Episode 36 - The Future of Milk: Innovation and Consumer Trends Reshaping Consumption

DMI’s Anne Marie Splitstone, EVP for Growth Platforms and Partnerships, and Silvia Robles, VP for Growth Platforms and Partnerships, speak with DMI’s Scott Wallin about the evolution of fluid milk innovation since 2015, emphasizing consumer insights and industry partnerships.

They highlight the role of the Dairy Foods Research Center Network, which includes 150 R&D experts, in driving innovation. 

Key consumer trends identified include a preference for high-protein, low-sugar products and lactose-free options. 

Successful products like Fairlife, which surpassed $1 billion in sales, and DFA’s Milk 50, launched with strategic packaging and positioning, are cited as examples. 

The conversation underscores the importance of consumer insights, industry collaboration, and ongoing innovation in driving growth in the fluid milk category.  

Tune in to find out!

Host & Guest:

• Host: Scott Wallin, Vice President of Farmer Communications & Media Relations, Dairy Management Inc.
• Guest: Anne Marie Splitstone, Executive Vice President, Growth Platforms and Partnerships for Dairy Management Inc.
• Guest: Silvia Robles, Vice President, Growth Platforms and Partnerships for Dairy Management Inc.

Transcript (AI-Generated, please ignore typos)

Scott Wallin  0:00  

Hi everybody, and welcome to another edition of the your Dairy Checkoff podcast, where we speak with check off leaders and dairy farmers about strategies that are driving sales and building trust of us dairy. I'm Scott Wong with dairy management Incorporated, and we've got a great topic for you today, fluid milk innovation. And with me are two my colleagues who are leading the efforts on behalf of the check off, Anne Marie split Stone, who is executive vice president of growth platforms and partnerships for DMI and Sylvia Robles, she is vice president of growth platforms and partnerships for DMI as well. But before we get to what's going on now, I want to start with maybe a little bit of history. Anne Marie, I'm going to come to you first on just this strategy that the checkup is leading in fluid milk innovation. Can you kind of walk us through its roots? Back

Anne Marie Splitstone  0:46  

in 2015 there was a lot of discussion about, what should we be doing to really revitalize fluid milk and really focus on slowing the declines that we were seeing? It's a humongous category. Consumers were still consuming it in large numbers, but rightfully, the group said, you know, let's see what we can do to really get things going a little faster. So the main goal of pulling together a group of farmers and experts on revitalizing category was really kind of twofold, how to drive milk as milk, and then how to drive milk as an ingredient in a value added sort of way. And at first it was really trying to inspire the industry to innovate more in the category, innovation, both in product form, like value added milk products that we now have today, and also in innovation, in promotion, marketing, packaging across the board. So it got folks together, started the fluid milk committee, started talking started talking about ways to do that. One of the ways was starting up a number of partnerships and understanding the power of brands to really drive the category. And that's where a lot of our partnerships in the fluid milk arena started. Really inspired a lot of innovation that I'm sure we'll talk more about in the value added segment like toast, free high protein, low sugar. All of that stuff started with the idea of inspiring processors and folks to innovate more. There was also a lot of desire to get more investment in infrastructure, and we've also seen a lot of that recently. So it was a long strategy, long haul plan, and it seems to have really done some great things, and I'm sure we'll talk more about it, but that's kind of where it got its roots, and it's evolved over time as things have been more stabilized and really focusing on partners that can cause a catalytic impact in the marketplace.

