How do you perceive the state of innovation in dairy at the moment?
Tim Van der Schraelen: If we look at the dairy business at the moment, volume wise it seems quite good but we know there’s a lot of pressure on prices. There’s probably one way for manufactures in the dairy sector to get out of that situation and that’s through innovation, especially in the functional parts of the market. This is the area that can still generate some margins and some good growth. This is especially true in segments such as drinking yogurts, where we see a lot of growth.
Do you perceive any activity in other sectors such as milk and cheese?
VdS: In liquid milk, because margins are under so much pressure, the only thing the manufacturer can do is add value, and functional ingredients and functional products are clearly a trend.
A lot of things are also happening on cheese especially if we look at Asia, an area where cheese traditionally wasn’t important. But now we see things beginning to grow a lot, especially with processed cheese.
How much is this innovation and activity driven by a need to differentiate your products from someone else’s, and how much is driven by the high interest in health issues among consumers?
VdS: It’s a combination of both. We’ve done a lot of research to try and grasp what’s happening in the minds of consumers and how this relates to our ingredients.
The more you go into developed regions of the world, the more health is an established concern, and for the manufacturers it’s a clear route to follow to differentiate your products from your competitors.
For companies like yours – major suppliers to dairy – what have been the big developments in recent years?
VdS: One has been what I would describe as the more technological stuff such as replacing fats, replacing sugar in products, while still keeping a good texture, good body and good creaminess for the products. If we talk about health concerns, these are the first things that come on the list for consumers. If I want to be healthy, I have to go easy on the sugar and easy on the fats. These are concerns that dairies have to address and that we as a supplier have to address.
The second area is health and nutritional claims, and the number one is clearly digestive health. This is one of the most important areas because if consumers eat products with, for example, prebiotics, they’ll notice that it makes a difference to the digestive system and they’ll be willing to pay a little bit more for these products. And they’re really prepared to pay a little bit more even in difficult times.
Even though we’ve had a recession, in the US last year Yakult increased its sales by 44%. In Italy – an economy that wasn’t doing too well – Danone with Activia made impressive growth. Another area is under the umbrella of what I would call ‘back to nature’; ‘back to basics’ products. And then there are products related to allergies, such as lactose-free products and gluten-free products. These may be niche markets, but for players in them they can be very successful in terms of margin generation.
When you talk about functional products, this is a different kind of business to traditional products – it’s not always a business about volume, it’s about added value, it’s about margins.
Additionally, there are things that you could put under the umbrella of ‘feel good’, giving you energy to cope with the difficult tasks you have through the day, and we see interesting opportunities here. It may be a bit strange if a young mum who drove her kids to school, then goes to the office, was drinking Red Bull all the time, but it probably wouldn’t be noticed if she had a dairy drink that provided energy.
The picture you’re painting is of some new and very exciting challenges for dairy. This presumably means that dairy in the future isn’t going to be boring?
VdS: Not at all. It shows that in order to be successful in the long-term, dairy manufacturers should explore these niches because it’s in these niches that margin is generated; that money is generated that permits further innovation in the future.
One of the big issues ahead is the health claims legislation. Can you say something about the important role that companies like yourself have in working with dairy companies to face up to these challenges?
VdS: This is one of our basic roles and one of the ways in which we want to differentiate ourselves in the Beneo group from other players in the market. We’ll support our customers in the different sectors of innovation because this legislation will change the focus of the industry much more than anybody anticipated when it started.
We welcome this legislation because functional foods and health claims can only be successful if, in the long-term, there’s a good basis for them and good substantiation to support these claims.
The problem is, with the European Food Standards Agency (EFSA) taking such a hard and difficult position, nobody is really sure about the outcome of claims that were well substantiated.
We’ve submitted a number of claims with good backup, but we’re still waiting to hear from EFSA. What we’ve submitted is based on good science and, internationally, there’s a clear scientific consensus on what we’ve submitted. If it’s refused, it’s more the position of EFSA than the scientific world because a lot of these claims are authorised in a number of countries.
Clearly, companies in the dairy industry need as much guidance as possible, and that’s the reason why we’ve announced the launch of the Beneo Institute. It will draw from knowledge within the group on three levels:
So, what’s the science we need to do the work, what can we do according to the law and how do we translate that to the different target groups?
Although based mainly in Germany, the Institute works together with people based in the different business units on the Beneo Group. I believe it takes the support we can give to another level because by grouping all this expertise together, the whole group can tap into the Institute as a source of information and expertise, and this will clearly help us to support our customers and partners in the dairy industry.
Tim Van der Schraelen is marketing & communication manager at Beneo-Orafti.
Geoff Platt is editor of Dairy Innovation magazine. Subscribe here.
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