Summer Inspiration Series: Developing Dairy Foods for the Next Normal

The “Summer Inspiration Series” of Friday blogs is all about stepping out of our comfort zone in terms of innovation. Why not? We’re already operating in an unprecedented manner. Some blogs may explore new concepts in “other” food and beverage categories and discuss how they may apply to dairy, others may focus on new consumer behaviors and brainstorm on how dairy foods processors may respond in coming months. 

McKinsey & Company just published: What got us here won’t get us there: A new model for the consumer goods industry. The report explains how COVID-19 has amplified 12 trends that have been disrupting consumer packaged goods (CPG) for the past decade. You can access the report HERE.

The authors explain that CPG players need to rethink their portfolio priorities and “where to play” choices to increase their exposure to growing markets, channels and subcategories. They also need to better focus on the what’s important to today’s consumers. Price sensitivity, for example, is skyrocketing in importance in the wake of COVID-19. Younger consumers seek out brands they see as special, different and authentic. All age groups are prioritizing conscious eating and living, preferring purpose-driven brands that help them meet personal goals. Small brands are rushing in to deliver on these brand values, although execution challenges during the COVID-19 crisis have held them back, growing at only their fair share, instead of outgrowing large brands, according to the authors.

This market data is revealing. Large brands (more than $750 million in revenue) in the U.S. lost volume at the rate of 1.5% a year, from 2017 to 2019, while small brands grew 1.7% and private label grew 4.3%. Detailed analysis of the large CPGs (more than $2.5 billion in U.S. revenue) shows that all of their organic volume growth and almost 90% of their overall value growth came from their small and medium-sized brands (less than $750 million in revenue), even though those brands contributed only 42% of 2016 revenues. In recent years, the leading brands in each CPG category generated only 25% of value growth in U.S. Nielsen-covered channels, while small and medium-sized brands captured 45% of growth and private-label products 30%. 

The future is niche products that meet a need. 

McKinsey & Company explains that successful stand-alone small brands are very disciplined and very careful about spending. Small brands usually market efficiently with the core consumer in mind. As they grow, they leverage their community and loyalty to “export” the brand. They also tend to focus on a key channel to deliver and delight the core audience before expanding distribution points to increase purchase frequency.

Grocery shopping trends during COVID-19

Consistent with prior years, the Food Marketing Institute (FMI), in collaboration with Hartman Group, fielded research in February 2020 to support this year’s U.S. Grocery Shopper Trends. The research included a national survey (n=2,000) and qualitative interviews around the country. 

To capture the dynamic changes in the intervening months, FMI updated this data through several additional weeks of survey research in March and April 2020 (n=1,000 x 4 waves). These findings have been integrated into the initial research to provide a relevant view of shopper trends as they stand at this moment in time.

“Retail food saw eight years of spending growth in one month,” reports FMI. 

Here are some dairy volume sales highlights from IRI, courtesy of the Midwest Dairy Association. 

• Milk sales are up 3.9% in 2020 year-to-date (YTD) through July 12, compared to the same period in 2019. In the four weeks ending July 12, volume sales increased 0.1%. Four of the eight regions are posting declines in the latest four weeks. While grocery stores continue to see growth, the “all other channel,” largely Walmart, has turned negative in the last two four-week periods. eCommerce sales continue to skyrocket.
• Cheese continues to see strong growth in 2020 YTD with volume up 16.7% YTD and 13.2% in the most recent four-week period. Large increases have been maintained despite significant price upticks of 5%. Growth is observed across all regions, top varieties, forms and types. Italian cheeses are performing particularly strong, as well as forms associated with family meals, such as shreds and grated.
• Yogurt sales are gaining strength over the last 12 weeks. Year-to-date, volume is up 3.4% with a higher increase of 4.6% in the most recent four weeks. Within yogurt packaging formats, tubs and tubes have been key growth drivers. Cups, which account for the largest volume share (56%), have been soft (-0.4% YTD). 
• Butter (and butter blends) is up 31.5% YTD and up 23.4% during the most recent four-week period.
• Ice Cream/Sherbet is up 11% YTD and up 5.2% during the most recent four-week period. 
• Cottage cheese is up 4.3% YTD and up 5.5% during the most recent four-week period. 
• Sour cream is up 17.3% YTD and up 15.2% during the most recent four-week period. 

