New Nutrition Business

10 Key Trends in the
Business of Dairy Nutrition
By Julian Mellentin
November 2016
Presented by
New Nutrition Business Report

NEW NUTRITION BUSINESS
Published by
New Nutrition Business
The Centre for Food & Health Studies
Crown House
72 Hammersmith Road
London W14 8TH
UK
Telephone +44 207 617 7032

Fax +44 207 900 1937
www.new-nutrition.com
Asia-Pacific Office:
PO Box 21675
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This edition printed November 2016

The Centre for Food & Health Studies Limited 2016
Trademark notice: Product or corporate names may be trademarks or registered trademarks and are used only
for identification and explanation, without intent to infringe.
British Library Cataloguing in Publication Data.

A catalogue record for this case study is available from the British Library.

Contents
1.HowdoweidentifytheKeyTrends? slide8
2.Summary slide14
3.The10KeyTrends slide26
KeyTrend1 slide27
SnackificationCaseStudies slide43
KeyTrend2 slide61
Fat/sugarCaseStudies slide82
KeyTrend3 slide97
CheeseCaseStudies slide115
KeyTrend4 slide130
ProteinCaseStudies slide146
KeyTrend5 slide153
DigestiveWellnessCaseStudies slide165
KeyTrend6 slide174
DairyfreeCaseStudies slide200
KeyTrend7 slide220
PermissiontoIndulgeCaseStudies slide229
KeyTrend8 slide244
KeyTrend9 slide258
DigitalRevolutionCaseStudies slide274
KeyTrend10 slide283
HelloSavoryCaseStudies slide288
New Nutrition Business 3

List of case studies
CaseStudy1:MoonCheeseasnackingstrategytocreateanewcategoryforlongshelflifecheese slide44
CaseStudy2:LaladrinkingyoghurtaimstoexpandAmericanshealthysnackingrepertoire slide52
CaseStudy3:Noosashowshowsuccessfulfullfatyoghurtcanbe slide83
CaseStudy4:Anniesconvertsparentstothebenefitsoffullfatyoghurt slide90
CaseStudy5:SargentoBalancedBreaksCheesereinventedasanaturallyhealthywholefoodsnack slide116
CaseStudy6:GoodCultureleveragestheproteinbenefitsofcottagecheese slide124
Casestudy7:LMenconnectingtoproteincanbeasuccessfulstrategyfornichesinAsia slide147
CaseStudy8:PremiumpricingnobarriertosuccessforP3PortableProteinPack slide149
CaseStudy9:A2Milkadigestivewellnessbusiness slide166
CaseStudy10:AdessoymilkandjuiceinBrazil slide201
Casestudy11:CoconutCollaborativetakesthenondairychallengetoyoghurttothenextlevel slide209
CaseStudy12:Ben&Jerrysentersthenondairyicecreammarket slide214
CaseStudy13:TheCollective:permissibleindulgence+goodmarketing slide230
CaseStudy14:YassofrozenGreekyogurtdessertsalittlebitofindulgence slide238
CaseStudy15:Souvenaid,amedicaliseddairydrinkprofitingfromanecommercefocus slide275
CaseStudy16:ASpanishdairycombinessportmilkwithmobileapp slide280
CaseStudy17:VigorintroducesBraziltosavoryGreekyogurt slide289
CaseStudy18:Chobaniamassmarketbrandintroducessavoryyoghurts slide293
CaseStudy19:Chaatastartupinsavoryyoghurtsnackswithglobalflavours sldie299
CaseStudy20:SohhasavoryyogurtsbringMediterraneanflavourstodairysnacking slide304

List of tables and charts
Chart 1: We test the trends on 8 key parameters slide 10
Chart 2: Where the dairy trends sit on the product lifecycle slide 13
Chart 3: The Key Trends all overlap and are connected slide 16
Chart 4: Snacking transforms commodities into a value-added, high-margin business slide 36
Chart 5: Dairy pioneered single-serve convenience 25 years ago slide 41
Chart 6: Cheese is the next big snacking opportunity slide 42
Chart 7: Lala competitively priced to drive growth slide 54
Chart 8: Fat and sugar content of yoghurt brands, UK slide 78
Chart 9: Sugar vs fat content (g/100g) in yogurt, US slide 79
Chart 10: Fat and sugar content of yoghurt brands, the Netherlands slide 80
Chart 11: Noosas super-premium pricing no barrier to success slide 87
Chart 12: Annies price comparison slide 94
Chart 13: There is growth potential for cheese in many countries slide 110
Chart 14: Cheese to catch up with yoghurt slide 113
Chart 15: Premium pricing strategy has not hindered growth slide 117
Chart 16: Good Culture is premium-priced slide 125
Chart 17: Oscar Mayer P3 price comparison slide 149
Chart 18: The upward march of A2 Milk slide 166
Chart 19: Dairy alternative market size and growth rate slide 179
Chart 20: Where is non-dairy most popular? Slide 180
Chart 21: Dairy giant Danone commits to growing the non-dairy market slide 189
Chart 22: Dairy giant Danone commits to growing the embryonic non-dairy yoghurt
and desserts markets slide 190
Chart 23: Coconut Collaborative is premium priced slide 210
Chart 25: Ben & Jerrys non dairy ice cream price comparison slide 217
Chart 26: Super-premium pricing is no barrier to success slide 233
Chart 27: Premium-priced niches growing as low-cost volume market falls slide 249
Chart 28: Niches set to become 30% of the market by 2020 slide 251
Chart 29: Digital Revolution drivers slide 262
Chart 30: Chobani savoury yogurts are premium priced slide 296
Chart 31: Chaat savory yogurts are premium-priced slide 301
Table 1: Nutrition snapshot, Cheddar Moon Cheese slide 50

