New Products Hint at a Bright Global Dairy Future

Hershey Co. announced last month it was launching a new brand in China called Lancaster. The product is a “milk candy”—a $1.2 billion category in China and one of the nation’s fastest-growing candy varieties.

Milk candies, as the name implies, are generally made using milk, butter, starch and sweeteners. Hershey plans to import the milk to make the candies. The company has not identified the origin of the milk, but whether it comes from the United States or New Zealand or elsewhere is beside the point.

The Hershey rollout is a perfect example of how new product development overseas is broadening milk utilization and creating opportunity for the world’s major milk producers.

Hershey’s landmark plunge—Lancaster marks its first rollout of a new brand outside the United States—reinforces beliefs that recent consumption gains for dairy and dairy-containing foods are only the tip of the iceberg in China. Hershey in fact opened a product innovation center—its second largest R&D facility in the world—in Shanghai days after the Lancaster launch.

Innovation is key to the health and growth of any business. And vibrant new product development by dairy manufacturers and food and beverage makers using milk, milk powder, whey proteins, milk protein concentrates, cheese, milkfat and lactose in Southeast Asia, the Middle East, Latin America and elsewhere suggest a broadening of tastes and growing appetites for dairy around the world.

We have talked about the drivers before: rising populations, urbanization, escalating wages, expanding middle classes, modernizing infrastructures and retail channels, booming foodservice, and lifestyles that increasingly put a premium on nutrition and convenience.

Speaking specifically about the growth potential of flavored milk, Sumit Khatter, director of category management at Tetra Pak, noted in the packaging company’s June Dairy Index, “Consumers clearly have the desire to explore new things. That’s creating demand for new flavors and taste experiences.”

In Brazil, China, India and Southeast Asia, flavored milks in papaya, rose, saffron, cardamom, tiramisu and red date have debuted over the past 18 months. In South Korea, pizza chains have taken to offering swiss, blue, cottage and cream cheese as toppings in addition to more traditional varieties. Nestlé and other yogurt processors are taking the Greek yogurt that’s swept the U.S. market to Malaysia, Singapore and other budding yogurt consuming nations.

But it isn’t only the desire for new tastes driving product development. Dairy’s nutrition message is getting through to consumers (through both government programs and processor messaging). Consumers have shown they are willing to pay premium prices for dairy to gain the associated health benefits for themselves and their families, which yields obvious benefits to dairy marketers and milk producers.

Most notably, products high in dairy protein have triggered a rush of new product development as consumers subscribe to dairy protein benefits. It’s a worldwide trend, in emerging markets and developed nations alike. Recent rollouts include Seoul Dairy’s Shakking “energy milk” (South Korea) with up to twice the protein content of regular milk and made with imported whey protein concentrate and milk protein concentrate; Volac’s Upbeat lowfat, high-protein dairy drink (Great Britain); and Powerful Men’s Powerful Yogurt (United States) with 20-25g of protein per serving.

Such lively new product development, particularly with high-value ingredients, is a positive demand sign, ultimately leading to bigger markets for U.S. milk and milk products.

(This article first appeared in Agri-View in July 2013.)

The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.