Growing Your Value-Added Dairy Foods Product Line
Decisions to expand your product line require an understanding of your market and customers' preferences, and alignment with your brand and the resources you have. It is also very important to maintain quality standards as you add new products to your product line and ensure consistency throughout production. This builds customer trust by providing reliable product experiences.
In a Harvard Business Review article, one contributing author compared marketers to biologists, noting that marketers must research the consumer population, looking not only for gradual mutations but also for bursts of change (Hardie et. al., 1994). The author noted that products change and evolve over time, and shared the example of how parent products, such as Pepsi, give rise to evolutionary children, such as diet sodas. Think of all the different variations of sodas, chips, and other products that are on the market. When you fail to innovate and grow your product line, you risk business extinction.
Developing your product line enhances customer satisfaction by offering more choices. For example, adding drinkable yogurt to an existing spoonable yogurt product line may appeal to customers who may appreciate a product that fits an on-the-go lifestyle, or is more accepted by their children.
A broader product line can also enhance market competitiveness if you can grow your market share. And finally, depending on how you diversify your product line, you can improve efficiency by leveraging existing resources, including equipment and people. Some dairy processors who bottle fluid milk, for example, also use the same equipment to bottle juices, lemonade, and other beverages. Doing this allows them to provide more hours to employees and spread the fixed costs of equipment.
Examples of different ways to expand your product line include:
New (to-your-business) Products. You must decide whether adding different products is both reasonable and feasible. For example, if you process fluid milk, do you want to add more complex products, such as cheese or yogurt? Or, if you manufacture hard cheese, do you want to expand into soft cheeses? If you decide to add a new product you haven't previously processed, it's essential to take adequate time to perfect your manufacturing process to ensure product quality for your customers, because they will expect any new products you offer to be of the same quality as your existing products.
Flavors. There is a wide variety of flavors in fluid milk, cheese, yogurt, and ice cream. There are many reasons why using new flavor options for product line expansion may appeal, including the fact that you are focusing on a product you already have expertise in making. It can also be exciting to create and offer new product flavors. If you are considering expanding through this strategy, you should consider the number of flavors, whether you'll discontinue any, and when and how that will occur.
Transformed Products. With some dairy products (such as cheese), even a slight change in the process can expand your product line. For example, cheese can be transformed by rubbing it with spices like rosemary or paprika, or by soaking it in beverages like wine or cider. Making products in different formats (sizes, shapes) is another way to transform them.
Seasonal or Limited-edition Products. Seasonal or limited-edition products are available only for a limited time. Seasonal offerings are an opportunity to leverage seasonal ingredients and market trends. Seasonal offerings also create a sense of excitement and urgency because they are typically limited-time products, which get your audience excited by offering something they can only purchase for a short period of time. Consumers are drawn to seasonal and limited-time products because these offerings tap into psychological and behavioral motivators. A sense of urgency and scarcity encourages quick purchase decisions to avoid the fear of missing out. Seasonal items often also evoke emotional connections, such as nostalgia and excitement, especially around the holidays. Limited-edition products also align with consumers' immediate needs and interests, whether it's a refreshing drink in the summer or a cozy treat in the winter. These products can spur impulse purchases, attract new customers who are seeking relevant seasonal experiences, and ultimately boost store traffic and sales, which may be important if you have an on-farm market.
As you plan your product line, consider your goals for product mix. Your product mix is the full range of products you offer and is characterized by the number of product lines (breadth), the variations within each product type (depth), and the total number of products in the mix (length). Image 5 below shows an example product mix for a value-added dairy venture. In this example, the product breadth is 3 because there are 3 product lines (cheese, yogurt, and fluid milk). The product line length is the total number of items across the three product lines; in this example, ten (four hard cheese items, two soft cheese items, two yogurt items, and two fluid milk items). Product depth is the number of variations within a product line or product type. In the example, the depth of the hard cheese product type is four, while for yogurt, the depth is two.
Evaluating Growth Opportunities
When evaluating growth opportunities, you need to balance customer interest and industry trends with your brand identity and long-term business objectives. For example, growing consumer demand for high-protein snacks might inspire you to develop a product like a single-serve yogurt, but you should only do so if it aligns with your brand values and production goals. Aligning new products with brand values strengthens customer loyalty and helps ensure consistency in the marketplace. A farm that is known for artisanal grass-fed products, for instance, might focus on small-batch specialty cheeses rather than lower-cost, high-volume items. Brand alignment doesn't stop with manufacturing or packaging; it continues through the care you take with shipping your products to wholesale customers or preparing them for your retail customers.
