Study says dairy companies need analytics to launch new products | TSLN.com

Study says dairy companies need analytics to launch new products

Gillibrand, a member of the Senate Agriculture Committeee, said farmers across New York are suffering from historically low dairy prices and are forced to shoulder an increasing amount of debt in order to continue operating their farms.
Photo courtesy South Dakota Department of Agriculture

ORLANDO, Fla. — As they cope with changing consumer trends and uncertain markets in foreign countries, U.S. dairy companies need to use more data-driven strategies to launch new products and decide whether to enter markets in countries that are not self-sufficient in dairy production, a leading consulting firm said at the Dairy Forum here on Wednesday.

After conducting interviews with 30 CEOs of international dairy companies, surveying more than 1,000 households and talking to dairy experts, Roberto Uchoa de Paula, a senior partner at McKinsey & Company, said that U.S. companies need to launch new products to maintain growth but will still find it hard to gain major growth at home.

Foreign markets offer opportunities,he said, but the executives need to consider many factors, not just a dairy deficit when going into foreign markets.

“With the right mix of scale and innovation, the industry can use these data-driven strategies to transform opportunities into advantages, secure new pockets of U.S. market growth and prepare for long-term success in international markets,” Uchoa de Paula said at the event, which is sponsored by the International Dairy Foods Association.

Christina Adams, a McKinsey partner who grew up on a ranch in Oklahoma and whose family was in the dairy business, said companies wanting to launch new products need to consider the impact of millennial shopping habits, the “better for you” health trend, consumer interest in having an “intimate” relationship with the producers of products, what’s happening to retail stores, and the “explosion” of small companies introducing products.

Companies that have been producing dairy products for a long time have a harder time developing new products, she said, recommending that the big companies establish separate units to develop new products rather than relying on divisions working together.

But while it is easier for small companies to launch new products, those new products do not have a higher survival rate than products from big, traditional companies, she added.

Younger consumers are more likely to look at new brands, follow brands on social media, avoid “big food” and more likely to buy online, Adams said.

Thirty-five percent of consumers say they want to eat healthier than they did a year ago, but they differ in what they consider healthy, she said.

They think protein is healthier than fat and that plant-based foods are healthier than animal-derived products, but sales of butter have grown and cream is now the fastest growing dairy product.

Adams noted that coffee shops are now putting butter into coffee as a new high-energy drink.

Plant-based alternatives are here to stay but no one knows how big that sector will get, she added.

Ludovic Meilhac, another McKinsey & Company partner, noted there are dairy deficits in Africa, India and Central and South America, but that many of those areas have political instability. China also has a dairy deficit but it has recently been subject to U.S. tariffs that led to retaliatory tariffs on U.S. farm products.

Meilhac suggested that in the big countries with dairy deficits, companies start with a regional approach within those countries rather than trying to supply the entire country.

Dairy growth will be possible but not easy and executives need to think about the unthinkable, the McKinsey executives concluded. Tactics that comprise a winning strategy, they said, include a focus on identifying growth spaces through analytics, making quick and small investments instead of big bets and investing in new supply chain capabilities.

McKinsey & Company will soon release a white paper titled “A winning growth formula for dairy” that highlights the research findings and suggested responses in more detail.

–The Hagstrom Report



News




























































































































July 25, 2019



































See more