Market Growth in Health and Wellness Dairy

Health and wellness dairy products are once again driving growth in dairy, as manufacturers stay abreast of changing consumer demands.

Health and Wellness Dairy Performance

Health and wellness statistics from Euromonitor International show that global value sales of health and wellness dairy products amounted to a formidable US$174.3 billion in 2015. This comprises dairy products that are fortified/functional, better for you (BFY, i.e., products labelled as being reduced in sugar and/or fat), organic, lactose-free and naturally healthy (such as sour milk drinks). Non-dairy milk alternatives, such as naturally healthy soy-based dairy alternatives, are also included.

While the overall dairy category outperformed the health and wellness dairy category between 2011 and 2013, the situation reversed in 2013, with the health and wellness category expected to drive growth to 2020.

Changing Impact of Dairy Fat

Not all health and wellness dairy categories have enjoyed equal popularity, though. Over the review period, reduced sugar dairy product values slid by 11 percent, while reduced fat took a 4 percent dip. As consumers are becoming warier not just of added sugar but also of “artificial" ingredients, they are no longer keen on seeing sweeteners listed on product labels.

The move away from BFY reduced fat products illustrates how healthy eating trends can change over time as scientific insights reveal new facets, casting doubt on once widely accepted nutritional maxims.

Based on the premise that dairy fat consists mainly of the cardiovascular disease (CVD)-promoting saturated kind, official healthy eating guidelines have long been advising consumers to opt for low fat rather than full fat dairy products.

In recent years, however, studies have started to emerge which are calling established wisdom on the matter into question. In December 2015, for example, the American Journal of Clinical Nutrition published a well-designed study based on the DASH diet, in which sugar-rich items were replaced with full fat dairy products (2016 Feb;103(2):341-7. DOI: 10.3945/ajcn.115.123281). DASH stands for Dietary Approaches to stop Hypertension and is widely endorsed, including by the U.S. National Institutes of Health (NIH).

This study indicated that the high dairy fat version of the DASH diet resulted in identical heart health benefits compared to the original (low in dairy fat) DASH diet. Earlier this year, the same journal (AJCN) published a study based on almost 19,000 women, which appeared to show that fat dairy consumption correlated with reduced obesity incidence (2016 Apr;103(4):979-88. DOI: 10.3945/ajcn.115.118406).

In April 2016, the journal Circulation published a paper analyzing a set of results from the well-known Nurses’ Health Study, involving over 3,000 adults, which came to the conclusion that consumption of full fat dairy products led to a 46 percent reduction in diabetes risk (2016 Apr 26;133(17):1645-54. DOI: 10.1161/circulationaha.115.018410).

At this point in time, where official public health bodies are concerned, accepted wisdom regarding dairy products still stands. The fact that reduced fat dairy products are lower in calories than standard offerings is not disputed by anyone, and consumers will not react well to having their choices curtailed, should dairy players decide to just pull the plug on their reduced fat diary offerings. However, if evidence in favor of full fat dairy’s positive or neutral effects on chronic disease keeps on accumulating, we can eventually expect to see some guideline revisions, which will drive more consumers away from reduced-fat dairy.

Consumers are already starting to embrace the emerging “dairy fat is healthy fat" message, as evidenced by Euromonitor International’s health and wellness data. In the United States, for instance, reduced fat dairy value sales contracted by 7percent in 2015. Reduced fat milk and cheese were particularly badly hit, with value sales declines of 10 percent and 12 percent, respectively. In Japan, reduced fat dairy slid by 5 percent in 2015 (and by 24 percent over the 2010 to 2015 review period overall), while the U.K. and Australia registered 2 percent and 3 percent drops, respectively. Besides Japan and the United States, the markets in which reduced fat dairy products suffered the most substantial review period declines were Turkey, France, Sweden and Belgium.

Lactose-Free a Winner, but Under Threat

In stark contrast to BFY dairy, lactose-free dairy enjoyed exceptionally high growth. Global values rose by 53 percent over the review period, reaching US$5.1 billion in 2015.

The health and wellness trend has brought the issue of food intolerances and allergies to the forefront of modern consumers’ minds. People’s ability to digest lactose as adults is genetically determined, and populations across the globe vary markedly in their ability to digest this natural milk sugar. Owing to rising awareness of the issue, a growing number of consumers are blaming the digestive discomfort experienced after consuming dairy product on its lactose content and are demanding suitable alternatives. As a result, lactose-free dairy and ice cream both achieved 10 percent value gains globally in 2015.

The United States is the largest market for lactose-free food, accounting for 29 percent of global value sales in 2015. Lactose-free dairy and ice cream continue to experience appreciable dynamism, considering the relative maturity of the market, enjoying value growth rates of 15 percent and 16 percent, respectively, on the previous year.

A notable success story is presented by the fairlife brand of milk and milk drinks that was rolled out nationally in early 2015 after The Coca-Cola Co. formed a partnership with the dairy cooperative Select Milk producers, which originally launched the product in 2012. In 2015, fairlife claimed a 13 percent value share of lactose-free dairy, stealing share from its competitors: Leading brand Lactaid’s (by Johnson & Johnson Inc.) value share slipped from 53 percent in 2014 to 48 percent in 2015 and the third and fourth ranking brands Land O’Lakes and Dean’s shares dropped by two percentage points each. fairlife LLC ’s strategy of positioning its low-sugar, lactose-free, high-protein YUP! flavored milk drinks as a guilt-free indulgence snack clearly resonates well with parents and Millennials.

Lactose-free dairy products seem to have only one nemesis: lactose-free products that are not dairy based. Packaged food data showed other non-dairy milk alternatives (excluding soy milk) achieved the highest value growth of any dairy category in 2015 globally, mustering an impressive gain of 20 percent. Accruing a value of US$13.7 billion in 2015, the category’s sales are double those of lactose-free food, while, at the same time, proving 2.5 times as dynamic where growth is concerned.

A growing number of consumers are drawn to avoiding dairy altogether, believing themselves not only to be sensitive to milk sugar, but to dairy proteins. Some are simply seeking to reduce the animal-derived food component of their diets, be it for health, ethical or sustainability reasons.

Organic Dairy in Demand

Another category that has achieved a very respectable performance in health and wellness dairy is organic dairy, registering value growth of 38 percent over the review period. Organic standard milk stood out as particularly dynamic, more than doubling its value sales between 2010 and 2015.

While organic dairy may no longer sport double-digit annual growth rates across virtually all categories, as it did a decade ago, statistics showed consumer interest in organics is not on the wane. Quite the contrary; as consumer desire for natural, unadulterated products gathers force, combined with rising environmental and animal welfare awareness, demand for organics only continues to strengthen steadily.

Euromonitor International predicts that, over the 2015 to 2020 forecast period, organic dairy is going to deliver a similar growth performance to the one seen over the historic period, up at a comping annual growth rate (CAGR) of 6 percent based on constant 2015 prices reaching global values of US$13.2 billion in 2020. Overall health and wellness dairy, for comparison, is predicted to achieve a CAGR increase of 3 percent in constant terms, which represents a slightly stronger performance than over the historic review period, where it hovered below the 2 percent mark.

Simone Baroke is an industry analyst specializing in the global health and wellness market. She has been working for the business intelligence provider Euromonitor International (Euromonitor.com) since May 2005. Baroke has worked for the food and beverages industries in both Germany and the U.K. As a trained nutritionist, she is able to combine valuable scientific expertise, as well as a public health perspective, with her extensive knowledge of the global health and wellness market.  Simone holds a bachelor’s of science in health sciences and nutrition from Westminster University and a mater’s of science in food policy from London City University.