Claims shoppers want, before and after COVID-19.

The FMI research shows shoppers continue to scrutinize products to avoid negatives and minimize processing. A large majority of shoppers (82%) reported at the outset of 2020 that they examine food and beverage packaging for specific properties they seek, similar to 2019. Few shoppers in March or April indicated paying any more or less attention to labels now than prior to the pandemic.

Shoppers focus on wholesome foods with minimal processing that help them avoid negatives, especially sugar and sodium. They also pay close attention to the level of processing, looking for claims such as natural (27%), no artificial ingredients (28%) or having no preservatives (28%).

Online shoppers tend to examine package claims more carefully, looking for cues of ethical sourcing practices in both animal treatment and business relationships. They are also more likely to seek out products offering positive nutrition, such as vitamin-enriched or antioxidant-rich claims. Shoppers who do not shop online, on the other hand, focus more on avoiding specific ingredients. Sugar is the number-one food component that all consumers avoid. 

Less sugar is the new norm in the next normal.

“Sugar’s increasingly negative image due to its impact on rising diabetes rates and childhood obesity has hurt sales of sugary beverages, especially sodas, juices, and ready-to-drink sports drinks and teas,” according to the hot-off-the-press Packaged Facts report: U.S. Beverage Market Outlook 2020: Grocery Shopping & Personal Consumption in the Coronavirus Era. “People who want to reduce their sugar intake typically do not want sugar-free products but instead those with less sugar or those sweetened with natural, non-sugar ingredients. Public health recommendations and tax legislations are helping drive the move toward reduced or no/less added sugar claims. New product activity has surged for reduced-sugar varieties of beverages, with manufacturers using natural sweeteners like stevia and monk fruit, real fruit, honey and erythritol.”

It’s no wonder that less sugar was a priority for the start-up companies that were selected to participate in the 2020 Dairy Farmers of America (DFA) Accelerator program. This is how big brands become niche players. 

“We’re excited about the companies for this year’s class. Not only is this the biggest group that we’ve ever had, but a lot of these companies are developing cutting-edge products and solutions,” says Doug Dresslaer, director of innovation at DFA. “Plus, on both the ag tech and food sides of the program, we have companies doing really cool things with sustainability and dairy by-products, which is a strategic focus for our cooperative and the industry.” 

The DFA Accelerator is a 90-day immersive program, typically with a combination of on-site meetings and virtual programs to provide training, growth opportunities and mentorship. Most startups typically spend about four weeks in Kansas City, where DFA is headquartered. This year due to the COVID-19 pandemic, the program was managed remotely with virtual Demo Day presentations made yesterday, July 30. This is where each of the companies talked about what they’ve learned and provided their best pitches about their startups. 

I was fortunate enough to be in the audience. All nine companies were very impressive. I look forward to featuring the dairy products in the Daily Dose of Dairy. Here are some highlights:

Ag Tech Innovations

• Armenta (Ra’anana, Israel): a non-invasive technology for antibiotic-free treatment of bovine mastitis 
• Capro-X (Ithaca, N.Y.): a sustainable solution for whey waste from Greek yogurt production 
• Livestock Water Recycling (Calgary, Alberta, Canada): a manure treatment technology, which recycles 75% of manure into clean water while segregating manure nutrients for precision fertilizer application 
• Mi Terro (Los Angeles): a sustainable fashion brand that uses excess milk to make men’s and women’s t-shirts 

Dairy Food Products 

• Chank’s Grab-N-Go (Millville, N.J.): a handheld snack company featuring pizza cones, Philly cheesesteak cones and more (pictured) 
• GoodSport (Chicago): a sports drink made from upcycled liquid dairy by-products, which uses only natural ingredients and has naturally occurring electrolytes and vitamins 
• SuperFrau (Cambridge, Mass.): electrolyte drinks made from upcycling surplus whey, with real ingredients and no added sugars 
• Wheyward Spirit (Eugene, Ore.): premium spirit made from whey 
• Yaar Nordic Quark Bar (London, U.K.): Nordic chilled dairy snacks made with fresh quark, a mixture of cow’s milk and natural lactic acid 

Since its inception, the DFA Accelerator has worked with 25 companies and has continued to work with the majority of these companies in some capacity after the 90-day program. To date, 94% of the alumni companies are still in business today. For additional information, link HERE.

