Dairy sector focuses on UK functional growth

By staff reporter

- Last updated on GMT

Related tags Milk

The success of soy drinks shows that the UK functional drinks
market is highly lucrative something that the dairy industry must
take full advantage of, says Organic Monitor.

Indeed, the UK dairy sector has already been quick to exploit this potential.

UK milk sales have been declining since the 1970s with sales volume decreasing by 25 per cent between 1994 and 2004. Facing decreasing profitability and rising competition, British dairies have managed to develop novel products that have reinvigorated milk sales.

Flavoured milk drinks have been launched as soft drinks, gaining sales over carbonated drinks. Organic milk and functional milk are increasingly marketed on their health benefits, clawing back market share from competing beverages like dairy alternatives.

Tesco for example has launched functional milk under its private label whilst Pepsico has added a novel functional juice to its Tropicana range. Like soy drinks, the new functional drinks contain sterols that actively lower cholesterol levels.

Soy drinks were originally bought by consumers suffering from lactose intolerance. But scientific evidence linking soy consumption to lower incidence of heart disease has allowed manufacturers to market soy drinks as functional beverages.

These beverages are very popular in the UK where up to two-thirds of the population have high cholesterol levels. Chilled soymilk is the fastest growing segment with sales expanding by over 20 per cent a year.

The popularity of soymilk led Unilever to launch a competing functional milk product in 2004. Fortified with plant sterols, Flora Pro Activ also actively lowers cholesterol.

It is positioned alongside chilled soymilk in supermarkets and is targeted at consumers who are health-conscious but do not like the taste of soy.

Tesco's new functional milk drink is targeted at the same consumer segment. Its cholesterol-lowering milk is fortified with Reducol, a plant sterol.

The functional ingredient is derived from forestry by-products and is guaranteed GM-free. The new milk is part of a cholesterol-lowering dairy product range marketed under the Tesco brand.

Pepsico is also looking to capitalise on growing demand for functional beverages by launching a fortified juice drink under the Tropicana brand. The orange juice is fortified with Benecol, a stanol-ester ingredient that actively lowers cholesterol.

The novel orange juice is also targeted at health-conscious consumers.

Alpro's Soya & Fruity is believed to have influenced the launch of the new Tropicana functional juice. Alpro launched Soya & Fruity as a fortified blend of soymilk and fruit juices in June 2005. It has been, until now, the only cholesterol-lowering juice drink in the UK.

With increased investment in the dairy alternatives industry, consumers are likely to see more soy functional beverages. The latest new entrant is Danone, which could launch soy products in the UK if its Senji yoghurts are successful in France.

ABN Amro's investment in Nutrition & Soja could lead to some new soy drinks to be launched in the UK. In February, the company extended its soy drink flavours to include chai and mocha.

Organic Monitor therefore concludes that functional beverages may be the way forward. However product positioning is critical in a marketplace where the lines between soy drinks, dairy milk and competing beverages become increasingly nebulous.

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