in the milk and plant-based milk category while maple and cookie, pastry and cake flavors are exploding in the creams and creamer category. Like other categories, clean-label and better-for-you attributes are growing as consumers become increasingly health-focused, keeping some loyal to dairy.
“What we’re seeing is that value-oriented shoppers and brands are continuing to reshape the flavor experience in dairy by choosing more natural and real-ingredient sources,” Jacob Knepper, senior data analyst with SPINS, said at a recent Dairy Foods webinar on emerging trends.
According to SPINS data, clean-label dairy milk has seen a 7.4% increase in dollar sales growth year-over-year for the 52-week period ended March 26, 2023. In the yogurt category, attributes like no artificial sweeteners (+11.6%), no artificial preservatives (+12.4%) and no artificial flavors (+11.5%) have seen notable dollar sales growth in the past year. Natural, low-calorie sweeteners like coconut sugar and allulose have increased their presence in dairy products during the same period.
At Aldi, discount-minded shoppers are also looking for better-for-you dairy products.
“From our traditional dairy lovers, we’ve recently seen Aldi shoppers reaching for high-protein, low-sugar options in our dairy aisle,” a spokesperson from the retailer told Store Brands. “This preference is driving demand for our multi-pack Greek yogurts, which pack a nutritional punch into a convenient, on-the-go format. Shoppers can feel good grabbing our dairy products knowing they not only taste good but are free from added hormones and rBST.”
While plant-based dairy alternatives have grown, it hasn’t necessarily hurt the demand for dairy overall. According to Circana, for the 52-week period ended April 23, 2023, dairy is still the highest valued edible category. Year-over-year, dairy’s dollar sales have increased 16.8% while unit sales have decreased 3.8%.
Hispanic Cheese Makers, a manufacturer of Mexican, Caribbean and Central American cheeses, has seen increased private label demand, so much so that they have invested in their production capabilities to keep up. The company manufactures cheese such as Queso Cotija, Queso Fresco and more from milk without rBST hormones.
“This demand is driven by not only Hispanic consumers but also by mainstream consumers,” said Mark Braun, CEO of Hispanic Cheese Makers. “Consumers’ appetite for our cheeses is growing as they discover our delicious taste and versatility. The company continues to introduce new products and product variants in the Hispanic cheese category. Some of its most recent introductions include snack-centered Oaxaca bites, Panela with jalapeño and Quesadilla with jalapeño.”
The company recently completed a multi-phase plant expansion, a total investment of $30 million. The project included new loading docks, coolers and storage, major machinery and more.
“A key challenge has been balancing growth and disruption from our recent investments all while meeting customer fill rates,” added Braun.