According to a report by Spins, the US dairy industry is poised for continued growth in high-protein and functional food segments in 2025.
Wellness and functionality are set to dominate the consumer landscape this year, as reported by the US market research company Spins. From personalized diets to products supporting weight management and healthy aging, dairy brands are poised to capitalize on functional and high-protein segments while also exploring new growth opportunities.
High-protein: the category that keeps on growing
The US snacks and beverage category is a powerhouse of high-protein innovation, boasting nearly $5 billion in sales and a projected 9.3% growth rate. This presents a prosperous future for businesses specializing in dairy protein ingredients. Spins reported that whey and milk protein sales, the leading protein ingredient category, reached an impressive $705 billion in the US, marking an 8.6% increase year on year. Additionally, whey and casein sales grew by 120%, surpassing whey alone by $26 million in sales. In contrast, animal and plant protein combinations saw an 8.2% decrease in value, although they still generated close to $532 billion, making them the second largest segment in functional protein ingredients.
Functional foods
Beverage products are at the forefront of new product development (NPD) activities, according to Spins’ index tracking US food industry innovation rates. Yogurt, with an innovation rate of 12.4%, is the only dairy and plant-based category ranked among the top ten in NPD activity, surpassing the overall food and beverage industry average of 10.5%. However, yogurt’s dollar share trails the industry average, indicating that there is potential for brands to enhance their value proposition to boost sales. In the functional beverage sector, wellness shots, including dairy-based gut shots, have experienced growth across major consumer trends such as digestive health (+13.6%, $80 million), mood support (+6.5%, $6 million), and detox (+16.4%, $15 million), as noted by the market research firm. Probiotics remain a leading functional ingredient, driving $270 million in sales for digestive health solutions, $5 million for mood support products, and $12 million for detox products.
Three emerging subcategories
Cottage cheese is likely to continue its resurgence in 2025 as a natural, low-calorie, high-protein option. According to Spins, the category, which includes farmer cheese and ricotta, has increased its market share and forms part of the growing natural products segment. Innovation in flavors, formats, and protein claims on packaging will be crucial for maintaining momentum in the cottage cheese sector. Dairy companies focusing on colostrum, a dairy-derived ingredient widely used in supplements, are witnessing growth, with sales of $1.8 million, up nearly 140%. Spins identifies colostrum as having ‘crossover potential,’ applicable for both gut health and immune health. Additionally, brands specializing in A2 dairy may need to diversify into products such as butter and cheese. Though US butter consumption has risen by 18% over the past decade, A2’s largest US player, A2 Incorporated, recorded an EBITDA loss of $15.5 million in FY24, despite expansion in its a2 Milk Grassfed products, as mentioned in the report. The A2 dairy segment is estimated to be worth $135.1 million, with fluid milk making up 87%, yogurt 9%, and cheese and butter each comprising minor shares. Could leveraging Americans’ increasing appetite for butter and cheese help propel the A2 dairy segment in 2025? Answers to these questions and more will emerge as we continue to monitor developments across the dairy industry.
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