Dairy is the largest category in retail grocery with $76 billion in sales, according to Circana sales data. That’s even larger than the second-place category, liquor, that includes beer, wine, and spirits.
Most U.S. consumers purchase dairy products, and when asked about their future intentions, nine out of 10 say they have no plans to cut back. That’s based on research from McKinsey. In fact, market research indicates there’s growth potential in multiple dairy product categories.
However, that growth will be in new forms as consumer tastes and purchasing patterns will evolve. Consumers have a growing interest in health and nutrition, and they want convenience. Dairy can win on all three fronts if dairy processors, manufacturers, and marketers evolve to meet those demand patterns as detailed in a new report by CoBank, “Dairy products have more growth potential.”
Snacking cheese to pace growth
Globally, the cheese snack market is projected to reach $75.1 billion this year, and a Fact.MR report projects the segment will grow at a compound annual growth rate of 6.5% through 2034. North America’s share of that 2024 total amounts to 23.9%, with growth driven by new flavors, formats, and formulations.
The snacking cheese trend took off during the COVID-19 pandemic and has simply continued to grow. Based on U.S. Dairy Export Council (USDEC) and Innova Search Criteria data, all new product launches of snacking cheese in major U.S. dairy product export markets have grown 152% since 2019, as shown in the graph.
Lactose-free dairy products are projected to make significant sales inroads, and the category goes far beyond fluid milk as an estimated 120 million Americans have some form of lactose intolerance. There’s a second plus side for this segment . . . only filtration and an enzyme are needed to remove the lactose, and that helps maintain dairy’s clean ingredient label. As a result, yogurt, cottage cheese, and sour cream are among the products that can join the lactose-free category.
New processing capacity and infrastructure
This transformation does take time as dairy plants need to be retooled or built. “These days, you can’t be amazing in Class I dairy product manufacturing without ultrafiltration,” said Tory Nichols of the first step in removing lactose while speaking at the 2024 Wisconsin Dairy Products Association annual meeting. “You can’t be amazing in Class II soft dairy product manufacturing without flavored creamers,” continued Nichols, who previously worked at Walmart for 28 years and now is the managing partner for the Valerian Partners, of another growth category.
Overall, the snacking and high-quality protein revolution can help keep dairy more relevant than ever, competitive among all food categories, and a consistent grocery store purchase.
