What’s driving dairy product innovation in California?
At SIAL Paris 2024, DairyReporter spoke to Bob Carroll, VP of business development, California Milk Advisory Board (CMAB), to find out more about what consumer trends are driving dairy sales as well as new product development. We also chatted about this year’s Real California Milk Excelerator and what the seven finalists are bringing to the table: more on that here.
For the latest retail and shopper trends shaping dairy innovation in the Golden State, read on.
Protein-packed and lactose-free dairy
Protein remains a major driving force in new product development. According to retail data shown to us by Carroll and covering the 52 weeks ending March 2024, four of the top 10 highest-growing brands in sales terms in California featured protein-related claims: with Premier Protein ($221.4m in sales, up $36.9m), Core Power Elite ($43.8m, up $21.3m) and Core Power ($44.1m, up $21m) forming the top 3; the other top 10 high-protein brand being Muscle Milk in forth (up $17.1m and having generated more than $56m in sales for the period).
“If I had to say one thing for what's really driving a lot of the growth in California in particular, it's protein,” Carroll told us.
This is also reflected in the Real Milk Excelerator cohort, where start-ups have entered with product concepts such as high-protein frozen yogurt and cottage cheese-based ice cream.
“The other major trend is lactose-free,” he said, then caveated: “We had a lot of plant-based growth in California for a long time, but that’s turning around – people are coming back to dairy. Almond and oat, even oat milk is declining now in California.” Some of those consumers are swapping plant-based for lactose-free dairy, he said.
“I'm not sure if everybody who's starting to consume more lactose-free products are lactose-intolerant. It's really this idea that it's healthy somehow - there's a perception.”
Cottage cheese is also continuing to grow. “TikTok was really just the starting point,” the VP said, referring to the viral social media trend of two years ago that spawned cottage cheese ice cream. “The brands that are benefiting from that are clean-label brands such as Daisy and Good Culture,” he said, adding that there are no signs that Americans have had enough of the high-protein dairy stuff yet – unlike in some European markets such as Italy, where growth in high-protein product sales had been stagnating.
“At some point, cottage cheese, high-protein, will at least level off – but I think in the Us, we have a way to go, absolutely. And with that level of innovation [from startups in the RCME cohort], I suppose things can only get better,” Carroll added.
There’s the argument that melding product categories together – such as commercially-made cottage cheese ice cream – could hit some of that clean-label image that minimally-processed dairy currently enjoys and which is also a major selling point for the category. “Retaining that would be a challenge, definitely,” Carroll agreed but suggested that dairy brands have tackled similar challenges successfully before: for example, in the sweetened yogurt category.
“In yogurt, we’ve seen a trend for low or no sugar, and certainly 5-10 years ago, US yogurts were loaded with sugar. But now, there is a big trend towards zero-sugar products and some of these brands are the fastest-growing,” he explained.
Collagen
While not a dairy trend per se – collagen comes from the connective tissue of animals such as cows or fish – Carroll told us the ingredient has applications in the dairy beverage space, such as dairy-based RTD beverages. “There is a huge trend of adding collagen to coffee in California,” the VP told us. “I've seen a lot of people have powdered collagen that they just scoop into their coffee, so that’s for sure was a trend and products being RTD makes it a little bit easier to start a business.”
Projo, one of the companies in the RCME cohort, are aiming to enter the functional coffee space with their protein-packed, collagen-infused instant coffee, he told us. “I haven't seen this type of functionality offered in this particular format and I think that's a potential place for Projo to go into,” he added. Across the food industry, collagen-infused products have been cropping up in recent years, from collagen-infused tea to water.
Collagen intake is linked with improvements to skin, hair and bone health and increase in muscle mass, with research suggesting that even a low dose of 5g per day can be beneficial.
Hispanic cheese
Americans’ cheese intake continues to set new records in recent years, with USDA data estimating that cheese consumption surged to 42 pounds per person in 2022. In California in particular, Hispanic cheeses have been making the largest waves among consumers, as Carroll told us.
“California has the largest Hispanic cheese processor in the US and the growth has been phenomenal, largely driven by the real fresh cheeses: queso fresco, the shorter shelf-life, almost farmer-type cheese. At one point, I did a list of all the growing products by item in California, and out of the top 30, four or five were either Hispanic or Italian-style.”
There’s also growth in mozzarella and string cheese driven by the food service sector or retail, or a mix of both.
The other area of growth in cheese is in snacking. “Snacking kits, where you have cheese in one compartment and nuts and dried fruit in another, have been a huge growth driver,” Carroll said.
Private-label dairy
The US Consumer Price Index for Dairy and Related Products nudged upwards each month since May 2024 and has been trending largely flat in the last two years. This indicates that the prices paid by consumers for dairy goods have stayed elevated during the period.
One way shoppers have been addressing this has been by trading down from brand to private-label items – and this continues today, Carroll told us. “Inflation has had an impact on private label and own-brand sales growth, though not across all dairy categories – ice cream for example is still very heavily branded.
“But private-label cheese and milk has seen lots of growth."
