Thursday, August 8, 2019

Gen Z Requires Dairy Processors to Push the Boundaries of Innovation

Photo source: Synergy

Generation Z was born somewhere between the mid-1990s and about 2015 (years are still to be decided). It’s the world’s youngest and largest consumer group and they have real food and beverages likes and dislikes. This is so much more than not wanting to eat their vegetables.

They are a tech-savvy, culturally diverse and experience-focused generation. They research foods and beverages in social media and directly impact household spending when they are not buying product themselves. Yes, they shop! Many parents let their youngest household members access the online grocery shopping account to select their preferred foods. (When my kids were little, the rule was it had to be on sale and I had to have a coupon. Today, sales and coupons are often irrelevant for many foodie households.)

A few weeks ago, Midwest Dairy and Dairy Farmers of Wisconsin hosted a Dairy Experience Forum in St. Paul, Minn. The event brought together dairy farmers, industry experts and partners with the goal of sparking disruptive innovation to drive the industry forward. The group focused on getting into the consumer mindset of Gen Z in order to keep dairy foods relevant.

Among the highlights of the event was a live Gen Z consumer focus group of eight young adults ages 18-21 that discussed how their generation’s personal values and perceptions of food impact how they make purchasing decisions. During the discussion it became apparent that while Gen Z has some similarities to the Millennials who proceed them, they are also very different. Overall, the group identified themselves as skeptics, career focused, more protective of their social media exposure, concerned about equality and driven to make the world a better place. Given their on-the-go-lifestyles, convenience is a top priority, which provides numerous untapped opportunities for dairy to innovate and create products that will fit consumers’ ever-changing needs.

“It is essential that we think about the values of Gen Z now in order to establish trust and brand loyalty among a generation that will have huge buying power in the years to come,” said Lucas Lentsch, CEO of Midwest Dairy. “As an industry, we need to pay attention to what they care about and be proactive in creating innovative products that meet their needs, instead of being reactive and missing opportunities. Gen Z is setting the trends today that other generations will follow tomorrow, so it is essential that dairy is part of that conversation.”

Building off the discussion of proactive and disruptive innovation, Lentsch hosted an Innovation Panel. This group reinforced that in order to truly innovate, the dairy industry needs to tap into the consumer mindset and establish a type of brand love for dairy.

During this panel, marketing and product development leaders from Associated Milk Producers Inc. (AMPI), General Mills and Sartori Cheese discussed the need for consistent and spontaneous innovation in order to spark brand love. As an industry, dairy has always been very consistent, always providing a fresh, nutritious product produced by farmers. However, there is opportunity for dairy to be more spontaneous by creating products that disrupt the category and meet consumers’ needs in new and unexpected ways.

This includes flavor innovation. Gen Z is forcing the dairy industry to push the boundaries of flavor innovation. It’s time to get ready, get set and go!

Think more limited-edition and seasonal flavors. Tap into international flavor trends. Try a flavor contest. Gen Z wants to be engaged in flavor innovation and now is the time to get them involved.

To read an article I recently wrote for Food Business News on how “International ice cream formulations are diversifying U.S. freezers,” link HERE.

Photo source: Pasha Ice Cream

“The current climate of innovation for dairy and dairy alternatives tends to fall into either indulgence or functional categories,” says Sarah Diedrich, customer marketing manager at Synergy Flavors.

In regards to indulgence, she says we can expect to see more texture plays in decadent frozen desserts.

“We see this through the new retail ice cream layered pints,” says Diedrich. “When asking the American teenager their favorite component of an ice cream, rarely is it ever the base itself. They crave the details that make it unique, the cookie dough pieces, the hard chocolate coating, and top it with gummy worms…why not? 

“Breakfast-inspired dessert flavors, like French toast crumble, and popular cereal milk profiles, are big with Gen Z, as they are familiar flavors that Gen Z loves, but still disruptive and Instagram-worthy.”