Scott Wallin  2:35  

You know, there's a part of the checkup, I kind of call it that secret weapon that we have, which is the dairy foods Research Center Network. Dairy Farmers founded this, this collaboration with universities and leading experts across the country, I think, over three decades ago, and they've done so much with us in various aspects, but when it comes to fluid milk, they've been front and center at our side, helping us to innovate Sylvia. Can you just talk about the value of having hundreds of subject matter experts at our disposal whenever we need them. The

Silvia Robles  3:05  

research centers are an essential resource and have been vital to us dairy and in fact, it's the DMI product research team that leads and oversees the network, which, as you mentioned, consists of six university research centers, 24 extended universities, and more than 150 R and D experts, you know, and that group really has been a catalyst for both domestic and global growth. I mean, it can be credited with major industry impacts, whether it be improving the quality of us powders for export, or unlocking of that waste stream to yield value added ingredients, as well as creating new technologies such as ultra filtration. And there's always research underway that's funded by the DMI product research team that really helps to advance dairy's presence and innovation, whether that be through technologies like encapsulation, separation, technology, precision, fermentation, dairy really does have a bright future ahead, and the research center network is going to continue to play a pivotal role. You

Scott Wallin  4:04  

know, one thing that Chekhov has been leading for a lot of years is our our research into consumer trends. You know, we want to understand what's top of mind for consumers. You know, when we want, when we talk about dairy, what do they want from their dairy products? And I know in fluid milk. Revitalization, we've discovered two areas which are value added and lactose free. Sylvia. Can you talk about the value of those consumer insights, and how just understanding more about that has kind of led us in our revitalization efforts? You

Silvia Robles  4:34  

know, you said it, Scott, insights are absolutely critical. And a few years ago, DMI really doubled down on insights, and we invested in three major landscapes. The first is the health and wellness landscape. The second would be the beverage demand landscape. And then the third was the food service landscape. And these three studies really helped set the roadmap for innovation and science. And there were, I would say, three key takeaways from the studies, in totality, the first. Being consumers are not satisfied with the current options the marketplace. Two, they are looking for way more complex products, and not just one benefit, but a bundle of benefits, and that bundle of benefits really does change based on the occasion that they're in. And the third big highlight is dairy really has a right to win and can be a solution for consumers needs. You know, you mentioned our focus on lactose free and value added dairy. And if you think about it, dairy is a complete protein, so it's well suited for multiple needs, beyond just building muscles and aiding and satiating in society, for weight management. And then lactose free dairy is a solution for those who are suffering from digestive issues. So it's really no surprise then that lactose free and a higher protein, low sugar dairy are really the segments that are driving gains in fluid milk, you

Scott Wallin  5:49  

know. And Marie, there certainly has been some good news in fluid milk over recent years where we've seen it kind of stabilize, you know, we saw some decline, but it's really showing us now that there is a lot of momentum going our way. What are you seeing in fluid milk category, and are there any factors you can point to that's kind of led to this turnaround? We are very

Anne Marie Splitstone  6:09  

excited. We finished up for the first time in a while, in 2024 in the first couple of months. So far, are seeing that positive momentum continue in fluid milk? So very excited. And importantly, it's not really just a one thing that's changed, but really a lot of things are finally working together well and converging. Some of the things Sylvia just mentioned about the innovation and we did a lot of value add, were critical in addressing that and basing that on real consumer insights and understanding how dairy is well suited to meet those needs and demands of consumers. Another thing is the real protein uptick. I think you see that everywhere in the media, consumers want more protein. They know they need more protein, whether it's from a weight loss perspective or it's really just overall healthy living. You know it's really not just for your gym rats and your body builders anymore. Everyone's looking to get more protein their diet, and they're getting more educated on what protein is and what types of protein. They know that there's casein protein and there's whey protein, and they're understanding how to utilize it and get it into their diets. They're also starting to understand the difference between protein sources, and so they're understanding that dairy is a complete or high quality protein, and we're seeing a lot of producers putting it onto their products, and manufacturers letting consumers know this is the really good protein that you want. The other trend is very much clean ingredient lines, and consumers are becoming much more aware, and that is helping us grow effectively, and it is hurting those not as healthy, not as good for your beverages which don't have complete proteins and not clean ingredient line lines. So as the consumer gets more educated and understanding and searching these things out, we're seeing that impact growth another area the work that we put behind whole fat science, we've seen consumers really understand what that means and how beneficial full fat products are for them, and that's driven into almost half the categories coming from this very delicious full fat milk product and whole milk. So those types of things, working together have helped. In addition to consumers looking for these high protein, low sugar products, and we have lots of those value added products in the marketplace, the lactose free products, Sylvia was talking about all of these functional benefits, we're seeing consumers want them, and dairy delivers in multiple ways, so that's really helping drive the turnaround.