Summer Inspiration Series: Think Alphabet Soup (with a Slice of Pizza)

The “Summer Inspiration Series” of Friday blogs is all about stepping out of our comfort zone in terms of innovation. Why not? We’re already operating in an unprecedented manner. Some blogs may explore new concepts in “other” food and beverage categories and discuss how they may apply to dairy, others may focus on new consumer behaviors and brainstorm on how dairy foods processors may respond in coming months. 

Several new McKinsey research efforts analyze the changes taking place in the homes of consumers, on their phones and in stores. In the report “Reimagining marketing in the new normal,” the consulting firm identifies six of the biggest shifts emerging from COVID-19. One of the most interesting is localizing outreach. You can read the report HERE.

It’s time to reimagine dairy’s role for back-to-school meals and snacks at the kitchen table, along with dorm room dining and lots of pizzas delivery to college apartments. Trick or treating will be cancelled and parents should not expect to see their grade schoolers jingle belling on the auditorium stage. 

Localized outreach has long been part of many dairy processors’ marketing efforts. It’s time to rethink the playbook for the next normal. Think “alphabet soup.”  

Many of us are old enough to remember this childhood classic. I believe the original intent by Campbell’s was to get kids to eat their vegetables by delivering them through a bowl of soup loaded with alphabet-shaped pasta. The meal was both nutritional and educational. This is something parents need now. 

Dairy foods are already nutritional. Let’s make them educational and entertaining, maybe even collectable. Can a yogurt cup become a pencil holder? Can the string cheese wrapper have a code on it that gets entered on the interactive website where a kid wins prizes? 

Milk cartons might use a panel to showcase a craft, such as repurposing the carton as a planter. A panel might be a cut-out card that kids start collecting and trading. That’s another flashback. Think Wacky Package cards from the 70s.   

The fact is that COVID-19 has dramatically affected consumer habits and dairy supply chains when foodservice demand plummeted and grocery sales surged. Consumers struggling with job losses and economic uncertainty quickly returned to buying basic dairy products like fluid milk and commodity cheese. 

A new report from CoBank’s Knowledge Exchange indicates that consumer behavior will be different for the next 12 to 18 months than it was pre-pandemic. As that behavior takes root, dairy supply chains will need to adjust from farm to fork. You can read the report HERE.

“The dairy industry is coping with some new realities, largely driven by the decrease in foodservice demand and restaurant sales,” says Tanner Ehmke, manager of CoBank’s Knowledge Exchange. “The challenge for dairy supply chains will be adapting to focus on meeting demand trends based on evolving consumer behavior as we navigate through an uneven reopening.” 

As consumers heeded the stay-at-home advisories, they increased purchases of products that in recent years had fallen out of favor. Processed cheese sales increased by nearly 20% during the eight weeks ending May 31. White milk sales gained more than 10% during the same period. Cereal is also doing well with sales up almost 15%.

Even as restrictions have begun lifting, polling has shown widespread reluctance among consumers about immediately returning to normal activities like restaurant dining and business travel. In late April, a Business Insider poll found just 9% of Americans believed they would resume their routine exactly as it was before the lockdowns, with only 16% saying they would resume “almost all” of their activities.

At a minimum, it will take some time for sit-down restaurant traffic to look anything like it did before the pandemic. Forecasts from Open Table suggest that the U.S. could lose up to 25% of its restaurants. 

Any structural reduction in restaurant sales has potential product mix implications for dairy processors and converters. For instance, firms that specialize in making or packaging products for foodservice accounts will need to retool, making different types of cheese or filling different-sized sour cream containers for at-home consumption.

Much of the price volatility experienced over the past 90 days has more to do with massive supply chain disruptions than major changes to aggregate demand and supply. Perishability played a big role in the upheaval. As demand spun toward retail, foodservice operators disposed of fresh products that now have to be replenished for reopening.  

Some buyers are asking if suppliers can develop and provide extended shelflife alternatives. Movement in that direction would presumably help on the supply side, giving manufacturers and dairy farmers more supply cushion. 

