5.2 Product innovations The dairyindustryoffers a wide range of products from raw milk to the specialist products aimed at special markets or consumers and offers ingredients to other industries. Consumers are rather conservative and cautious in accepting entirely new food products, and prefer to look for new benefits in more or less familiar products (Jongen and Meulenberg, 2005). Consequently, innovation is more successful in applying new technologies, or new products formulations, that fulfil consumer needs than in radically new products. This is reflected in the collected data (table 5.2). Innovation activities within thedairyindustry focus on finding new product varieties (45%) and applying new ingredients which add a new functionality (22%). This suggests that dairy companies in this research more often pursue a defensive or analytical, organisational strategy than a prospective strategy. Table 5.2 Product innovations Sub-category product innovation Number (%) New bacteria/spread 9 1,5 New properties of ingredients (way of use) 71 12,2 New ingredient (functionality) 129 22,2 New product variety 262 45,1 New final product 22 3,8 Packaging 88 15,1 Total Source: Own findings. 581 100,0 As the range ofdairy products is becoming wider, producers need to develop new ways to attract consumers, resulting in an increased importance of packaging innovation. Consumers demand not only healthy and tasty products but also convenient, complex, and creative solutions. Packaging partly fulfils those requirements, reflected as third most important sub-group between the product innovations with a share of 15% in total innovations (table 5.2). Hall (2007) reported the following on the current trends in new product development in thedairyindustry, as well as on the key trends in theindustry: 37
38 - milk, non-dairy milk and yoghurt drinks had the largest share (one third) in product releases in 2006, more than other dairy categories; - new product development in milk concentrated on healthier milks addressing fat and cholesterol; organic milk with low fat varieties, new flavourings and single-serve products were also important; - for cheese the orientation of innovation was on health and convenience (functional cheese, individually wrapped portions, new blends, long-life packaging, table-ready packaging); - new yoghurt products comprise mainly new flavours (wintery flavours such as plum, cinnamon, American heritage flavours and exotic fruits); there is also intense competition to differentiate between health benefits; - the most innovative category of 2006 was margarine, butter and spreads with new flavourings, more convenient packaging, long-life and healthier butters; - strawberry remains the most common flavour, mango the fastest growing; - the role of functional foods is increasing, now that they have also become incorporated in more indulgent categories; the three key trends of ethical, health and indulgence are increasingly combined in one product; - emphasis on brain health is gaining momentum (omega-3); - 'natural' is an important trend for the future with lower tolerance for artificial preservatives, sweeteners and flavourings; - low-fat and wellbeing products are becoming an up-market trend; - premium trends are on the rise, particularly foods which have a strong regional or local identity; - gourmet is becoming a mass market with real gourmet producers introducing even more unusual flavourings (Italian/French cooking flavours such as truffles, spicy Indian or Hispanic flavours); - the convenience trend is likely to expand with several innovations in the area of portability, based on new technology that allows for extendend, unrefrigerated storage. 5.3 Process innovation Process innovation counts for 9% ofthe total observed innovations. Table 5.3 shows the occurrence ofthe two distinguished possibilities. New production technology seems dominant.