Milk Matters: Product innovation a strategy to boost demand

By Dr. Joseph O’Donnell

Like many of you, I came back from the World Ag Expo in Tulare inspired and full of new ideas. Everyone likes to see innovative new products whether new food products or new farm equipment, new technology, new features, new advantages – innovation is always exciting. It is clear to me that milk producers and processors alike appreciate innovation and understand the importance of keeping competitive in the food marketplace. That means constantly introducing innovative new products or discovering new benefits of existing products.

Sometimes we promote the newly discovered nutritional benefits of new dairy products; sometimes we position innovative products designed for today’s culinary advances; often we have products that are used as ingredients in other manufactured foods such as texturing proteins for meat products or cheeses that deliver a new taste sensation to consumers not familiar with something like pizza (as in China). The world keeps moving forward and so must dairy product development. What is less understood by our own industry is the process by which a new product sees the light of day.

Product development is a continuous process that starts with generic, fundamental information and gradually works its way into becoming more and more a proprietary product sold by a manufacturer in a competitive environment. The process starts with the milk producer. Producers market raw milk – no brand. The truck comes and takes the milk away. While all producers do not compete with each other for the market, the condition of the market itself does influence all producers. Pricing formulas lie way beyond the understanding of this scientist but I do know that the old supply/demand ration is a major factor. One way to increase the demand side of the equation is to increase the variety of dairy products attractive and available to consumers either as retail products, foodservice products or dairy ingredients in food products (bakery, sports beverages, infant formulas, etc.).

Consumers have ever-changing needs and desires. Our non-dairy competition nimbly reacts to these changes. In order to keep up in the market, our dairy product development work can never rest. If product development does its job, the producer sees increased demand for raw milk but how can the milk producer possibly influence product development?

Just as producing milk is a mostly generic process so is the generation of the fundamental research necessary to start the ball rolling. For example, working out the structure of complex milk fats or proteins or finding new concepts to support the nutritional value of milk products are all things that benefit the entire industry – globally. It is riskier since you really don’t have a finished product in mind. That is the nature of innovation. What you do have is confidence in your product and in your researchers. It may take some time before all the feasibility studies and variables are worked out. Universities excel at this kind of research. The costs are kept modest because universities are usually state supported thus faculty salaries are covered; the infrastructure established; and they are not-for-profit. This is where many of the great advances in the world spring forth. Going to the moon started in basic science laboratories. That antibiotic that saved your life started in a basic science lab. In the case of dairy food research, the scientific data are published and product developers from anywhere can access and move forward with product innovation.

The milk processor buys raw milk and converts it to a finished product. In the end, the processor is selling a competitive product. The pricing is competitive, the quality is competitive, the application is competitive, and it’s all competitive, not only with other dairy manufacturers and products but also with non-dairy products.

Maintaining a research and development laboratory is expensive. The product developers working in these labs consult with the marketing departments to transform ever-evolving university research into new products that meet the constantly changing consumer needs. This is all done at significant cost to processors with an end goal of putting a constant flow of new products on the consumers’ table and, at the same time, fuel demand all the way back to the raw milk.

Because data on the sales of these new products are proprietary, it is difficult to assign a true value to the basic research that started it all. This is why the not-for-profit dairy associations that interface with both producers and processors are critically important. A trust factor is essential so the work on basic research will relate to the needs of the product developers in those R&D labs. Once that network is established then the engine runs. It’s all about intelligent communication and innovation.

In summary, we have producers all responsible for the same raw product and dependent on market demand to move it along with processors trying to out-compete other dairy or non-dairy processors. Both milk producers and processors depend on the entire product development process in order to expand their markets and increase demand for their dairy products. As a nutritionist, I believe the more dairy products our industry can deliver to the global market, the healthier the world will be. That delivery depends on developing the proper products as much as any other factors, including price.

I have left out a lot of steps but the point I am trying to make is that producers, processors and the ever-important consumers all benefit from research. In fact, quality of life and even corporate survival depend on it. New products are constantly in the pipeline; consumption of milk products lies in the balance. Innovation has always been a defining characteristic of the American psyche. Innovation happens when our industry works together, believes in our products and is committed to contributing to the health of our nation by delivering the finest products made from the greatest food nature has created.

FYI

Dr. Joseph O’Donnell is executive director of the California Dairy Research Foundation. He can be reached at 530-753-0681.

Information on the California Dairy Research Foundation can be obtained from the organization’s web site at www.cdrf.org.

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