A world with more extended shelflife manufacturing options might mean less dumping of milk than took place in April. Business models may also be readjusted from just in time inventory practices to having more inventory stored in warehouses.

Grocers are also cutting down on product selection to enhance operational efficiency. Published reports say that the popular Wegman’s supermarket chain, for example, has cut its offerings from about 52,000 products to 30,000 products. 

Data from Nielsen shows that for the four weeks ending June 13, supermarkets carried nearly 7% fewer dairy items than the year prior. For dairy companies and other food marketers, that could mean fewer line extensions, fewer opportunities to differentiate, fewer chances to test new concepts.  

As the economy reopens, potential changes in consumer habits, the level of social distancing that remains in place, and the level of disposable income will again reshape dairy supply chains long term.  

That brings me to pizza. Retail and foodservice pizza sales have outpaced pre-pandemic levels. Domino’s, for instance, said that its U.S. same-store sales increased by 21% year-over-year from April 20 through May 17. 

“That’s especially good for the dairy industry considering how much cheese pizza carries to the dining table,” wrote Phil Plourd, president, Blimling and Associates Inc., and author of the CoBank report. “Because pizza remains relatively inexpensive and convenient, it should continue to outperform in the months ahead.”  

Prior to COVID-19, about one in eight Americans ate pizza on a typical day, according to USDA data. That’s a lot of cheese! 

The U.S. pizza market generated an estimated $47 billion in revenue in 2019, according to IBIS World. With the average price per pizza being $11.23, that equates to about 4.1 billion pizzas. 

The global pizza market has annual sales estimated at nearly $145 billion, according to Pizza Magazine. Western Europe leads the way with $54.4 billion, followed by North America ($50.7 billion) then Latin and South America ($16.8 billion). 

I’m ordering pizza tonight for the family, with extra cheese! Photo source: Dairy Farmers of Wisconsin

Pasta filata mozzarella is characterized by its functionality, which when heated, e.g., on a pizza, can generate the authentic stretch and mouthfeel that consumers associate with a desirable pizza experience. Pasta filata is the largest, fastest-growing and most globally widespread cheese type, accounting for more than 20% of cheese produced globally and estimated to reach USD 88,853 million (EUR 78,570 million) by 2027 with a CAGR of 5.5% (2019-2027), according to Coherent Market Insights

Recognizing the global craving for pizza is outpacing per-capita cheese consumption, Chr. Hansen has launched a series of high-yielding cultures and enzymes. They are designed to offer pasta filata makers the ability to increase cheese volumes and maximize milk efficiency through natural solutions while keeping intense focus to protect downstream whey fractionation processes. Learn more HERE.

Summer Inspiration Series: Connect with Consumers Through Limited-Edition and Seasonal Offerings

The “Summer Inspiration Series” of Friday blogs is all about stepping out of our comfort zone in terms of innovation. Why not? We’re already operating in an unprecedented manner. Some blogs may explore new concepts in “other” food and beverage categories and discuss how they may apply to dairy, others may focus on new consumer behaviors and brainstorm on how dairy foods processors may respond in coming months. 

Today let’s talk about connecting with consumers through limited-edition and seasonal offerings. But first…Happy National Ice Cream Month! Make sure you enjoy a scoop or two on National Ice Cream Day, which is celebrated on the third Sunday of July in the U.S.

U.S. ice cream marketers are doing a great job with promotions and innovation this ice cream season. And it’s paying off. Consumers appreciate the comfort and enjoyment of ice cream during these uncertain times and marketers are keeping them entertained with new products, flavors and marketing.

(Scroll down for COVID-19 ice cream sales trend data.)

Ice cream and frozen novelty sales continue to boom, according to IRI. What’s important to note is the growing inflationary gap between dollar gains and volume gains. Consumers are starting to pay more for food, including ice cream, and it shows in the numbers. As we enter a recession, it will be interesting to see what luxuries consumers splurge on. Ice cream has historically been one.

In early April I wrote about taking quarantine time to reboot your brand and develop inspirational messaging for COVID-19 marketing efforts. Many of you listened! If you missed the blog, you can link to it HERE.

