Cultured dairy products like Greek yogurt, cottage cheese, kefir, lassi and gourmet cheeses have gotten plenty of press as sales spiked over the past several years. But, now, the market for them is eroding.
What are dairy food producers supposed to do now? A lot of brands went all in on probiotics. Is there anything that can save them now that sales are slipping?
Why the decline in cultured dairy demand?
Good question. Most likely, it's a combination of increased competition, a recent peak in the dairy market and changing consumer preferences.
Unit sales of cottage cheese fell 5.1 percent last year. Why? Did people suddenly stop liking cottage cheese? It's a nice, low-fat, health-friendly food, right? Well, yes it is. And truth be told, private label cottage cheese sales were just fine — in fact they increased 2.1 percent.
But brand names like Dean's (unit sales down 22.2 percent), Daisy (unit sales down 6 percent) and Breakstone (units down a whopping 25.7 percent!) dragged the sector down in 2015. Consumers had more cottage cheese products to choose from, and other dairy products competing for attention as market entrants rushed in to take advantage of a hot market.
And there was competition from non-dairy sources, as well. Sabra — hummus purveyor extraordinaire — saw a 43.9 percent increase in its sales. That was sure to take attention away from other creamy-textured, dip-able products like cottage cheese and sour cream.
The same could be said of Wholly Guacamole, which sold 13.7 percent more units last year. Guacamole is in high demand right now; many quick-service restaurants are adding it to sandwiches (maybe to offer more taste competition to Chipotle).
So why are hummus and guacamole hot, while dairy is not? One word: snackification.
How snackification is changing the dairy foods aisle.
It used to be that a trip to the dairy aisle involved getting a fresh gallon of milk, maybe a tub of cottage cheese or sour cream, a package of butter and a block of cheese. But those are parcels designed for people who stock refrigerators and cook at home. They aren't Millennial friendly.
Millennials live on the move. They don't plan meals like their Boomer parents. They want grab-and-go items. And they want snackified products — high on flavor, small on serving. We're seeing that trend playing out with the dairy products that are popular right now.
Even with entrants flooding into the Greek yogurt aisle, unit sales of yogurt fell less than half a percent last year. That may not be statistically significant, but the yogurt market was able to support all that new supply because yogurt is already sold in a snackified package. Single-serving yogurt cups have dominated the yogurt shelf for decades.
Regular brick cream cheese sales dropped 1.3 percent; meanwhile, sales of whipped cream cheese tubs rose 2 percent. Why? Because tubs of whipped cream cheese are ideal for dipping baby veggies or fruit bites.
It's also perceived to be healthier. A whipped cream cheese has about 40 percent less calories as the same volume of regular cream cheese, just due to the presence of the air — consumers get all the creaminess and less of the guilt. And whipped cream cheese comes in a variety of flavors — strawberry, chive, maple, hazelnut and more. It's tailor-made for Millennial foodies.
The snackification/exotic flavor preference trends also partly explain why hummus and guacamole are gaining where dairy is losing — producers of those products have quickly embraced single-serve packaging and have actively marketed to experimental Millennial consumers via diversified flavor offerings.
A Millennial grocery shopper can, for example, buy regular hummus, or pine nut hummus, roasted red pepper hummus, pesto hummus, white bean hummus… Regular guacamole, or spicy guacamole, habanero guacamole, chunky tomato-and-onion guacamole, garlic guacamole…
So, what lessons can dairy producers learn?
Diversify, diversify, diversify: Offer more intra-product line flavors. Experiment. Be bold in your product development. Market potential food pairings and easy-to-make recipes.
Embrace the snackification trend: Offer more single-serve packages. You need to cater to Millennials on the go.
And as you develop products, think about use. Millennials love dips. They love bite-size foods. How can you develop dairy foods that best play to those preferences?