Innovation in Dairy Products and Alternatives

September 2023

Revitalising the dairy sector requires innovation to counter slight volume growth. This encompasses creating novel products aligned with evolving consumer tastes, like plant-based alternatives and healthier, sustainable choices. The report delves into functional dairy targeting need states and gut health, advancements in lifestage nutrition (with a focus on ageing consumers and women's health), plant-based and sustainable dairy opportunities, and the potential of experiential dairy.

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This report comes in PPT.

Key Findings

The dairy industry adapts to inflationary pressures

The global dairy products and alternatives industry’s strong growth in 2023 (6.4%) is mostly due to price hikes, while volume growth remains marginal. To tackle the ongoing inflationary pressures, companies are actively seeking solutions, including adjusting prices directly, making changes to product formulations and exploring shrinkflation as a means to navigate the challenges posed by inflation.

Functionality and lifestage nutrition are key hotspots

Health and wellness is paramount in the dairy industry. Protein continues to be a promising pocket of growth. There is also a growing emphasis on innovation in gut health and need states. Among these, energy and cognitive function positionings have seen the most development, although remain niche. Another key area is targeting functional dairy to cater to the specific needs of different life stages.

Despite challenges, plant-based dairy continues to grow

Amid health and sustainability, plant-based dairy continues to flourish, despite a 2022 slowdown due to supply chain disruptions. 2023 and the forecast period show promise, driven by innovations in plant-based cheese and non-soy milk alternatives. On the other hand, genetic engineering, precision fermentation and cell-cultured dairy hold disruptive future potential but can face consumer scepticism.

Western markets drive sustainable dairy

Though the majority of consumers worldwide desire to have a positive eco-friendly impact, few pay extra for sustainable food and drinks. Western markets drive the growth of sustainable dairy due to heightened awareness, while affordability hinders emerging markets. Notably, France and Germany exhibited remarkable growth in sustainable dairy products in 2022, indicating promising opportunities.

Experiential elements in dairy can enhance its appeal

The dairy industry should tap into experiential elements to succeed via innovative flavours, sensory exploration, and multicultural influences. Incorporating ethnic tastes, texture variations (ie fizzy dairy drinks) and tech-enabled experiential shopping will help elevate the sensory appeal. E-commerce, social media and the metaverse will also help foster interactive engagement with consumers.

Key Findings
Value growth but volume decline: The shifting trends in the dairy industry
Dairy set to struggle in the West while plant-based alternatives gain ground
Innovation to bring new life into the dairy aisle
Rising inflation takes a toll on the dairy industry
Price hikes impact prominent dairy and alternatives brands including Lurpak and Oatly
Wide range of strategies employed in an effort to cope with the ongoing impact of inflation
Innovating through inflation: The industry’s agile strategies for profitability and affordability
The rise of private l abel is revolutionising the dairy and plant-based industries
Beyond Western markets: Private label takes the spotlight in Turkey
Milking innovation for added value: The power of health and wellness in the dairy industry
Why one size does not fit all in the dairy industry
Dairy losing ground in the protein game as the industry lags behind in promoting it
Unlocking protein demand surges in selected markets
An expanding market for probiotics and a more holistic gut health positioning
The US gives signposts of future gut health innovation coming to the dairy aisle elsewhere
Energy, cognitive function and memory health lead need states positionings in dairy
The dairy industry has potential in natural sleep and stress-reducing offerings
Need states by popular ingredient
Targeting children: Claims around added vitamins and fibre increasingly desired by parents
Milk formula for adults: A growing opportunity in healthy ageing
Unlocking Yili’s lifestage nutrition insights for portfolio segmentation
Despite a slight slowdown, plant-based dairy continues to show promising growth
Plant-based milk shifting ingredient dynamics from soy to oats
Optimising taste and nutritional content with high-protein plant-based ingredient blends
Unlocking the potential of Bambara groundnut, a nutritious and sustainable African crop
Plant-based innovation expands beyond core categories and capitalises on coffee creamers
Redefining the future of dairy with tech-driven innovations
The dairy industry's progressive transformation from cows to cultures
Bel Group’s 3-pronged tech-driven innovation strategy for cheese production
Consumer environmental consciousness vs willingness to pay: A challenging disparity
Western markets lead in the dairy industry's sustainability landscape
Locally-sourced dairy: An affordable and satisfactory alternative to organic
Consumer-centric and corporate-driven innovation: Driving engagement and impact
Consumer education on sustainable offerings is essential for future success
Exploring unconventional product innovation through sensory experiences
The metaverse as a new frontier for engagement in the dairy industry
Key recommendations


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