Scott Wallin  8:27  

When you use the term delivers, my goodness, fair life is that product that continues to deliver. And when we talk about innovation, so much of these efforts, it started with fair life, showing what was possible for fluid milk, the checkoff had a role with fair life's launch years ago. Anne Marie, can you talk about how we assisted in in the launch of fair life, and just how critical that has been to kind of show what's possible for us? Yes,

Anne Marie Splitstone  8:54  

fair life was, and continues to be, really a major success in 2022 the portfolio surpassed a billion in sales, which is incredibly impressive. And last year, Coca Cola said it was its fastest growing brand in the United States, and it's really regarded as coke centerpiece. As they're trying to diversify beyond sodas which have been in a long decline, and to really become a total beverage company. So a lot of great success from that business. But to answer your specific question, and what was check off role in helping with the fair life launch, and it actually started a long time before we were actually working specifically with fair life. The researchers in the science area were doing research into ultra filtration decades ago, and really trying to understand the power of that and what unlocks it might deliver. And it delivered a way to get lactose free, got a way to have high protein and lower sugar, and then started working with fair life and saw an opportunity to bring. That technology to life in their product. We were an early investor in some of the marketing support for the brand. It's really hard to break out in beverages. It's a very competitive category. It's full of innovation, and so there's a lot of spending. So we help, to some degree, in supporting the business. Obviously, all the all the players that we partner with spend at least 10 to one versus what we're investing, but we were able to help them get a little bit more and get a little bit more over the top, and really start with launch levels when they came out the product. And as you can see by the success of that business, and it really the catalytic effect it had in the marketplace and all the innovation that came after it, that early research way ahead kind of paid off in dividends for the entire category and and where we could take it. And we often see science being that unlock, or consumer insight being those unlocks that can start a big change in trend, and that's what happened with fair life. So

Scott Wallin  10:53  

let's talk a little bit about some of those players. I'm not going to have you review the entire history of the products. We'd be here for quite some time. But can you talk about maybe one or two that hit the market and are still, you know, available to consumers today, that are innovative,

Anne Marie Splitstone  11:09  

building on that, but finding their own way to talk to consumers, which I think is critical. You know me too. Products can go out there, but it was critical, as we were working with different players, that we made sure they had ownable different reasons, but took advantage of what consumers were telling us about what they wanted with these high protein, low sugar and a couple of examples of partnerships that we worked on, shamrocks, rock and fuel. It's been very successful. You can get it across the country, and it's continues to do well. They continue to innovate on that product, dairy, gold fit, which also was similar in what it delivered, but it also took a unique approach and consumer understanding and a more family appeal and lactate, which a different, more direct way of getting lactose free, but also playing into the technologies and the insights that we helped develop as part of fair Life. So all three of them, as well as many others, have looked at the success and looked at how we could work with them to find a unique and ownable way to drive the overall category not to be a share gain. And that's a critical thing we do when we invest. And they've all proven very successful. They've taken it and run with it and continue to build on those portfolios after the initial work and investment, and I'm thrilled they're all still doing very well right now, absolutely.

Scott Wallin  12:25  

And Sylvia, there's another product that hit the market not long ago called Milk 50. I know you kind of had a front row seat to the whole development and launch of this product. What can you talk about milk 50?

