A New Dawn For Dairy
From protein to pouches, purity to province: the smartest dairy players are taking the trends shaping FMCG 2015, adding milk (or cream, butter, cheese or ice cream) and reaping the rewards.
By doing so they’re adding value, driving growth and staying relevant. The alternative is not attractive: stand still and ignore the transformations taking place in wider society and inevitably you’ll sink, as many have discovered in the past year.
So which trends are shaping the UK dairy? With concepts of healthy eating having been turned on their head and consumers increasingly adventurous, how is the sector responding? Who are genuine game changers?
We’ve spoken to retailers, brands, analysts and farmers to discover what’s making them tick in 2015. So here’s The Grocer’s definitive list of the trends dairy players need to pay attention to now.
Coca Cola’s life of Fairlife ultra-filtered milk in the US last year says it all: with soft drinks a casualty of the global war on sugar, dairy is offering new opportunities for savvy players.
The idea of healthy eating has been transported. Sugar is public enemy; protein is the darling of the day; fat is no longer to be avoided at all costs. Dairy is ideally positioned to take advantage of new attitudes to fat and protein. It’s a huge opportunity.
Changing attitudes towards protein and sugar are already shaping UK dairy, but dairy players mostly remain schtum on fat and continue to develop ‘healthier’ low-fat options. With fat demonised for years, it’s easy to see why, but some say it’s time they woke up and make fat content an asset.
“With the war against sugar ongoing, perceptions of what is healthy are changing to become more accepting of fat and less of sugar,” says Hamish Renton, MD of HRA Marketing. “One would assume skimmed milk is the healthier option, but some recent evidence suggests that full- fat dairy is associated with a lower risk of obesity.”
Indeed, diets rich in butter, cream and full-fat milk (such as dietitian Trudi Deakin’s 83% fat diet) are becoming more popular.
Changing attitudes to fat are also shaping other grocery sectors . July saw the launch of Fat Water, a mix of water and oil nano particles that’s claimed to provide quick energy without sugar or stimulants, and coconut brands have made much of their high ‘good’ fat content.
UK dairy brands might not yet be shouting about fat, but many are making more of the lack of processing required in their products’ production. The removal of fat or production of dairy or lactose-free goods require high levels of processing, while full fat products are increasingly marketed as being more as nature intended.
Many say it will be take a bolder stance on healthy (and fat) to drive real value back into dairy. “There’s confusion about whether dairy or free-from products are healthier,” says Mintel Food & Drink Research Manager Caroline Roux. “Dairy companies should be aware of that.”
It might take a soft drinks company to show them the way, Fairlife is full fat, has 50% more protein but a third of the sugar of standard milk. Crucially it cost twice as much. Coca-Cola global Chief Customer Sandy Douglas has said that Fairlife could be so popular it will “rain money” for the company.
Now that’s the sort of rain UK dairy farmers would welcome.
Brands are getting battered by cut price own label in block butter; spreadable is where the money is for them at present. But there’s another way for brands to retain value in this increasingly commoditised market: artisan, gourmet butter.
With fat no longer viewed as the villain it once was, butter is permissible once again. And a growing number of high-end and niche butters have their sights set on grocers’ chillers.
Senior Buying Manager for dairy at Ocado Kevin Hancock says there’s a growing appetite. “We sell Echire, which is £3 per 250g,” he says. “I took 10% off that [in a recent promotion] and unit sales doubled.”
Echire, a gourmet butter named after the village in Western France where it’s made, is not the only posh butter looking to get on the menu. Isigny Sainte-Mére Unpasturised Sea Salt Butter is stocked by Waitrose and Ocado and Graham’s The Family Dairy has a Gold Top spreadable butter in development. Wyke Farms is currently working on a new sea salt butter for the export market. It will also be sold in some higher-end UK retailers at a price point of around £2.
Bigger brands that cannot demonstrate artisan credentials may struggle to play the artisan card, however. Last September Arla dropped its premium Slow Churned Lurpak and in July The Grocer revealed the Lurpak Cook’s Range had been axed. Cornwall’s Trewithen Dairy is looking to pick up where Lurpak finished, with its Buttery Baking ads and trumpeting its herd of ‘happy , healthy Cornish cows’.
Shove Off Sugar
There’s is no getting away from it; milk is full of sugar. “Milk has sugar from lactose and there’s not much we can do about that,” says Abi Rogers, Category Controller at dairy drinks producer Crediton Dairy. “The added sugars are the problem. In terms of solutions, Stevia is difficult with dairy because you taste it, but we’re working on sugar reduction.”
Solutions are under development. Coca-Cola uses ultra-filtration to remove 30% of the lactose in its premium US milk Fairlife, while Dairy Crest has removed 40% of the added sugar in the Frijj Seriously Strawberry and Choc-a-Chocolate variants in launched in January by adding artificial sweeteners sucralose an AceK, neither of which have the bitter aftertaste linked to Stevia.
Not everyone turning to artificial sweeteners to cut sugar, however. The Collective removed 15% from its yoghurts in 2014 by cutting the amount of sugar in the conserves it uses to flavour its products and upping fruit and juice content, allowing it retain its ‘all natural’ credentials. Other products cutting sugar include Happy Monkey milk drinks, being relaunched this autumn with reduced sugar and fat. This reflects the fact the School Foods Standards sugar limit, which currently stands at 5% added sugar or less, is widely expected to be lowered.