At the Dairy Experience Forum, there was a discussion about social media and e-commerce and how this is both changing the way consumers shop for their food and also how they discover new products. This is the way Gen Z shops. With online food sales expected to grow 20% by 2023, there is opportunity for dairy as consumers will continue to seek out foods that are fresh, local, convenient and align with their values. While the process for discovering these foods might look different in the future, e-commerce is very exciting as it allows niche products to reach an even larger audience much faster and to build brand loyalty much more quickly than traditional brick-and-mortar stores. Research shows once a consumer buys your product online, they are likely to purchase it time and time again.

Photo source: Synergy

“The e-commerce panel reminded us that while shopping for your food online will only increase over the years, it doesn’t mean that traditional grocery stores will go away. We will just need to think differently about how we bring our products to market in each of these avenues,” said Allen Merrill, Midwest Dairy chairman of Midwest Dairy’s board of directors. “For example, future consumers may buy all their groceries online, but they will still visit their local grocery store to explore and discover new products and brands. This offers a tremendous opportunity for new dairy innovation, and that is very exciting.”

Former U.S. Agriculture Secretary Tom Vilsack and president and CEO of the U.S. Dairy Export Council, shared insights about today’s global consumer and the opportunity for dairy to meet the needs of consumers around the world. This is essential, as the world’s population continues to grow at a rate of 1.07% a year, equaling roughly 82 million people.

“Roughly 95% to 97% of the world’s population lives outside the U.S. and that is a population that continues to grow,” said Vilsack. “It’s a younger population in developing and developed countries where incomes are rising, the middle class is expanding and cities are growing. There is a tremendous demand for dairy protein. So, in addition to having so many consumers for our products, the world needs and wants dairy.”

To read about the power of dairy protein, link HERE to an article I wrote for Food Business News titled “Dairy vs. Plant Protein.”

Sustainability also continues to be an important driver for consumers. The Gen Z focus group participants at the Dairy Experience Forum, as well as several speakers, discussed how farmers are the solution for sustainability issues, not the problem. On the front lines and with a deep investment in animal and land stewardship, dairy farmers can address root sustainability issues like water usage, greenhouse gas emissions, caring for the earth and animal welfare. While his is an everyday mission for farmers, speakers challenged farmers to proactively share the stories about how they are caring for the world in tangible ways in order to better connect consumers with the truths about dairy farming and sustainability.

Gen Z wants to know. They are demanding the information from their brands.

Synergy Flavors suggests three Gen Z-driven macro trends that are impacting the industry in far-reaching ways.

  • Unity: Younger consumers support brands that align with their views and encourage companies to take a stance on political opinion. For example, ‘buycotting’ is the anti-boycott, encouraging the excess purchase of a particular brand or product to support their messaging and counter sales of the competitors with which they don’t agree. Gen Z is seeking more authentic foods and beverages, with a particular interest in clean-label products and with traceable and transparent sourcing.
  • Tech Integration: Gen Z consumers are completely tech-savvy and using it to their benefit. They aren’t disengaged by their devices. They are connecting with content and friends on deeper levels and developing enriching relationships. Creating a visual and verbal brand lifestyle on social media is imperative to the success for new food and beverage products, and Gen Z consumers often define how “cool” a product is based on how it makes them feel, driven, in part, by its online persona. Their food or flavor of choice for the day also may depend on how they are feeling in that moment. How can food manufacturers use this to their advantage? By developing products meant for specific occasions or feelings (i.e. relaxing vs. exciting), they can attract Gen Z consumers and create a deeper connection to their needs.
  • Sensory-Centric Focus: Innovation has given the youngest generation an array of fun, multi-sensorial experiences. Virtual reality, artificial intelligence and unique activities, such as escape rooms and culinary tourism, all bring about new worlds to explore, and sensory experiences rank as top gifts for teens and young adults. Thus, Gen Z is expecting a lot out of products in terms of the “wow” factor. Gen Z consumers prefer bold flavor combinations like sweet, sour and spicy, and are keen on more extreme sensations, like ‘super-sour,” but without veering too unique in profile. Younger generations have a higher tolerance to these extreme profiles than those before them, so what’s hot enough or sour enough for the average Joe may seem “weak” to Gen Z.
“Forward-looking food and beverage brands are eager to anticipate trends the diverse and digitally native Gen Z are bringing to the world,” says Diedrich. “Growing up with a focus on authenticity of food rather than brand loyalty brings new challenges and opportunities, but by understanding the context in which these consumers live, manufacturers can develop more attractive products that are better suited to their needs and wants, delivering better performance in the marketplace.” 