New
Table 2: Nutrition Nutrition
snapshot, Business
Pepper Jack Moon Cheese slide 51
Table 3: Nutrition snapshot, Lala yogurt smoothie vanilla slide 59
Table 4: Nutrition snapshot, Lala yogurt smoothie wild strawberry
Table 5: Nutrition snapshot, Noosa full-fat yogurt Coconut
slide 60
slide 88
Who we are Introduction
Foundedin1995,NewNutritionBusinessistheworldsnumber1providerofstrategicand
marketinsightsintothebusinessoffood,nutritionandhealth
Fromglobalgiantstostartups,ourclientsincludetheworldsmostinnovativefood,
beverageandingredientscompanies.
Weinterviewmorethan500seniorexecutives,worldwide,infoods,beveragesand
ingredientseveryyear,givingusaninformed,firsthand,globalviewofwhatworks,what
doesntworkandwhy.

Who we are Introduction
Webringaglobalperspective(officesandaffiliatesinEurope,NorthAmerica,AsiaandNew
Zealand)andourlanguageskillsgiveusacompetitiveedgeinunderstandingmarketsand
cultures.
Expertiseinglobalmarketsandacrossmultiplefoodandbeveragecategories.
Aroundtheworld,companies
largeandsmalluseourtrends
toinformandguidestrategy
andidentifyclear,actionable
stepsfor:
R&D
productdevelopment
marketstrategy

1. Howdoweidentify
theKeyTrends?

A Key Trend is one that drives growth and sticks around
Wefocusonlyonthosetrendsthataretheunderlyingkeydriversforourindustrynotfadsor
shorttermdevelopmentswithnolongtermmeaning.
Forus,aKeyTrendisonethat:
Drivesgrowth
Willendure
Weconstantlymonitoramassofqualitativeandquantitativedata,includinginterviewswith
morethan450seniorexecutivesinthefoodandbeverage
industryaroundtheworld.
Overtimewehavebeenabletocontinuously
test,challenge,refineandimproveour
methodology.Weveaddedlayeruponlayer
tooureverdeepeningknowledgeofthe
consumer,themarketandthekeydrivers.
WeusetheTrendDiamondasadisciplineto
evaluateatrendoneveryfactorfrom
regulationtotechnologytoconsumerbelief.

Chart 1: We test the trends on 8 key parameters

We look at where trends sit in the product life-cycle
Thischartshowsproductandbrandpositioningandtheevolutionofmarkets.
Manyproductsstartbytargetingconsumerswhohaveaneedforaproductthathaseffective
technology.Theysellinlowvolumesatpremiumprices.
Overtimetheirappealwidensandtheymovetotherightonthepricecurve,eventuallybecoming
massmarketproducts.
Manycompaniesdeliberatelytargetthelifestyleareaasawayofcreatingadefensiblenicheand
maintainingpremiumprices.
TECHNOLOGY
CONSUMERS LIFESTYLE
MASS MARKET
CONSUMERS
CONSUMERS
High Consumer Commitment Low


Different consumers have different health motivations
Mosttrendshavestrongerresonanceintheearly(Lifestyle)partofthelifecycle.Intime,many
(butnotall)willcrossoverintomass.Thestagesofthelifecycleare:
TechnologyconsumersThesearetheearlyadopters,peoplewhohaveanearmedicalneed
foraproduct.Theymakeup10%ofconsumersandtendtobeolder.Theyneedthetechnology
ofthefunctionalfoodtoaddresstheirhealthcondition.Theyseeproductsinamedicalised
contextand,aswithdrugs,theywillpayasubstantialpremiumforsomethingthataddresses
theircondition.
LifestyleconsumersThis20%30%ofpeopleareinterestedinmaintainingtheirwellness,
notfightingillness.Theywilladoptnewbrandsandwillpayapremiumforaproductbutonly
ifitsupportstheirlifestyle.
MassmarketconsumersTaste,price,brandoften/usuallytakehigherprioritythanhealth
forthis60%ofthepopulation.Healthmessagesmustbesimple,easytounderstand(contains
fibre).Motivatedwhenabenefitbecomesastandardandisavailableinproductswithlowor
nopremiums,ideallyfromwellknownandtrustedbrands.