With high-end foodservice fermenting anything it can get its hand on (sourdough, pickles and craft beer, etc) and awareness of gut health gurgling in the background, fermentation has big potential for dairy.
“Fermentation is a process that’s easy to grasp, quite natural and very traditional,” says Mintel’s Caroline Roux. “It’s big in Asia and has always been around in Europe, but now it’s trendy and very big in the US.”
In dairy, kefir is the easiest fermented product to understand. Originating from the Caucasus Mountains, kefir is cow, goat or sheep milk fermented through the addition of a live culture or yeast. It contains 47 strands of good bacteria, whereas yoghurt contains just one or two, and is drunk religiously across Russia and the former Soviet states.
While still small in the UK, sales are multiplying fast. The Bio-tiful range was launched in 2013 and now comprises organic kefir, riazhenka and two kefir-based smoothies. “It’s gone fantastically,” says Kevin Hancock, Senior Buying Manager for dairy at Ocado, which stocks Bio-tiful’s full range. “Sales have trebled since autumn last year.”
American kefir leader Lifeway Foods is working on bringing its drinkable kefir to the UK and increasing its UK presence. At present, its frozen kefir is available in Whole Foods and Harvey Nichols among others.
HRA Associates’ Hamish Renton says success in the UK will rely on convincing branding. “There is a growing market in the UK, and many retailers are stocking at least one kefir product,” he says. “But the target market appears currently to be eastern European and Asian tastes. Considering the number of articles advocating the health benefits of kefir, many consumers will likely be interested in it but could be deterred by branding. To appeal more to the mainstream, packaging needs to be targeted more to UK consumers.”
Snacking Grows Up
Universal free school meals have been a “nightmare” for dairy since they were introduced in England last September, says Ocado’s Kevin Hancock. They might be popular with parents, but it’s taken the big bite out of cheese snacking brands’ sales. So some are turning their attention to adults. “The adult cheese snacking market, worth almost £21m, is experiencing dynamic growth of 7.1% in value and 5.3% in Volume,” says Amy Fisher, Central Shopper Marketing Manager for Dairy Crest. In June, the company extended its Cathedral City Selection range to include a £1 Mini Bag for convenience to tap the trend.
They’re not alone. Bel UK’s The Laughing Cow Mini Cravings, launched in March 2015, includes smoked, Cheddar and blue cheese variants. In April 2015 Mondelez targeted indulgent in-home adult snacking with Philadelphia Deliciously Whipped tubs, which include an olive variant.
Mintel’s Caroline Roux says the US, where brands such as Sargento have launched cheese and nut snack packs, could give further inspiration: “The presence of nuts supports healthy qualities and encourages reappraisal of cheese’s health credentials particularly by educating on protein content.”
The New Pure
Purity is a concept that’s difficult to define but becoming increasingly influential in dairy. Exemplified by the success of natural and Greek yoghurt, and the growth of spreadable and block butter at the expense of spreads, this trend is all about appealing to growing consumer demand for fresh, wholesome and unprocessed foods.
For yoghurt consumers, the main perception seems to be that purity comes in a big pot; big pot plain yoghurt is up 11.9% in value year on year [Kantar 52 w/e May 24 2015]. “For Ocado, with its customer base of larger households, 1kg pots of Yeo Valley natural yoghurt are very successful,” says Hancock.
Dolan at Arla believes “the healthy vibes of big pot come from the link to breakfast. In reality 60% of big pot is still used as a dessert, but the association is there. Greek yoghurt was the first to push into big pot, and people think it is intrinsically clean, natural and healthy.”
Smaller brands and organic players have been especially good at embracing the purity trend, but it can be a more difficult concept for big multinational brands to pull off.
However, new launches such as Arla Skyr, which is marketed heavily on its pure Icelandic credentials, show the big guys can do purity convincingly if they pitch their products right.
To claim ‘purity’ the entire supply chain needs to be up to public scrutiny. “It’s beyond clean label to the manufacturing process and clean supply chain,” says Roux. “In the US Chobani had an issue with GM feed, so it can come down to even what the cow is eating.”
Coffee & Nuts
Fancy your coffee with your yoghurt? How about coffee in your yoghurt?
“While people are having a coffee break they’re being encouraged to have a lot of coffee-flavoured yoghurt, and we have also seen a lot of coffee-flavoured yoghurt in the US,” says Mintel’s Roux.
Alpinas’s Café Selection Greekstyle yoghurt range uses real Colombian coffee to import a 3omg-5omg caffeine hit in four coffeehouse-inspired variants; Dannon’s Oikos Greek-style yoghurt is available in caffé latte and caramel macchiato flavours. Here, brands remain tentative, dipping their toes into the coffee cup with limited editions by The Collective, Müller Light and Müller Bliss Corner.
Beyond Coffee, Kevin Hancock of Ocado sees coconut flavours growing in line with the trend for coconut-based dairy alternatives like CoYo. Dairy-free 2015 launches include Alpro’s Coconut Almond drink and Coconut Cuisine, an alternative to cream; Mackie’s Indulgent Flavours range now has a White Chocolate & Coconut variant.
As much about texture as flavour, the compulsion to add seeds and oats to dairy products is spreading from America to the UK. In the US Chobani Oats has an Ancient Grain Blend variant, while products like Stonyfield Organic’s Greek and Chia range use the supersedes; here Friesland Campina’s Yazoo extended its oaty Yoghurt Smoothie into 330ml sizes in January, while Yoplait’s Liberté breakfast pots, launched in March, combine yoghurt with fruit and seeds or muesli.