Silvia Robles  12:37  

Believe it or not, Scott, milk 50 was two years in the making. It was originally tested in q4 of 2022 as part of our partnership with DFA that year. You know, DMI and DFA had a long standing, 10 year partnership. And as part of the partnership in 2022 we tested some initial new product concepts, and then that emerged, no 50 merged as a nugget of an idea, and we worked in 2023 with DFA to really identify, Okay, what is the most appealing benefit bundle, Or said another way we needed to land what was the right combination of protein and carbs that would be compelling to consumers and still get to That 50 calorie concept. We identified what the optimal communications hierarchy was for that bundle. Meaning, what should lead? Should the 50 calories lead? Should the nine grams of protein lead? Or should it be 75% less sugar, or should we simply call out that it only had two or three grams of sugar? And so I think it's important to note here that while we were working on milk, 50 good culture, probiotic milk, had been struggling in the market, and so we identified the key issues with that launch and work to apply the learnings to the milk 50 product in real time. So for example, one of the things we learned was that we really needed to stand out on shelf. So whereas good culture may have launched with two skews and in a half gallon Gable top carton, the traditional half gallon carton, we worked really hard to make sure that note 50 launched in a different package structure. So it's in a 48 ounce bottle, and it had three SKUs. And we test the graphics and the prototypes and the ads before launch, as opposed to after the launch, which was the case with the good culture probiotic milk launch, you know, and Scott early indications are for the milk 50 launch are very encouraging. They are located. They launch in the west coast, but they're actually also located, you know, nationwide, in your Target stores. So stay tuned as we continue to track the launch and see how it's doing in the market. You

Scott Wallin  14:43  

know, it's just so exciting to see these products because it does show people are open and receptive to the innovation fluid milk can provide, and it does have all those other benefits that I know we as a check off and others across the industry are touting. You know, we've mentioned all the research in the. Insights that we generate through our team, and those are shared across the industry in so many different ways. But we were at an event not long ago called Natural Products Expo West, and this is something that Chekhov has been at now for the last two years. And you might think, Well, why are we there? Well, I'll tell you why real quickly before I want to hear from you, Sylvia, but 65,000 people attend this event. These are entrepreneurs, innovators, investors, retailers, consumer packaged good companies and on down the line, and we were front and center just a couple weeks back, showing what's possible with innovation for dairy. Can you talk about the value of Expo West and what we got out of this year's event? Being

Silvia Robles  15:38  

at events like Expo West is incredibly important. It's actually the biggest, the biggest natural food show in the country. And to your point, it's where entrepreneurs and the industry really showcase what's their latest food and beverage products, their latest innovations, the things that are really on trend. It's very well attended. You know, you mentioned the retailers, the investors and a lot of press. So exhibiting at Expo West and really showcasing dairy innovations to attendees is vital to our objective of driving sales of dairy, but I think it's also important to inspire others to innovate with dairy, and that's why, when we show up at events such as Expo West and or at the International dairy foods Association dairy forum, we really seek to create an experiential immersion into the transformational power of dairy you know, our education sessions sample innovations. We present research that highlights the consumer health and wellness needs. And in the case of expos, we zeroed in on that modern health and wellness need a woman because, you know, Women's Health is very hot, very on trend now and then. We also partner with spins, who is the only company that really does align natural, regional, conventional and specialty retail data to kind of help uncover the different market growth drivers and in market innovative examples for these needs, many of which contain dairy. So while we are really focused on driving innovation and driving sales, we can't do it alone. So being at these events really help us to inspire others to innovate with the ultimate you know, power food, dairy. And

Scott Wallin  17:19  

what I love about this event is we bring farmers with us. They work the booth, they participate in our educational presentations and and for so many people at Expo West, they're they're having a chance to talk to a dairy farmer for the first time. So I think that's just one of those added benefits we get from from having farmers with us. So I'm going to keep my farmer mindset, my farmer had on right now, Sylvia, and I want to know what's coming down the pipeline. I know, I know things are proprietary, and you can't speak to everything, and we're so busy working behind the scenes in fluid milk innovation. But what can you speak to that made me a little bit of whet our appetites a little bit with what's happening in fluid milk innovation. I

