The case for dairy

Experts say natural and organic dairy sales are back on track thanks to innovative products and heightened consumer awareness.

By Carol Radice

Experts following the dairy category report an uptick in sales of natural and organic dairy products compared to this time last year. They cite several factors, including improvement in the economy, the spotlight on health care reform and the increasing number of studies linking food and health, for the good news.

Theresa Marquez, chief marketing officer for La Farge, Wis.-based Organic Valley, says the company’s sales are up 5%. “Think of it what you will but the attention that healthcare reform is receiving has the public thinking about their health and ways of being more proactive, a side effect of that will be more people considering the role organic products will play in that equation,” says Marquez.

Recent studies highlighting the importance of safe and sustainable agricultural practices are also spurring consumers rethinking their choices, Marquez says. “As studies continue to be published connecting the food we eat to our health the more people will turn toward organic,” she says. “Mounting evidence that the nation’s health problems are largely due to the type, amount and quality of the food we are eating is overwhelming.”

While she acknowledges the need to monitor larger trends, Marquez encourages retailers to pay attention to some of the smaller shifts in consumer buying habits. “These are often the true influencers in our category and more accurate indicators of its long-term success,” she says. She points to the recent surge in raw milk. “Raw milk sales are through the roof and although it still represents a small segment of sales, to me it is an indicator of just how concerned people are becoming of issues with conventional foods and how willing they are to purchase more simple products,” Marquez says.

Rich Martin, vice president of sales and marketing for Straus Family Creamery, based in Marshall, Calif., says more consumers are entering the category. “For us, to date sales are trending ahead of last year in terms of growth,” he says. “We’re seeing double-digit growth in our branded products and are very happy with where we are right now,” says Martin, attributing the growth largely to an increase in same store sales. “This is incredibly encouraging because it tells us more people are moving into the organic dairy category.”

For Straus Family Creamery, growth is not only coming from staple areas such as milk, but smaller, profitable segments such as butter as well. “Our butter has the highest butter fat, lowest moisture content of any butter in the U.S. and because it is a premium product it carries a premium price, typically running about $6 to $7 per pound,” Martin says.

Getting social

Martin says based on feedback from the company’s social networking efforts, consumers are looking beyond price when making purchasing decisions. “The grass root movement toward eating local and making healthy decisions from a personal and environmental standpoint are key factors driving interest in the category,” he says.

Blaine McPeak, president of Boulder, Colo.-based WhiteWave, makers of Silk and Horizon, says while his company has also seen improvement in sales this year he remains cautiously optimistic the growth will be sustained, anticipating seeing a few more “ebbs and flows” before year’s end. “It’s also a good opportunity for the industry to help make certain that consumers continue to have a high level of confidence in the brands and products we offer.”

According to McPeak, sales of organic milk have grown to nearly $1 billion. “This is a category that is clearly on grocers radar and something they see as a way to attract shoppers into their stores.” Some of the growth, notes McPeak, can be attributed to parents who are seeking alternatives for their kids. “There has been a rise and awareness of what our kids are eating and increasingly as parents become more educated about what is in the products they serve their kids they have become more cautious about what they purchase.”

Egging them on

David Will, general manager of Chino Valley Ranchers, an Arcadia, Calif.-based supplier of certified organic free-range eggs, says egg sales are on the rise after a flat 2009.  “While the economic recovery likely contributed to this, for our consumers purchasing our eggs is less about price and more about a lifestyle choice,” he says.

While representing a small percentage of the overall egg business, Will says increasingly consumers are voting with their wallets by making more natural and organic dairy purchases. “Looking ahead, I see the number of people refusing to support companies whose animal practices they do not agree with increasing,” he says.
Like Chino Valley Ranchers, Jesse Lafl­amme, co-owner of Monroe, N.H.-based Pete & Gerry’s Organics, says organic egg sales have rebounded the first quarter of the year.

While it is tricky to pin point where their current growth stems from, Laflamme says it seems as though consumer confidence is increasing as are the number of people trying their products. “People are much more educated about food safety, they want to know where their food is coming from and they question everything,” he says.

Heart-healthy milk

As consumers become more aware of food ingredients, omega-3 has been getting a lot of media attention and is playing a role in a number of product launches. Organic Valley Family of Farms’ debuted organic milk with the heart-healthy omega-3 fatty acids ALA, DHA and EPA.

Marquez notes the omega-3s are derived from sustainably harvested fish. “Studies show omega-3s, which many of us do not get enough of from our diet, are fats essential to brain development and continued brain health, vision, prevention of cardiovascular disease, and normal growth and development,” she says. Recognizing the connection consumers want with the companies they buy from, Organic Valley has made some changes to its packaging. “Our carton features line drawings of some of our farmers so consumers can see who’s behind the milk they buy.”