Chart 2: Where the dairy trends sit on the product lifecycle
TECHNOLOGY LIFESTYLE MASS MARKET
CONSUMERS CONSUMERS CONSUMERS
Key Trend 1
Key Trend 2
Key Trend 3
Key Trend 4
Key Trend 5
Key Trend 6
Key Trend 7
Key Trend 8
Key Trend 9
Key Trend 10

2.Summary

10 Key Trends in the Business of Dairy Nutrition

Chart 3: The Key Trends all overlap and are connected

Summary Dairy strategy
1. Dairycompaniesaretodaypresentedwithsomegoodopportunitiesforprofitable
growthatgoodmarginsiftheycanconnecttotheKeyTrends(seeSlide15).
Dairyhaslongbeenoneofthemostcreativecategoriesinthesupermarket,possibly
rivaledonlybybeveragesincreatingnewproducttypesandbringingnewbenefitsto
theconsumer.Atthesametimedairyisfacedwithadistinctandgrowingcompetitive
threatonethatsomecompaniesarealreadyturningintoanopportunity.
2. Amajoradvantagefordairyisthatscienceshowitisoneofnaturesnaturally
functionalwholefoods(seeSlide23).For30yearshealthprofessionalsdemonised
dairyforitssaturatedfatcontentcreatingthemarketforlowfatdairyproducts.Butas
researchrollsbackthenegativesaboutdairyfatitsconnectiontoriskof
cardiovasculardiseasehasbeenfirmlydebunkeddairyisundergoingahealthrebirth,
itshealthbenefitsputtingitonaparwithalmondsandblueberries.Thispositiveimage
meansdairyproductscanbepositionedasbothhealthyandindulgent,andmany
successfulbrandsofferpermissiontoindulge,capitalisingondairystasteandtexture
advantages.

3. Moveawayfromlowfat:Asaresultofnewscienceaboutdairyshealthbenefits,insome
marketsthemosthealthinformedconsumersarebuyingmorefullfatproductswhilesales
oflowfatareflatorfalling.Somebrandshavegivenupofferinglowfatvariantsand
successfullyfocusonthetasteadvantageofmadewithwholemilk.Inmostmarkets,it
willtake20yearsbeforeconsumersunderstandthatfullfatisahealthyoption,butthe
trendisclear.
4. Cheeseisoneofthebiggestbeneficiariesofthesciencebasedrebirthofdairy:There
nonegativesassociatedwithcheesefromthefatorsodiumanditactuallyconferssome
healthbenefits.Snackingisthebiggestgrowthopportunityforcheeseandafewcompanies
arealreadygettingmoresalesathighermarginsfromfocusingonsnacking.
5. Thedemonisationofsugarhasdairycompaniesbusyworkingouthowtomeet
consumersdemandsforlowersugarproducts:Wisecompanieswillsimplylowersugar
levelsandincreasefatandavoidthetasteandcostproblemsofusingsweeteners.The
strongestwaytodealwithconsumersneedforlowersugarproductsistoreeducatethem
backintothetasteandhealthbenefitsoffullfat.

6. Thepremiumisationtrendisakeyopportunityfordairycompanies.Asconsumer
beliefsabouthealthfragmentmassively,thenichescollectivelyareeatingupthemass
market,startinginthewealthiestcountries.Premiumnichebrandsareachievinggood
growthevenascommoditybrandsstagnate.
7. Aportfoliooflowvolume,highvaluenichebrandsisthewayaheadforprofitability
inalmosteverycase.Beginbyaddressingthelifestyleconsumerwhoiswillingtopaya
premiumforahealthierproduct.Thehighvolumecommodityfocusofmanydairiesisa
mistake,unlessyouaretheoneortwoplayerswhocandominatethelowcostpartofthe
marketusingpricebuteventhenyouwillbeunderconstanterosionfromprivatelabel
andyourvolumemaybeflatordecliningasconsumersbecomeevermoreeducatedabout
healthtrustedbrandsandswitchtopremiumbrands,ifnotforalltheirdairypurchases,at
leastforsome.
8. Singleserveandsnackifiedproductshavetobepartofeverycompanysstrategy.
Thisisoneofthestrongestwaystogetbetterpricesandbettermargins.Singleserveon
thegoproductsarebetteralignedtomodernlifestylesthanthetraditionalfamilyoriented
bulkpackswhichhavebeenthefocusofmanydairysmanufacturingled,commodity
basedstrategies.

