Dairy-derived Flavors Market Segmentation by Flavor - Non-Fermented, Fermented; By Form - Liquid, Powder, Paste; By Nature - Natural Dairy-derived, Artificial Dairy-derived

The producers of dairy-derived flavors are continuously modifying their product offerings as per the end-use application product range. Consumers are always on the lookout for new tastes and flavors in their products. Hence, manufacturers are continuously evolving by offering new and innovative flavored products for their consumers.

The dairy flavor market has seen exponential growth in the past few years. Manufacturers are investing in research and development for new product innovation. In recent years, dairy product manufacturers have started offering various flavors in yogurt to capitalize on the popularity of flavored yogurt. Moreover, they are introducing innovative café-inspired flavors in various dairy products including yogurts.

Coffee flavored yogurt has become a hit in North America. For instance, Alpina Café Selection’s Caramel Macchiato Nonfat Greek Yoghurt is one such unique flavored yogurt. It is made with real Colombian coffee, grade A milk, and other natural ingredients. Tea flavor has already been introduced in dairy-based frozen desserts. For instance, Matcha & Dark Chocolate Butter is one such tea flavored dairy product.

Consumer Demand for Natural Ingredients Setting New Norms in Dairy-derived Flavors

The purchasing pattern of consumers has forced manufacturers to use natural ingredients in products. Artificial ingredients reduce the cost of the product but cause serious health problems to the human body. With growing health awareness, consumers are demanding more and more products manufactured using only natural ingredients. This shift of consumers towards natural ingredients is propelling the demand for natural dairy-derived flavors.

Dairy-derived flavors are available in both, artificial dairy-derived and natural dairy-derived forms. The extraction of natural flavor is a very complex process but technological advancements in the flavor industry have made this procedure quite simple, which results in more production in less time. Thus, manufacturers are successfully catering to the increasing demand for natural dairy-derived flavors across the globe.

Increasing Flavor Needs for Drinkable Yogurt to Push Sales

Manufactures are coming up with new and innovative products to increase their market share across the world. Dairy product manufacturers are also developing new products, which can change the course of the dairy product industry. For instance, dairy-product manufacturers have introduced drinkable yogurt in the North American market, and it became the most popular dairy product in a very short period. Consumers are still unfamiliar with the product and to increase their interest in such innovative products, manufacturers need to come up with flavor-based solutions.

The drinkable yogurt category seems to have a lot going for it with fermentation, convenience, and functional properties, however, drinkable yogurt accounts for a very less percentage of total yogurt sales. Consumers rate drinkable yogurt as tasty, exciting, fun, and an indulgent treat, which packs in nutrients as well as taste. Brands that are providing drinkable yogurts are focusing more on functional benefits and end up lagging on flavor innovations. Flavor is always the key, but especially so in a category like this, where consumers still lack familiarity, so flavor innovation and consumer education are key factors. Thus, producers have a great opportunity in this new and emerging segment to develop new flavors of drinkable yogurt.

Perishability of Natural Dairy-derived Flavors Could Lead to Potential Losses

Natural flavors are perishable in natural and can get unstable during the extraction process. The extraction procedure of natural dairy-derived flavors is complex in nature. These are sensitive to chemicals, hence, even slight variation in pH or temperature can cause instability. Thus, high precision is required during the production of dairy-derived flavors. These flavors are volatile, and at high temperatures, there is a possibility of the taste getting lost. Thus, possible losses and complexity of the process are limiting the dairy-derived flavor market from reaching its full potential. The adaptation of new technology and the advance facilities by the manufacturers of diary-derived flavors will help the manufactures to simplify the process and avoid possible losses.

North America and Europe Secure Prominent Market Positions with High Share

Established markets such as North America and Europe, hold significant market share in the dairy-derived flavors market. In 2019, it is estimated that both regions together account for more than 50% of the market share across the globe. These regions consist of most number of flavor manufacturers across the globe. Most of the leading flavor manufacturers belong to these regions, for e.g. Givaudan, a Switzerland-based flavor and fragrance manufacturer that holds the top position in the flavor manufacturing industry.

North America and Europe also have a decent number of small and medium-scale local flavor manufacturers. North America is expected to grow at a CAGR ~4% and Europe is set to expand at slightly higher CAGR of ~4.5% over the forecasted period.

The Asian continent is divided as South Asia and East Asia, which are expected to register high growth in the dairy-derived flavors market over the forecasted period. Asian countries are considered as the best possible markets for the dairy-derived flavor market. South Asia is expected to grow at the highest CAGR ~8.0% and East Asia expected to grow at a CAGR of ~6.5% over the forecasted period.

The Analyst’s Viewpoint

A comprehensive view of the global dairy-derived flavors market has led our analysts to conclude that the market is growing at a stable rate, with North America and Europe holding a large chunk of the global consumption of dairy-derived flavors. The increasing usage of new and innovative products is spurring the demand for dairy-derived flavors. The impact of high demand for natural dairy-derived flavors will remain for a long period of time. Technological innovations and adaptation of new technologies by leading market players will give a thrust to the global dairy-derived flavors market.

Companies with research and development capabilities and expertise in the use of technology will gather momentum and profitability in the global dairy-derived flavors market. Leading market players who are adopting an acquisition strategy will continue to grow and have a vast market revenue share. However, complexities in the extraction and processing of dairy-derived flavors could restrain the growth of the global dairy-derived flavors market.