In addition, Organic Valley has also expanded its line of cultured dairy products with the launch of three organic Live Low Fat Yogurts. According to company officials, the organic yogurt contains Thrive, Organic Valley’s proprietary blend of probiotic cultures that boost digestive and immune systems, and are beneficial to overall health. “This yogurt has quickly become the most requested new item from consumers,” says Marquez.

The 32-ounce bottles of low fat yogurt are available in plain, vanilla and berry flavors. Each serving also contains two grams of organic inulin, a soluble fiber and a prebiotic derived from organic Jerusalem artichokes. The vanilla and berry flavors are sweetened with agave nectar and the vanilla yogurt is made with Fair Trade vanilla.
“We call it a multi-use product because our bottled yogurts can be used in many different ways including salad dressings, dips, on cereal or enjoyed straight from the bottle,” she says.

Not crying the blues

Officials at Pete & Gerry’s say its heirloom pastel blue eggs are sparking the interest of chefs at top restaurants in the East prior to the company’s planned expansion into retail later this year. Laflamme says they will slowly roll out the Platine Bleue eggs in Whole Foods and specialty shops in the coming months before making them available in grocery stores.

According to Laflamme, blue eggs have been produced in South America by the indigenous Mapuche inhabitants for hundreds of years. The Araucana chickens, which produce these eggs, were range free and bred to withstand the harsh environment of Patagonia. “Our Ameraucana hens are derived from those chickens and produce eggs that are light blue, have a deep yellow yolk and more flavor,” he says. “It seemed to us like a good time to try something different. People want the variety and we think these eggs are not only attractive to look at they taste great and have the ability to add some excitement to the category,” he says.

The eggs will be sold in the company’s clear recycled plastic containers to maximize visibility, but Laflamme says plans also call for promotions and in store demos as well. Lower production rates mean the eggs will be priced slightly higher than the company’s organic offerings.

Laflamme says he’s also exploring developing relationships with other egg producers to enable wider distribution of the Platine Bleue. “This is a great time to be in this business,” he says. “There is such a hunger for transparency from consumers regarding where food comes from. In this age of social networking this is only going to grow larger. For the companies doing it right the future is great.”

Fresh packaging

Because retail space is crowded and consumers are bombarded with messaging, packing is especially important for organic dairy products, according to industry experts.

Martin says the entire Straus Family Creamery line will undergo a packaging redesign this year. According to company officials, the new look will provide a consistent appearance across all of the company’s products and features a design that emphasizes its connection to the land and animals.

In addition to new packaging, the company is also launching new yogurt and ice cream products this year. “Our yogurt business continues to rapidly grow despite having a limited offering of sizes and flavors. This spring we introduced two new yogurt flavors—Blueberry Pomegranate and Cinnamon—in whole milk and non-fat varieties,” says Martin.

The company is also introducing ice cream flavors inspired by popular ice cream shop varieties. According to Martin, the new flavors include Caramel Toffee Crunch, a caramel ice cream with organic toffee pieces infused with sea salt, and Brown Sugar Banana, with organic roasted bananas, brown sugar and organic chocolate chunks.

“The challenge for a company like ours committed to organic is to develop interesting, innovative products and at the same time stay true to our commitment to only do organic and to keep the labels as simple and clean as possible. For us, organic is a philosophy, not a line extension,” he notes.

Martin says the consumer push to buy local is certainly helping the regional players like Straus do well. “People want to feel good about their purchases and the company they are supporting. They like knowing how and where the products they buy are made, why certain ingredients are included, what purpose do they serve. One of the unique things about us is that we have our own dairy cows and our unique pasture grounds largely influence the taste of our products. The proximity to the ocean makes the grass sweet and that contributes to better tasting milk,” he says.

In the past year, Horizon launched its Little Blends, a line of yogurts created to appeal to kids as they transition from babies to toddlers. Made from organic dairy and all natural fruits and vegetables, company officials say Little Blends are a good source of calcium, protein, prebiotics and DHA omega-3. According to McPeak, the yogurt is produced with milk from cows not given added growth hormones and does not contain artificial colors, flavors or preservatives or high fructose corn syrup.

The company has also launched single-serve shelf-stable organic milk boxes, which McPeak says appeals to kids and busy adults on the go. The boxes are available in plain 2%, chocolate, vanilla and strawberry flavors. “This product is ideal for lunch boxes, after-school sports, travel, camping, etc.,” he says.

McPeak says future growth depends on efforts to communicate with consumers and product development. “The companies that come through this and sustain long-term growth will be the ones who were proactive and those who sat back and did nothing may get left behind. While manufacturers continue to drive innovation, to ensure future success it is also up to retailers to nurture, grow and promote the category.”

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