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Keeping up with consumer demand in the dairy industry

Posted: 14 August 2020 | | No comments yet

Dairy brands must innovate faster and adapt to deliver comfort, nutrition and delight to consumers. Normunds Staņēvičs of Food Union elaborates.

Keeping up with consumer demand in the dairy industry

The world is experiencing a disruption with rapid changes that have drastically affected consumer behaviours. The COVID-19 pandemic is impacting everyday life, habits and patterns, and consumers are trying to adjust and find a way through it all. This, of course, includes how consumers manage their health, exercise and diet – including consumption of dairy products and ice cream.

When the pandemic hit, families feared shortages in their dairy supply. Many were concerned with panic-buying, which created an alarming distrust in the food supply chain and consumer brands moving quickly to reassure patrons. In the second quarter of 2020, behavioural and lifestyle changes became apparent – people left their homes less, opted for online deliveries where they could, and the extreme shortage that everyone feared never came. Instead, the dairy industry was left with a decrease in demand, excess supply and fears about a healthy, safe and reliable supply chain.

Change and disruption put pressures on both dairy and ice cream industries to continue to innovate and bring consumers new, exciting and nutritious products, to expand distribution systems, and to demonstrate a local market presence. While the industries grapple with the sudden changes in the market, our ambition at Food Union is to build an even stronger connection with our consumers going forward. As our brand promise states, “It’s not about food, it’s about people.” Our mission has always been to produce consumer-centric products.

Sensory experience and behaviour trends

Sensory innovation and behavioural science help identify what consumers demand during a time of uncertainty.

ice cream

During uncertain times, many turned to foods that offered a sense of comfort and nostalgia

According to an FMCG Gurus survey, health concerns shifted consumer shopping behaviours in Europe during COVID-19, with 72 percent reportedly changing their dietary habits to consume more natural and immunity boosting products. Individuals are concerned about their health, and as a result, they are prioritising healthy, low-calorie snack options. We can utilise R&D to create a high-quality product that does not compromise nutrition, flavour or texture in order to connect with consumer’s needs for comfort and nutrition during this time. Dairy products alone provide the consumer with a blend of nutritional benefits, such as calcium, potassium, vitamin D and protein, while fermented dairy products provide the consumer with both easily metabolisable nutrients and beneficial microorganisms.

During COVID-19, the dairy industry had to readjust logistics in the supply and distribution network to ensure consumers around the world had safe and efficient access to products

At Food Union’s Ice Cream Competence Centre located in Riga, Latvia, we innovate new ice cream products each season. We recently launched 100 new products, including fruit smoothies and plant-based options across Latvia, Lithuania, Estonia, Norway, Denmark, Romania, Belarus and Russia.

Food Union continues to develop exciting innovative products based on sensory and behavioural research, which is now more important than ever. It is unclear when life will return to normal, but behavioural research shows that in times of adversity, consumers expect more from trusted brands.

Digital innovation

During COVID-19, the dairy industry had to readjust logistics in the supply and distribution network to ensure consumers around the world had safe and efficient access to products. As stay-at-home orders restricted consumer access to grocery stores, we moved fast to optimise our supply chain during a major crisis.

Consumer habits, behaviours and emotional needs will continue to shift as the global crisis unfolds

Our advanced digital information and distribution systems at Food Union allowed us to rapidly develop new e-commerce platforms that reliably deliver products directly to the customer’s doorstep. Thousands of customers in Latvia, Lithuania, Romania and Denmark can now enjoy dairy products, meats, breads and eggs without leaving their homes. We also established direct-to-consumer models in China to deliver products to high-density neighborhoods. As the future remains unknown, continuing to invest in innovation will allow the dairy industry to remain agile and adapt to serve customers directly. 

Although the pandemic’s physical distancing measures enhanced the need for e-commerce, the direct-to-consumer model had already expanded over the past few years when consumers sought out personalised and tailored services. Direct-to-consumer models build a relationship directly with the consumer and reassure the consumer that our supply chain is adaptable and reliable. In 2019, European e-commerce sales increased by 14.2 percent and are projected to increase another 12.7 percent in 2020. The pandemic, with its forced stay-at-home orders, only reinforced our industry’s need for e-commerce platforms. Strategically incorporating e-commerce platforms builds customer trust and access to products.

Tradition brings comfort

Consumers’ daily lives have been inundated with increasing concerns, so it is no wonder why so many turned to comfort foods. When a customer tastes their favourite ice cream, they should get momentarily lost in the nostalgia that the flavour brings.

At Food Union, our operations span two continents and nine countries. Each unique region deserves to experience their beloved culinary history and tradition in a product’s flavours and textures. We use a local business approach to develop trusted market brands and infuse them with product innovations lead by our R&D experts and global partners. Across European markets we built on legacy brands to bring consumers comfort and a sense of melancholy.

It is unclear when life will return to normal, but behavioural research shows that in times of adversity, consumers expect more from trusted brands

In 2015, Food Union founder and global head, Andrey Beskhmelnitsky, entered the Chinese dairy market with the backing of the Hong Kong-based investment company Meridian Capital Limited and one of Asia’s largest private capital firms, PAG. The venture into Chinese markets was grounded on principles of tradition and locality as we invested in regional milk suppliers, dairy plants and partners. In fact, Food Union’s line of children’s dairy products, Lakto, uses Riki branded cartoon characters, BabyRiki, as an effective way to connect with young audiences across China. Through storytelling, BabyRiki showcases Food Union’s healthy products, while children learn about physical and cognitive wellbeing. Our valued partners in China provide local market expertise so we can continue to build brands that tell the story of tradition, culture and innovation.

family eating ice creamOur expansive presence has always been our strength. We know that we work stronger together, especially during a crisis; this holds true for our business model and product development. We must ensure access to the products that bring consumers delight, comfort and nutrition. Behavioural research, sensory research and digital innovation propel us closer to consumer’s demands and keep the industry agile and successful.

Consumer habits, behaviours and emotional needs will continue to shift as the global crisis unfolds. Therefore, continued insightful, swift and meticulous thinking is crucial in product development and delivery. We have a duty to bring our products to customers in an efficient, safe and innovative way. We do not know what the future holds, but creative thinking, research and development will always lead our path forward.

About the author

Normunds is CEO of Food Union’s European division. Food Union unites the largest dairy company in Latvia, the leading ice cream producer in the Baltic countries and Denmark, and ice cream companies with strong regional presence in Norway, Romania, Belarus and Russia. Normunds’ duties include overseeing and managing the development of Food Union companies in the Baltic States, Russia, Belarus, Denmark, Norway and Romania.

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