Specialty products on the move; value-added dairy products boost profit margins and please palates – includes related article on New Products Conference

Specialty products on the move; value-added dairy products boost profit margins and please palates – includes related article on New Products Conference – News & Trends

Ellen Dexheimer

Specialty Products on the Move

Value-added dairy products boost profit margins and please palates

In this era of individuality, consumers’ needs vary from person to person, from day to day, and from minute to minute. The health-conscious consumer who buys fat-free ice cream one week may splurge to purchase a premium ice cream the following week.

Dairy processors accommodate this trend by providing not only basic dairy products, but special products for special needs as well.

Webster’s Dictionary defines specialty as “a special mark or quality.” But the definition of a specialty dairy product is more complex than the one Webster provides. The first component of a value-added product is that because ingredients or health features have been added, a processor therefore can benefit from a higher profit margin. Secondly, the product provides a consumer with benefits that appeal to his or her immediate needs.

Healthy products made healthier

For the consumer, “value-added” often means that a healthy dairy product has been made healthier. In some cases, it can mean that a product has been made more convenient to prepare or consume. In other cases, it may simply mean that the product offers additional or unique flavors and textures.

“It’s like making a healthy dairy product healthier,” says Dave Haley, senior product manager at Marigold Foods Inc., Minneapolis.

Dave Hettinga, vice president of research, technology and engineering at Land O’Lakes Inc., agrees. “Obviously you want to look for attributes that satisfy consumers wants, needs and desires,” he says. Attributes such as less fat and fewer calories all add value to a product, and in most cases, these attributes add profit margin for the processor, Hettinga explains.

The number of value-added dairy products available to consumers has increased considerably in recent years, primarily because dairy processors have taken a new approach to securing dairy case space. In addition, processors are introducing more new products in hopes of increasing dairy product consumption.

“It’s true that because of the overabundance of SKUs (Stock Keeping Units) you need to have something different, a special hook created for a specific niche market,” says Haley.

For example, Marigold recently introduced Kemp’s Yogurt Jr.’s, yogurt developed for children that contains more protein, more calcium and no lumps.

“There’s no doubt that premium products or value-added products are what the industry needs to do,” Haley explains. “You’ll never be able to replace [the traditional appeal of] 2-percent milk, but you can add things to 2-percent and gain extra profits,” he says.

Obviously, other industry members agree. Extra Light 1% milk, launched earlier this year in California, is a prime example of a value-added commodity. The product, which is manufactured by several dairies in California and promoted by the California Milk Advisory Board (CMAB), is distributed throughout the state. Extra Light 1% is targeted to consumers concerned about fat in their diet, but who still desire whole-milk taste.

“The product currently has a 10 percent average share of market, and is taking away a little bit from lowfat milk sales and a little bit from nonfat milk sales,” says Adri Boudewyn, CMAB spokesman.

In a similar response to demand for lower fat fluid milk that tastes like whole milk, Farmland Dairies rolled out Skim Plus in mid-April. Farmland Dairies, Wallington, N.J., describes Skim Plus as a low-cholesterol milk with the flavor of whole milk. The product contains 24 percent more protein and 12 percent more calcium than whole milk.

The reason for the success of these lowfat products is simple, says Lynn Dornblaser, publisher of Gorman Publishing Co.’s New Product News. “The consumer has awakened to the importance of fat in the diet, and will simply choose less often those products that don’t deliver the lower fat benefit,” she explained at the Food Marketing Institute convention in Chicago in May.

Special milk for special needs

In addition to new lowfat fluid milk products, the fluid milk lineup has expanded to include products for consumers with special dietary needs. Dean Foods Co. has tabs on two prominent products in this category, Easy 2% lactose reduced lowfat milk and Ultra Slim-Fast refrigerated diet drink, which is under the direction of Ryan Milk Co., a subsidiary of Dean Foods.

Dean Foods launched Easy 2% in early May. The product was developed for consumers who have trouble digesting the lactose in milk, and has the same amount of vitamins, minerals, protein and calcium as standard 2-percent milk, only with 70-percent less lactose for easier digestibility. Easy 2%, which is targeted to families who have one or more members who suffer from lactose intolerance, currently is the only lactose-reduced fluid milk product on the market that comes packaged in gallons and half-gallons.

Although Easy 2% is processed like other 2-percent milk, Dean achieves lactose reduction by adding a lactase enzyme, patented by Dean Foods, during processing. As a result, Easy 2% has a slightly sweeter taste. Other lactose-reduced dairy products could follow, says Tom Keith, marketing projects director.

Dean anticipates that Easy 2% will account for 2- to 4-percent of total company dairy sales, which are estimated at about $1.25 billion in 1990.

Dairy does diet drinks

New product trends in the ’90s also will include “fractional,” products, products designed for eating by just one or two people. “Single-serve products are invading every product category,” said Dornblaser.

And the dairy category is no exception. Not only does refrigerated Ultra Slim-Fast fulfill the special needs of dieting consumers, it also comes in pre-mixed 12- and 24-ounce individual servings for convenience.

Dean’s subsidiary, Ryan Milk Co., Murray, Ky., has been awarded the exclusive processing and selling rights in 40 states for refrigerated Ultra Slim-Fast diet drink. The product’s roll-out began in June, when it was introduced in Cincinnati, Orlando, Phoenix and Tampa.

