Innovation key to functional dairy growth in Europe

Not so long ago, dairies, government agencies and marketing men were patting themselves on the backs for convincing a large percentage of the Western population that drinking milk was good for them and that they should do it—often. It took a while, but the message got across.

Dairy manufacturers and marketers are now facing a new challenge—meeting the needs of an increasingly sophisticated populace that wants more than a long glass of milk with their meals.

The good news is that they are responding to that challenge with an alacrity that bodes well for dairy manufacturers and functional foods players alike.

A report on the western European dairy market from food and drink consultancy Zenith International states as much. "New hope is being fostered by new segments, such as organics and probiotics," said Zenith's research director Gary Roethenbaugh. "The key word for future growth is innovation. The challenge facing the European dairy industry is to continue investing in research and developing innovative products that meet consumer needs and backing them with sustained marketing activity."

Mintel's database of functional dairy new products shows this is exactly what the dairy industry is doing the world over. In the last three months, Mintel lists more than 70 product launches ranging from functional yoghurts to margarines, creams, cheeses and milks. Encouragingly, many of these launches occurred in the lesser-known markets of Vietnam, China, Indonesia and South Africa.

A spokesperson for Finnish-based dairy giant, Valio, said non-traditional areas of the dairy market were becoming the most important in terms of growth. This is reflected in Valio's constant development of new functional products, and a full-time staff of 120 devoted to the task. New launches include a lactose-free milk; low-lactose milks, cheeses and yoghurts; a similar range of probiotic-based products; and blood pressure-lowering fermented milks and yoghurts. All show strong sales growth in the predominantly Scandinavian markets where they are sold.

A spokesperson for another large European player, Netherlands-based Campina, noted this change in consumer spending habits. "People want more from their dairy products. They want products with added value," she observed. The company is active in many countries and has a different strategy for each market. "We realize that we must move from our traditional range of products to stay at the top of the European dairy game. We are taking active steps to do this with probiotic products and other enhanced products in many of the European markets we operate in."

Zenith's Roethenbaugh said companies must concentrate on value-added products to improve profitability. "The way forward seems to be functional, ecologically friendly and consumption-occasion products along with increased attention to product quality and safety," he noted.

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