At the same time, you must carefully assess whether your processing capabilities and capacity can meet demand without compromising quality. Make sure that you're taking the time to assess your business resources, including financial, labor, and technical expertise, before you add new products to your repertoire. Your decision should be guided by a clear vision of your long-term goals, whether that's expanding your product lines, increasing market share, or maintaining a focused niche presence.
Questions to Consider
What are you interested in making? An obvious way to expand your product line is to add products you are interested in. This approach is valuable as your passion for the product(s) is likely to be evident to your customers.
What are the characteristics of your milk? Consider how the characteristics of your milk (e.g., components and quality) will influence the new product(s) you want to make. Which products suit the style of milk that you have? When processing non-standardized milk, you will also need to consider how your milk changes throughout the seasons and whether you can adjust your processing to deliver a consistent, high-quality product.
What are your facility capabilities and limitations? Consider the facility and equipment requirements for products that you are exploring. Will investments in additional equipment be required? If so, have you assessed the new product’s return on investment (ROI)? Assess whether your equipment has the capacity to increase processing. Product storage space availability is another aspect to assess. Finally, don’t overlook the human aspect. Are the people involved in processing ready, willing, and able (physically and mentally) for the added demands of an expanding product line?
What are the requirements? While it is important to want to make the items for an expanded product line, you or your employees must also possess the knowledge and skills to manufacture potential additions. Do you understand and can fulfill the technical and regulatory requirements for manufacture, aging (if required), and storage? Can you consistently source quality ingredients?
Is there a marketplace opportunity? Are there products not available in the marketplace that you could feasibly make? This provides an opportunity to add something new to the product line.
Where are you geographically located? Target customer and market outlet proximity can also influence which product you add to your product line. For example, if you are very rural and not close to the marketplace, you might consider making more aged cheeses that are durable, easy to store, and easier to ship and distribute. Your local geography can also influence product characteristics; for instance, you may incorporate maple or berry flavors if your region is known for this.
What parameters do you have? Even if you see a marketplace opportunity and believe you can fill it, you may decide to set additional rules and parameters. For example, one processor makes mozzarella only during tomato season, when tomatoes are in season in their farm garden.
When introducing new products to your product line, you may need to place extra emphasis on promotion, especially if you're an established business with a pre-existing strategy; in such cases, you may need to make some adjustments to that strategy. For example, if you add a new product that your customers may be unfamiliar with, offering samples can be an effective promotional tactic. Surveys have found that sampling food products, particularly cheese, is a highly valuable promotional tool. Past consumer surveys have found that approximately 70% of customers like to sample cheese before making a purchase (Mintel, 2016) and that 77% are more tempted to try a new variety when offered a sample (Mintel, 2011). Another way to encourage trial and purchase of new products is to offer a snack-sized format.
Sue Miller of Birchrun Hills Farms offers this advice: “If you are relatively new to dairy processing and perhaps making one or two cheeses, but want to expand, perhaps to double or triple the number of products, take your time, learn the craft, understand what's happening with your milk as the season or the year unfolds, because your milk is always changing.”
References
Hardie, Bruce G.S., Leonard M. Lodish, James V. Kilmer, David R. Beatty, Paul Farris, Alexander L. Biel, Laura S. Wicke, John B. Balson, and David Aaker. (November – December 1994). The Logic of Product-Line Extensions. Harvard Business Review.
Mintel. (2011, October). Cheese – US, October 2011. Mintel.
Mintel. (2016, October). Cheese – US, October 2016. Mintel.
Resources
Canning, K. (2021, October 8). Beat the odds in new dairy product development. Dairy Foods.
Harfmann, B. (2022, October 11). Helping dairy processors “win big” in new product development. Dairy Foods.
Product Development Resources
Northeast Dairy Business Innovation Center
Cornell Food Processing and Development Laboratory
Penn State University Department of Food Science
Consumer Research Resources
Headwaters Economics. An easy-to-use platform that provides population demographic information at the county level.
Acknowledgment: Appreciation is extended to Sue Miller, who generously shared her time, experience, and insights during the webinar that informed this article.