Innova Market Insights has identified a number of themes that are dominating the top flavor trends of this year and will influence innovation going forward. This includes:

  • New Discoveries. All consumers, but especially Gen Z, are on a big, broad journey of discovery, moving out of their comfort zones to explore new food experiences, with flavor playing a major part. There is a role for reinventing classic flavors with novel twists, alongside developing new and more unusual flavors and combinations.

“When it comes to category fusion, I love the example of the Veggie Plot,” says Lu Ann Williams, director of insights and innovation at Innova Market Insights. “This is a savory yogurt that can be ready-to-eat, or it can be used in sauce or as a dip. Everybody can customize how they are going to use that because it ticks several category boxes.”

  • Sensational Concepts. Brands are leaning towards more remarkable and unusual flavor hybrids, as well as stronger taste experiences (hot, sweet, savory, etc.), while sour options are also surging in popularity. Well-established sweet and salty combinations are being joined by a whole raft of other hybrid flavor solutions.
  • Sophisticated Touch. Established flavors perceived to be dull are being reinvented, often in much more complex and sophisticated combinations. Notice how traditional coffee flavor is now cold brew and often with layers of flavor, such as caramel latte.
  • Cultural Celebration. Consumers regard themselves as world citizens and are increasingly interested in diverse flavors inspired by foreign cuisines. Southeast Asian, East Asian, Mediterranean and Middle Eastern flavors are more in evidence in traditional and familiar Western foods and beverages.
  • Fifth Dimension. Umami is the fifth basic taste after sweet, sour, bitter and salty but unlike the others, it’s hard to define. Often described as savory, meaty deliciousness, it comes down to the taste of glutamates on our tongue. Western awareness remains low, but the rising demand for exotic flavors and convenient home cooking is driving growth of launches with an umami claim. This presents an opportunity for more savory flavors in dairy applications. 

Fluid Milk Innovation Accelerator Competition

Consumer’s changing lifestyles have increased the demand for healthy food and beverage options that align with consumer values. While milk is the original functional beverage, the unique wholesome values of milk have been overlooked in our busy, chaotic lives. In response, the California Milk Advisory Board (CMAB) has launched The Real California Milk Accelerator to inspire new ideas integrating the values of fluid milk into contemporary products and provide the resources to help bring them to market.

With more than $450,000 in prizes, the contest combines two of California’s great natural resources: high-quality, sustainable fluid milk and the insatiable California entrepreneurial spirit. The competition aims to inspire innovation and investment in fluid milk products, packaging and capacity within California by connecting the dots between manufacturers, producers, investors, ideas and entrepreneurs.

“Consumers are looking for beverages that support their wellness goals while also fitting into their evolving lifestyles. No other food in nature exists to provide the nutritional value of milk with its unique flavor and functionality. Milk is a perfect ingredient in products developed for the way we live today,” says John Talbot, CEO of the CMAB. “Our goal is to drive innovation and help startups clear the hurdles to bringing these products to market.”

Through The Real California Milk Accelerator, the CMAB is seeking high-growth potential liquid milk product concepts, with milk making up at least 50% of their formula. The applicants will need to commit to producing the product in California, should they win the competition.

Up to eight applicants will receive $25,000 worth of support each, to develop a protocept, while receiving elite mentorship from marketing, packaging and distribution experts. This includes a business development trip to tour dairy farms and production facilities and to meet with industry leaders to help drive success of their new venture. The winner will receive up to $250,000 worth of additional support to get their new product to market.

Competition rules and application documents are available at HERE. The deadline for application is August 31, 2019.

Get ready. Get set. Go!

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