From Dairy 1.0 to Dairy 2.0
Using dairy’s natural health benefits as a selling point is moving the industry into the future, says Julian Mellentin of New Nutrition Business
In 2012 Danone entered America’s $1.4 billion (€1.03bn) market Greek yogurt market with its Oikos brand. In 2012 Oikos earned $283.8 million (€209.3m) and in 2013 is on track for $400 million – making it the most successful product launch ever (not only in dairy, but in any category).
It’s a success that is a tribute to the Danone marketing machine, to its skills as a fast-follower (though never, these days, an innovator), to its ability to invest in advertising, secure shelf-space – and deliver a good product. But it’s only a sign of the massive shift, which has taken place in dairy nutrition.
Internationally, dairy has long been at the leading edge of functional food development, with brands such as Yakult and Danone Activia creating global successes.
The first wave
Dairy 1.0, the first wave of functional dairy products, was a two-decades-long effort to shoehorn into dairy products ingredients ranging from plant sterols, omega-3s and CLA, to glucosamine and many others, in order to market medicalised benefits such as lowering cholesterol, heart health and joint health. It was the added ingredients providing the health benefit, rather than a “whole dairy food” product format.
Some were very successful, such as probiotics. Other ingredients, such as marine omega-3s, were not. Among the reasons were:
1. Ingredient not a logical fit to the carrier (fish oil in yogurt anyone?)
2. The product didn’t deliver an effective dose (you can supply a full dose of probiotics in a yogurt easily enough, but a big dose of omega-3s, magnesium or whatever starts to have a negative taste effect and turn consumers off).
But this period is over. The new direction is what some companies are calling “Dairy 2.0.”
In Dairy 2.0, dairy innovation is no longer focused on positioning dairy as a competitor with dietary supplements, but on:
a) Ingredients and benefits that are a more logical and “easy to accept” fit with dairy
b) New and more interesting product formats, usually in the form of companies reinventing “old formats” or taking traditional regional dairy products from one geography and launching them into new geographies where they are “new and exciting,” but adapted to suit the tastes of the new markets.
Dairy 1.0 and Dairy 2.0 are summarised in Table 1 (right).
Three examples
Here are three examples of Dairy 2.0 in action. The first is Greek yogurt. An entrepreneur took what is an everyday and unexciting product in Europe and presented it as new and exciting to consumers in the US under the brand Chobani.
The Greek segment has grown to about $1.6 billion in the US, from essentially nothing five years ago. Naturalness, great texture, a focus on great flavours and the perceived benefits of naturally high protein content have all contributed to the Greek yogurt success story.
Meanwhile, dairy giant Danone launched its own Oikos brand in 2012 – since then it has became the most successful new product launch ever in the US.
Secondly, 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 in sales in 2012.
Thirdly, quark, a soft fresh cheese, is commonplace in many parts of northern Europe. In the last year, its all-natural, high-protein, low-fat credentials have produced 100 per cent growth in some markets. But it’s a little-known product in the UK, where the Lake District Dairy, a farmer-owned co-operative, has launched the UK’s first quark brand.
Source: New Nutrition Business, www.new-nutrition.com
