Setting the Pace for Innovation in Dairy

By Christopher Costagli, IRI

“Times and conditions change so rapidly that we must keep our aim constantly focused on the future.”
- Walt Disney

It’s pretty safe to say that without innovation life would look a lot different than it does now. We might still be riding horses to work, reading at night by candlelight and sending messages via carrier pigeons. Change is necessary for growth.  

This is also true for the CPG industry, including dairy manufacturers. All of us working in the industry must constantly ask ourselves if we have been doing the same old thing for much too long – whether its ongoing battles with spreadsheets, data sitting in separate systems or something else – and how we can do better. There are abundant tools already available to manage the everyday challenges, the market and its consumers will continue to evolve, and whether we are proactive or reactive is up to us.

Dairy has been seeing some particular challenges in recent years, including with the rise of dairy alternatives and plant-based proteins, as well as other challenges. While growth has slowed in dairy, the aisle is still heavily shopped, with 99.6% of households purchasing dairy products and each buyer now spending $365 annually.

Innovation infuses shopper interest in the dairy aisle, though, evident by the fact that, in 2017, new dairy products generated over $2.6 billion, mostly through brand extensions, especially in yogurt and ice cream.  


Shopper Influences

E-commerce has made its way into the CPG arena and is an important channel to understand as it continues to evolve. More than three-quarters (77%) of all retail sales are being influenced by digital – even though 70% of U.S. consumers have not yet bought groceries online (though that is poised to change over the next few years). While center store CPG products have seen the majority of interest online so far, consumers will get more comfortable with ordering perishables online as delivery options expand.

Interestingly, a non-dairy brand is using e-commerce to bring back a dairy and retail relic of the past – the milkman. Ripple offers a subscription to their pea protein milk beverage, so consumers can get it delivered to their door at a specific time. The brand is also tapping into the latest consumer trends around health, wellness and the environment in order to capture consumer attention.

Social media has become an important influencer, as well, particularly with younger generations. More than one-third (34%) of millennials say that they have become aware of a brand through social media, and almost half (47%) trust the content that other users are creating (versus the 25% who trust the content the brand generates). This trust in user-generated content is paying off for Halo Top, which has been benefitting from its strong social presence, which includes a 433% increase from 2016 to 2017 in customers talking about its brand online.

To successfully survive the growing influence of e-commerce and social media, dairy companies need to know which trends to leverage when they are innovating, be able to dig deep into consumers’ wants and needs, and find exciting new ways to upend the industry in order to grow.  

Winning Dairy Brands

As part of IRI’s ongoing New Product Pacesetters work, which assesses the first-year success of new products, several dairy brands are helping set the pace for innovation in the industry.

During 2017, approximately 14% of new dairy products generated $1 million or more in their year-one sales, and some even went beyond $5 million including UPCs from Halo Top, Yoplait Go-Gurt and Outshine Fruit Bars.

Newer brands had a harder time, as only 8% of their new products surpassed $1 million in sales. And, fewer UPCs from new brands broke $5 million.  

Overall, the most successful new dairy products leveraged existing brand equity, and the consumer trends of convenience, wellness and balanced indulgence.




Recipe for Healthy Growth

How can new and existing dairy brands compete in an exceeding crowded and competitive marketplace? Here are four key strategies:

1. Use your equity but do not be afraid to take a risk on something new. Be open to innovation opportunities that take you outside your comfort zone, and look to new categories and sub-categories for expansion opportunities.

2. Know your consumer. With big data only getting bigger, there are so many ways to find and understand your higher-value consumers. All consumers are expecting more from products and focusing on balance in their eating habits, so it’s important to know what your particular target consumers value.

3. Bridge the digital gap. While freshness and expiration dates are among the most reported concerns with consumers purchasing dairy products online, click and collect and local delivery, such as through Peapod and Instacart, are addressing those concerns. Product and packaging innovation can also help.

4. Stand for something. Brands that succeed often get involved with charitable initiatives that align well with their business. Chobani has a food incubator program that teaches startups what they need to be successful. 4th & Heart, a ghee manufacturer, helps women and children in India to build sustainable livelihoods. Häagen-Dazs is in its 10th year of working to save honey bees. These types of efforts are important, especially to Gen Z consumers who buy largely based on brand and see brands that stand for something as a status symbol.


Let me know if you’d like to further dig into any of the information above, or want to talk about different ways to uncover growth in the dairy aisle. You can reach me at



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