9. Proteincontinuestobeagrowthopportunity,particularlyinAsiaandtheMiddle
East,wherethemarketforsuchproductsisatDay1.Consumersseeproteinasabenefit,
andthemosthealthawareknowofproteinsconnectiontohealthyweightandbody
composition.Proteinisslowlytakingoverastheingredientmostassociatedwithweight
management.
10. Nondairyplantmilkssuccessfullyusethemessageofbetterdigestivehealthasaway
ofpositioningthemselvesagainstdairy(seeKeyTrend5).Muchofthenegativityabout
dairythatiserodingdairyinsomemarketsandisgoingtoerodedairyevenmorearises
fromconsumersseekingdigestivewellnessandassociatingitwithdairyfree.
11. Digestivehealthisamajorwellnessissueformanyconsumersandhasbeena
growthdriverinmanycategoriesforover20years.Companieshavetreateddigestive
wellnessandthefreefrommarkets(meaningglutenandlactosefree)asseparate.Butthey
areinfactthesamemarketsinceglutenfreeanddairyfree/lactosefreeconnectvery
stronglytodigestivehealth.Whenpeoplereducedairyorlactose,theyreportthatthey
feelthebenefitoneofthemostimportantreasonsforanyonetobuyahealthier
product.

12. Nondairydairyisbothanopportunityandathreat:Alldairycompaniesmust
decidehowtorespondtonondairyinmanycasesthatwillmeanenteringthe
market.In2016bothDanoneandCocaColabecamemajorplayersinnondairy
dairythroughacquisition.Danoneisnowoneoftheworldstop10dairycompanies
andalsotheworldsbiggestplayerinthenondairymilksmarket.
13. Companiesmustpushbackagainstattacksondairy:Justwhenacriticalmassof
scienceisrevealingthatdairyisanaturalwholefoodwithawealthofhealthbenefits
(seeKeyTrends2and3),itfacesagrowingtideofnewnegatives,spawnedbythe
digitalrevolutionandsocialmedia.Attacksondairyaregoingtoincreaseinintensity
andfrequency,anddairycompaniesneedtocommunicatethemanysciencebased
healthbenefitsofdairy.

14. Increasinglyconsumersarepersonalisingtheirdietsastheymaketheirownfood
choices,tailoredtotheirbeliefsandlifestyles.Thedigitalrevolutionismakingevery
consumerintotheirownhealthandnutritionexpertbygivingthemaccesstoan
unprecedentedamountofinformationontheirportabledevices.Thiscomesatthemoment
whenexpertadvicehasacredibilityproblembecauseofthefailureoflowfatdietadvice
(andmanyotherexamplesofpoorexpertadvice).
15. Cleanlabeldoesnotcreateapointofdifference(seeSlide25)andthereisnoevidence
thatgoingcleanlabeldeliversincreasedvolumesorhighermargins.Offeringconsumers
productsthatarecleanlabelhassimplybecometablestakesinmostcountriesits
justwhatconsumersexpectyoutodo.Infactinmanymarketspeoplestillplacetaste,price
andotherfactorsabovecleanlabel,evenintheUS.Cleanlabelisnotagrowthtrend.
16. GMOfreehaslittleornoeffectonconsumerbehaviourinmostmarkets.Whilethe
GMOfreemessageisbecomingmorecommonintheUSandJapan,theresnoevidenceof
itcreatinggrowth.

Dairy benefits from being powered by the King of Trends
Consumersdesireforfoodsandbeveragesthattheyperceiveasnaturallyhealthyornaturally
functional(asdefinedinthemindoftheconsumerthisisnotaregulatoryortechnicaldefinition)isthe
biggesttrendacrossallfoodandbeverageandthebiggestdriverofsuccessfulgrowth.

Rolling back the negatives on dairy fat has boosted
dairys position as a naturally functional whole food
For30yearshealthprofessionalsdemoniseddairyonthegroundsofallegedharmfromits
saturatedfatcontentproducingaconsumerobsessionwithlowfatdairyproductsinsome
countries.Butresearchersarerollingbackthenegativesaboutdairyfatandtheviewthat
dairyfatisconnectedtoriskofcardiovasculardiseasehasbeenfirmlydebunked.
Thediscoverythattheseandmanyothernaturalfoodsnotonlydonoharmbutmakea
positivecontributiontohealthhaspushedmanypeopletobecometheirownexperts.

Clean label is a must do for retaining consumer trust -
but it is NOT a trend that will drive sales growth.
Consumers sometimes prefer dirty label!
Forconsumers,clean
labelisanaspirationbut
pleasure,taste,priceand
convenienceallcomefirst.
LunchablesUploaded,the
mostsuccessfulnewUS
brandof2014,with$143
millioninsales,has60
ingredients.Araremass
marketsuccess.
Somepeoplecareabout
cleanlabelonlysomeofthe
time!

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10 Key Trends in the

Business of Dairy Nutrition