Wellness and functionality will continue to be on the forefront of consumers’ minds this year, according to US market research company Spins.
From personalized diets to products that support weight management and healthy ageing, dairy brands will be looking to build on the momentum in the functional and high-protein segments but also push into categories with growth potential.
So where do the opportunities lie? We break down Spins’ 2025 State of the Industry report to bring you the key points related to dairy NPD . . .
High-protein: the category that keeps on growing
With nearly $5bn in sales and 9.3% anticipated growth, the snacks and beverage category is expected to drive high-protein innovation in the US. This is particularly good news for companies in the business of dairy protein ingredients.
According to Spins, dollar sales of whey and milk proteins – the dominant protein ingredient category, generating nearly $705bn in US sales - grew 8.6% year on year.
In addition, whey and casein grew 120%, surpassing whey in dollar sales terms by nearly $26m.
Meanwhile, proteins that are a combination of animal and plant components recorded a decline of 8.2% in dollars, but remained the second biggest segment in functional protein ingredients, generating close to $532bn.
Functional foods
When it comes to NPD activity, beverage products dominate, based on Spins’ new item dollar share index that tracks the rate of innovation in the US food industry.
The index shows that yogurt (innovation rate 12.4%) is the only category in dairy and plant-based that’s ranked in the top 10 of the busiest food and beverage categories for NPD.
That’s above the entire food and bev category average of 10.5%.
But in dollar share terms, yogurt lags behind the industry average – suggesting there’s scope for brands to improve their value proposition in order to boost sales.
Within functional beverage products, wellness shots – which include dairy-based gut shots – have recorded growth across all three major consumer trends of digestive health (+13.6% / $80m), mood support (+6.5%, $6m) and detox (+16.4%, $15m), as highlighted by the market research firm.
Probiotics are also among the top functional ingredients powering the three trends – driving sales of $270m in digestive health solutions; $5m in product formulations for mood support; and $12m in detox products.
Three emerging subcategories
Cottage cheese is likely to continue its resurgence in 2025 as a natural, low-calorie and high-protein food. The category – which Spins captures alongside farmer cheese and ricotta – increased its current dollar share of the market and forms part of the burgeoning natural products segment.
Innovation in flavors and formats as well as highlighting protein claims more prominently on-pack would all be key to sustaining momentum in cottage cheese.
For dairy firms specialising in colostrum, the dairy-derived ingredient used in the supplement industry is in growth according to Spins – generating sales of $1.8m, up nearly 140%. The market research company says colostrum is among the ingredients with ‘crossover potential’, being suitable for both gut health and immune health applications.
And back to food, brands specializing in A2 dairy may be missing a trick by not diversifying into formats such as butter and cheese, according to the report.
US butter consumption continues to break records year after year – in the past decade alone, butter consumption has grown 18% - but within the A2 dairy segment, fluid milk remains the largest segment. However, A2 dairy’s dominant US player, A2 Incorporated, has underperformed in the US, recording EBITDA loss of $15.5m in FY24 (FY23: $23.3m loss), though the company saw growth of its a2 Milk Grassfed product but reported a slight market share decline in the premium milk category.
Spins estimates that the entire A2 dairy segment is worth $135.1m and is formed by 87% fluid milk and just 9% yogurt; 3% cheese, and 1% butter and sour cream. Could tapping into Americans’ growing appetite for butter and cheese help propel A2 dairy in 2025?
This and more will be revealed as the year progresses – and we will keep our eyes peeled to bring you the latest product innovations from across the entire dairy space.