Limited-edition and seasonal offerings keep consumers interested and coming back for more. They are often willing to dip into their pockets for a product that may not be stocked the next time they shop. 

High Road Craft Ice Cream is embracing the limited-edition flavors concept during National Ice Cream month. The company is celebrating with limited-edition, hand-crafted in small batch pints, one flavor for every day in July. They are available on the company’s online store in limited quantities. 

Here’s a sampling of what they’ve produced:

July 10: Salt & Pepper – salty sweet cream base with salt and pepper caramel and pecans

July 11: Cannoli – ricotta ice cream with chocolate chunk and pie crust

July 12: Mint and Chocolate – mint ice cream with chocolate cookie dough and Stracciatella

July 13: Tres Leches – three milk ice cream with praline pound cake pieces

July 14: Cherry Pie – cherry ice cream with jammy cherries and pie crust

July 15: Salty Snacks – sweet cream with peanut brittle, chocolate covered pretzels and a peanut butter swirl

July 16: Coffee and Cacao – roasted coffee base with Stracciatella 

July 17: Georgia Peach Crisp – sweet cream with peach jam and oat crisp

July 18: Roasted Strawberry – roasted strawberry ice cream with strawberry jam

July 19: NATIONAL ICE CREAM DAY

Sundae – Vanilla ice cream, jammy cherries, fudge caramel and praline peanuts

Brownie Sundae – Milk chocolate chip ice cream, chocolate chunk and brownies 

During these uncertain times, Jeni’s Splendid Ice Creams has prioritized offering flavors that transport you to another time and place. The company’s new feel-good collection was inspired by state fairs, a slice of Americana that will take you back to the summers of your childhood. 

Because state fairs have been canceled due to COVID-19, Jeni’s created its own virtual state fair experience on Instagram (@jenisstatefair). Viewers may explore the fairgrounds by tapping the photo tags—from boozy drink recipes at the Frosé Float to your new favorite summer playlist at the Brambleberry Bandstand—and play midway-style games with prizes throughout the month, including the chance to win a year’s worth of ice cream.

With the virtual state fair comes a new limited-edition flavor every Thursday for the next five weeks. The pints may be purchased in Jeni’s shops and online. The first offering was Watermelon Taffy, a flavor that directors of actual state fairs across the country picked as their personal favorite. This past week Wildberry Lavender rolled out. After that comes Orange Blossom Chiffon (July 23), Atlantic Beach Pie (July 30) and Sun-Popped Corn (August 6).

“We love the energy, color and flavor of a great state fair,” says Founder Jeni Britton Bauer. “From a flavor, art and design standpoint, we asked ourselves, if we were to hold our own state fair, what would we want it to be? What would it look like? The answer is a Jeni’s-fied mix of our memories of summer, vibes from the midway, and our imagination, in a way that only we could do.”

Check out these flavor concepts:

Atlantic Beach Pie – There is an old Southern legend that warns diners not to eat dessert after a seafood meal. Atlantic Beach Pie was the lone exception with its salty cracker crust, lemon custard filling and whipped cream topping. Jeni recreated this Southern staple with sweet cream ice cream and tart lemon custard adorned with homemade saltine streusel.

Orange Blossom Chiffon – This variety is sweet yet tart with tangerine and orange flavors. It is extra creamy and aerated for a chiffon-like texture. 

Sun-Popped Corn – The popcorn in this flavor is popped using the power of sunshine. The folks at BjornQorn in New York’s Hudson Valley use solar power to heat kettles filled with kernels. Jeni’s adds this crisp, sun-popped corn directly into fresh dairy, infusing every inch with the flavor and aroma of addicting buttery popcorn. 

Watermelon Taffy – Meant to taste like watermelon sour candy, this one has a puckery fruit flavor from a little watermelon and plenty of citric acid. It has a unique flavor twist from the addition of fresh cultured buttermilk and yogurt, which is made for Jeni’s by a nearby fifth-generation Ohio dairy.

Wildberry Lavender – This variety combines the flavors of steam-distilled lavender buds, cold-pressed orange zest and blackcurrants. To some, it tastes like fruit cereal milk. To others, it’s the flavor of springtime. 