Silvia Robles  18:00  

love talking innovation, and I will say that as part of our 2024 partnership with DFA, DMI and DFA work together to develop, really set out to develop a multi year pipeline of milk and milk based beverages. And so I mentioned the beverage demand landscape a little bit earlier, about one of the key double downs and insights, and we relied heavily on that pre competitive piece of work to help point us in the right direction. But we also conducted some post competitive research with DFA. And so once we had those initial concepts, you know, we took it a step further, and we met with DFA research and development to help us assess any watch outs with the concepts as we had originally envisioned them coming out of the research. And in the end, I will I'm happy to report that we refined and tested nine product ideas, and we went nine for nine on the results, and we even achieved two of what bases calls superstar concepts, which they will tell you, is fantastic in and of itself, but even more so when you consider the maturity of the category. And so what I'll say is, you know, DFA asked DMI to deliver a multi year pipeline of, you know, milk and milk based beverages, and DMI definitely delivered. So stay tuned, as we will hopefully see at least one of those ideas in the marketplace very soon, when a

Scott Wallin  19:23  

farmer comes to you with some thoughts on flu, milk, innovation, what are some of the things and tips you can share with them about their ideas? I

Anne Marie Splitstone  19:31  

love it when they do and like I like to think, and I like Sylvia. Love innovation. Their ideas come from all over and people who work very closely with it. Every day, you're thinking of things and you've got ideas percolating, share them. One thing I'll want to know, is it something they want to develop, or is it something they want us to test or understand? Where could we help? Sometimes it's helping them by sharing other consumer insights and information that we've done that maybe they haven't seen. As much of if it's something they want to go do, or if they're just sharing an idea, like I've always thought, why don't we? Then I think it's, you know, throwing it to the partner leads and the different players and see if we can get them an answer of why and who might be interested in bringing it to life. Sometimes it's things we would have tested. Like Sylvia said she's got nine great ideas, so it might be one of those or a version of those, because great ideas usually show up more than one place in their different iterations. And as we work through innovation, a lot of times, things evolve and change. And it's that extra nugget that might take a good idea to a great idea. You know, sometimes you feel like there's not new things in the world, but there's new twists or turns. So I love for them to share, and then if I can provide or the team can provide insights, or maybe they want to actually get it together in their marketplace and steer them back to our states and regions have a breadth of really knowledgeable people that can also help them directly know the retailers in their marketplace, that kind of thing. It kind of depends what they're hoping to do with the idea. If they just are curious and interested we want to hear it, or if they really have sort of a business idea, and they're an entrepreneur of sorts, then it might take a different form of how, you know, we can help and bring it to the next level. And we've spent a lot of our energy moving from just having these important partnerships that you know, Sylvia has been talking about one in particular. But that's one way we bring it to life. Another way is getting it out into the industry, all this great insights, research, science and tools, and so a lot of times it's just opening some doors and giving some information that helps people take to the next level. That's

Scott Wallin  21:39  

That's got to be the fun part of your job. Is it the excitement you've got this canvas every day.

Anne Marie Splitstone  21:47  

I could talk it to death. My family often tells me I talk dairy an awful lot, particularly given I'm not a farmer, but I'm very passionate about it, and it comes from the passion of the farmers that we get to deal with on the board and and and people that we're innovating with. So it's awesome. We're going

Scott Wallin  22:03  

to finish up this, this conversation with one final question to Sylvia. We've covered so much today. What is it the main takeaway you want farmers to walk away from this conversation? I

Silvia Robles  22:14  

would say it is a wonderful time for dairy and for dairy innovation in particular. You know, we have the roadmap for growth, we have the tools to inspire and accelerate innovation. We have the dairy credentials to win in the marketplace, and we have an energized team that's working on their behalf. So there couldn't be a better time than now to be innovating in dairy, but you've said it better myself.

Scott Wallin  22:37  

Well, I want to thank you both so much for those insights, I learned an awful lot, and it's just exciting to work with teammates like you that are really leading this charge on behalf of our dairy farmers. Dairy farmers, if you want to learn more about your checkoff, be sure to visit dairycheckoff.com and also check out other episodes of The your Dairy Checkoff podcast that you can find at our website.

Transcribed by https://otter.ai