ORLANDO, FL - How to understand consumer food preference and how to leverage them in the marketplace is a complex task, according to panelists on a program at the 2017 Dairy Forum sponsored by the International Dairy Foods Association.
In addition to the attendees at the annual three-day conference, there were online listeners to this panel presentation in 41 states and 57 countries, according to Kemps vice-president Rachel Kyllo, who served as the panel moderator. An overarching trend among consumers is that they want to know what's in their food and where it came from, she noted.
Three macro trends
According to Brian Boyle, the director of finance at PricewaterhouseCoopers, which is a major international business consulting firm, there are three distinct macro trends in the food sector. They are income bifurcation, ethnicity/demographic transition and technological changes.
Income bifurcation is a definite challenge for food suppliers because 55 percent of the people age 18 and over in the United States on living on an annual income of less than $30,000 Boyle emphasized. This converts to groupings of survivalists and selectionists on food prices, he observed.
The ethnic factor is important because Hispanics (more than 60 percent of them from Mexico) will have a 36 percent gain in
population in the United States by the year 2030, Boyle predicted. Other increases from their current total will be 41 percent for Asians and 13 percent for African Americans, he added.
Surveys indicate that 88 percent of households consume at least two ethnic category foods per month, Boyle reported. He said the current annual food sale values in the United States are $6.5 billion for Hispanic type foods and $2 billion for Asian categories.
For demographic transition, the most influential group will be the millennial sector of 76 million people — those age 19 to 36 today, Boyle indicated. A significant portion of them will “want the best” and many of them will be able and willing to pay for “what they want,” he remarked.
At the moment, however, Boyle observed that “most people shop on price alone.” The economic downturn in 2008 fed into that practice — much to the benefit of the lower-priced private label foods, he observed. Boyle also stated that technology has changed shopping habits.
Major food trends
Meshed with the macro trends will be major underlying ones such as health and wellness, convenience, transparency, and sustainability, Boyle pointed out. Regarding health concerns, he cited “a hyper focus” on ingredients — against genetically modified organisms, preservatives and processing and in favor of protein, fiber and calcium.
The preference for new cuisines derived from countries around the world is another established trend, Boyle pointed out. Related to that is the desire for new flavors in many foods, he noted.
Transparency disclosure “beyond the label” is another relatively new driving force, Boyle continued. That request extends to the entire chain of the food's growth and preparation, including a negative view on any added sugar and even whether any GMO feeds were provided to meat animals during the previous three years, he stated.
Regarding sustainability and social responsibility, the particular concerns are fair trade, animal and food worker welfare, and protection of the environment, Boyle pointed out. The “Farm to Fork” promotion is another expression of this, he added.
Convenience is shown with snack eating, the “grab and go” attitude, single serves, “ready to eat” packaging, the explosion of apps for food delivery and the opportunity of home delivery via use of the Internet, Boyle said.
Dairy sector trends
Many of the same trends apply within the dairy sector, according to Jon Davis, who is the executive vice president for ingredients with Agropur in the United States and the former chief executive officer of Davisco. Consumers “want it all and for a low price,” he remarked.
What they want are new flavor profiles, a reduction in processing steps, an indication of local sourcing and assurance that bovine somatotropin was not involved in producing the milk, Davis indicated. He questioned the request for non-BST, describing it as a lack of knowledge driven by scare and commented that many people opposed to BST don't even know what it is.
Davis and Philippe Caradec, who is the vice-president for corporate affairs with the Dannon company's operations in the United Sates, agreed that a ban on use of BST and GMOs would take away technologies that have been approved and proven to be safe. If there is a problem with health, Boyle said it is from pesticides, not GMOs.
“For its part, however, Dannon will base one-half of its product portfolio in the United States on milk produced by cows receiving non-GMO feed beginning in 2017— details of which are provided at www.Dannonpledge.com Caradec stated.”
In line with that practice, Caradec said Dannon subscribes to environmental protection, human and animal welfare, and the sustainability of farmers supplying milk for the non-GMO product portfolio by providing them with a milk price that guarantees a profit margin on their input costs.
Of Dannon's dairy farmer clients, 90 percent have been certified on animal welfare practices through the Validus program, Caradec reported. He called for consumer education regarding GMOs while Davis remarked that being denied the use of good technology “is bad.”
Dairy product performances
Regarding particular dairy products, Boyle said the recent highlights are yogurt, cottage cheese and cream while sales of fluid milk were down another 2 percent in 2016. Sales of beverages derived from soybeans, almonds and cashews were all up, cheese sales were flat and ice cream sales were up slightly during the year. He blamed scandal on a wood pulp contamination of Parmesan cheese for hurting cheese sales.
Consumers are looking for new cottage cheese products, for probiotics and protein, for new yogurt flavors, kefir and for gourmet items, Boyle continued. With cheese, he noted preferences for organics, more imports and varieties with minimal processing.
One new product that Agropur has launched is protein water (biPro), Davis reported. For the sake of consumer convenience, he said it is a replacement of the whey protein isolate powder which had to be mixed and shaken in water.
“What's right for the consumer today might not be right tomorrow,” Davis warned.
Dairy on the horizon
As to what's ahead for the dairy sector, panelist Christopher Nolan, the managing director at the PricewaterhouseCoopers Global Deals Origination division, predicted a continuation of mergers and acquisitions involving organic milk processors; an appetite for cultured products such as yogurt and cottage cheese as healthy snack choices; an emphasis on dairy ingredients with particular nutritional traits; the purchase of unique, artisanal, hard and farmer's cheese varieties, yogurts and cottage cheese by the “selectionist” buyers; and an increase of cheeses and yogurts made from nuts and other plant types.
Mergers and acquisitions are being prompted by the larger firms' interest in obtaining products that smaller companies have developed, Nolan pointed out. He said there are about 400 such companies in the United States that are takeover targets for that reason.
The top 25 companies have 45 percent of the world's food sales but their increases have only been about 1 percent in each of the last five years, Nolan observed. They're doing very little of their own product research but they're looking for “on trend products” in the organic and “all natural” sectors, he said.
From its high point, fluid milk consumption has declined by 13 percent per year while, from a much smaller base, organic milk sales were up by 20 percent during the past year, Nolan stated.
With cooking for family meals still popular with Hispanics, especially those with roots in Mexico (35 million of the 55 million Hispanics in the United States), Caradec expects a strong market for Dannon's yogurt and yogurt drinks. He said the company is well known in Mexico.
Regarding markets for dairy, Davis noted that 95 percent of the world's population lives outside the United States. On that point, he condemned the Trump administration's “bullying” attitude in relations with other countries, especially with China. “It's not a fight that the dairy industry wants.”
Boyle cited the emerging controversy about tariffs, noting that they affect the global supply chain. How this will play out will be “very interesting,” he commented.
What's natural in food?
With the failure of the federal Food and Drug Administration to clarify what constitutes “natural” in foods, some companies have removed such a reference from their labels and a class action lawsuit is pending, Boyle pointed out.
The FDA was flooded with comments on the question and no ruling is likely anytime soon, Caradec predicted. “It's extremely confusing for everyone.” While “a clean label will help a lot,” he suggested focusing instead on shared values, sustainability, ethical behavior and a sense of community in the food sector.
Boyle recalled how the cost of food in the United States was about a 35 percent share of disposal income during the 1800s compared to the low double digits today (much higher in many other countries).
To a question about the role of science, Boyle noted that although technology is very sophisticated in identifying food ingredients there continues to be lots of food fraud, especially on imports. He said fraud applies all the way the use of trace ingredients to an 80 percent false identification of what are supposedly “sea bass” coming from Chile.