The product has proven successful for Ryan Milk in test markets, primarily because “Slim-Fast has become almost a generic name,” says Weldon Cole, vice president of sales and marketing. “If you just consider milk as a commodity, ours is a value-added product because it has a 60-day shelflife,” he explains.

There are unlimited market possibilities for Ultra Slim-Fast, says Cole, citing the airline industry as a prime target. Because the product is a meal replacer, the airlines could offer Ultra Slim-Fast as an option that is less expensive for them than serving a full meal. Restaurants are another possible market, especially since dieting consumers sometimes bring their own Ultra Slim-Fast to restaurants. “Shelf prices run from 99 cents up to $1.29 for a 12-ounce serving and from $1.99 to $2.29 for a 24-ounce serving. There aren’t many places you can go for lunch that costs $2.29,” says Cole.

Plans are underway to expand both the distribution and the flavor selection of Ultra Slim-Fast.

Value-added for the manufacturer

When it comes to value-added products in the dairy industry, the fat-free frozen dessert arena is leading the pack with new product introductions from The Simplesse Co., Kraft General Foods, Dreyer’s/Edy’s Grand Ice Cream, Dean Foods Co. and Borden Inc., among others.

Close on the heels of Kraft’s introduction of Sealtest Free frozen dairy dessert last October, the company launched Sealtest Free nonfat frozen dessert bars, geared toward consumers looking to reduce fat and cholesterol in their diets.

Adding value to cottage cheese

Meanwhile, Knudsen Dairy, headquartered in Los Angeles, has introduced a potential goldmine for manufacturers–lowfat cottage cheese with fruit.

Knudsen has introduced Lowfat Cottage Cheese & Fruit, which it rolled out in late April. With this product, Knudsen has transformed a basic dairy product into a specialty dairy product by adding fruit, thus adding value in an attempt to boost sales in the comparatively small cottage cheese category.

According to a consumer focus study conducted by CMAB, cottage cheese’s position in the industry is being challenged by competitors such as yogurt and ricotta cheese, as well as the trend toward eating lower calorie dairy foods.

Knudsen has attempted to remedy this situation by reformulating its Lowfat Cottage Cheese & Fruit. Whereas Knudsen’s original small curd product contained 4 percent milkfat and was available only with pineapple, the reformulated product contains 2 percent milkfat and comes in pineapple, spiced apple, strawberry, and peach.

Cheese designed to please

Amidst the frenzy of new specialty dairy product introductions, industry sources project that light cheeses may be one of the fastest growing categories in the industry. For example, First World Cheese Inc., Maplewood, N.J., last month rolled out a line of Alpine Lace fat-free cheese.

Marketed under the Alpine Lace Lean N’ Free label, First World Cheese has introduced fat-free low cholesterol cheese, which the company says is the first real cheese fat-free product to go into national distribution. Alpine Lace Lean N’ Free is available in cheddar, mozzarella and American, and sold both in the dairy case and in the delicatessen departments of supermarket chains nationwide.

Another cheese processor, Merkts Cheese Co. in Bristol Wis., has developed a cheese product that fills both the convenience needs and the health demands of consumers. Merkts’ microwave cheese sauce is available in four flavors and comes packaged in 13.2-ounce microwaveable glass jars sold from the dairy case. Merkts says its cheese sauce contains 50 percent less sodium, 10 percent less fat and 8 percent less cholesterol than the leading national brand.

Butter: fat or no fat?

Butter is a source of consumers’ concerns about their dairy products, but a niche market for high-fat butter still exists. To address this demand, Hotel Bar Foods has introduced a new unsalted gournet butter called Plugra, which contains 82 percent butterfat. The product originally was developed for professional cooks, but will be available this summer at the retail level.

At the other end of the fat spectrum are products such as Lactantia “Pure & Simple” light butter, manufactured by Ault Foods Ltd., Toronto, Canada. With the introduction of Pure & Simple, the company hopes to stem the decline of butter sales in Canada, which are currently falling by an average of 3 percent annually.

Pure & Simple is a lightly salted butter that offers 52 percent less butterfat and consequently 46 percent fewer calories, 46 percent less cholesterol and 25 percent less salt than regular butter. The product is currently available at the retail level in Canada, but Ault Foods plans to market the product to the United States, Europe and other countries.

This surge of new product introductions has kept its pace for the past several years, and with consumer buying trends on the move, that pace is destined to continue. “Now that consumers know what to look for [in the dairy products they buy], they will not abandon the lowfat products or any products that offer health benefits,” says Dornblaser.

PHOTO : Close on the heels of Kraft’s introduction of Sealtest Free frozen dairy dessert, the

PHOTO : company launched Sealtest Free nonfat frozen dessert bars, which also are free of fat and

PHOTO : cholesterol. The product is geared toward consumers looking to reduce fat and cholesterol

PHOTO : in their diets.

PHOTO : California dairies are wallowing in the success of Extra Light 1% milk, launched earlier

PHOTO : this year. Extra Light 1% is targeted to consumers concerned about fat in their diet, but

PHOTO : who still desire milk that tastes good.

PHOTO : Refrigerated Ultra Slim-Fast is designed to fulfill the special needs of dieting

PHOTO : consumers. The product also comes in pre-mixed 12- and 24-ounce individuals servings for

PHOTO : consumer convenience.

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