It’s time to get busy creating flavors that peak consumers’ curiosity. It’s going to be long winter for many. Limited-edition and seasonal flavors may help pass the time. 

Again, don’t forget to get yourself a scoop or two this Sunday. Happy National Ice Cream Day!

(Scroll down for COVID-19 ice cream sales trend data.)

Eating with Our Eyes at SHIFT, the 2020 Installment of IFT

Before we heard of COVID-19, the majority of ingredient companies planning to exhibit at the Institute of Food Technologists’ Annual Meeting and Food Expo were likely going to focus their efforts on plant-sourced ingredients and all types of protein, along with natural and clean label claims. These topics will still be prevalent this coming week--July 13 to 15—when the conference “SHIFT”s to a virtual format. 

It’s going to be a different type of event, as IFT is all about tasting prototypes. This year we will be eating with our eyes.

Learn more about SHIFT20 by linking HERE. There’s still time to register. The live and pre-recorded sessions will all be available to registered attendees for one year. The topics are timely and a great resource for innovation and food science discovery.

A key theme at SHIFT20 will be whether the food that sustains our world could also be the biggest threat to its survival. Topics will be divided into five areas: Health and nutrition, food safety and security, science and technology, sustainability and innovation. For live events, attendees will be able to ask questions in real time. For pre-recorded sessions, attendees will be able to reach out to presenters through their virtual profile and ask questions directly.
Link HERE to view the complete SHIFT20 program.

Here are five facts to consider:

1. Retailers are reducing the number of SKUs they carry. With some products, this is because of anticipated supply chain issues. With others, it’s to free up shelf space for fast-moving and in-demand products, per the shopping trends of the past few months.
2. Many K-12 schools will be fully or partly virtual when classes resume in a few weeks. Many meals will be served at home. 
3. Universities and institutions will focus on pre-packaged foods for off-site consumption. 
4. The uptick in COVID-19 out-of-home dining during the summer months will slow when the seasons change.  
5. Food prices have increased the past few months, along with the unemployment rate. We are entering a recession.

Here are the five topics that every dairy foods formulator and supplier to the industry should prioritize.

1. Clean-label cost savings. A growing number of shoppers will become more price conscious this autumn. Brands that communicate their simple, clean-label attributes while being lower in price may have an advantage. Now is the time to consider formulation tweaks. This might be sweetener blending or strategic use of flavors and enhancers to reduce amounts of more costly ingredients, such as cheese, chocolate, cream, coffee and vanilla. This is especially true for imported ingredients.

2. Restaurant-inspired convenience cooking. Many home cooks are tiring, and while they may be increasingly price conscious, many are willing to spend a little more on restaurant-quality convenience. Think cooking creams and sauces; flavored cheeses and authentic queso; even barista foam and flavored creamer.

3. Adventurous flavors and package graphics. International travel has been shuttered. Domestic flights are limited, and frankly, scary to many. It’s time to design products that take the consumer on an adventure. They can even be tried and true favorites, just now with an attribute that brings back a memory of a place once visited. 

General Mills is doing this with its Oui by Yoplait French-style yogurt. The glass pots containing the yogurt now come in French-inspired designs. French Chic features stripes that come from the nautical culture of Northern France and have since become a style icon around the world. French Countryside features a pattern from what you might find in a farmhouse kitchen somewhere in the lavender fields of Provence. French Modern is inspired by Art Deco, the world-renowned visual style that first appeared in France in the early 1900s.

This limited-time Heritage Selection should be welcome by the many people who enjoy crafting with the glass pots. This is an activity that’s been trending the past few months while spending more time at home. Can your package provide something extra?

4. Immunity. The importance of health and wellness is at an all-time high as consumers try to build immunity and fight off the virus. This is something I wrote about early on after stay-at-home orders were issued. Read more HERE. It’s time to add proven probiotics to your dairy foods and flag their inclusion.

The American Dairy Products Institute hosted a webinar on July 9, 2020, titled: “Dairy Ingredients, Immunity & Immune Health.” To view the recorded event, link HERE. The research is fascinating. 

5. Food safety. It’s on top of every consumers’ mind. It’s also something that most companies don’t boast about. Now’s the time to share your food safety program, including COVID-19 precautions.