The Hagstrom Report

Agriculture News As It Happens
Navigation

Exec points to dairy product growth at PepsiCo, in world

SPECIAL REPORT FROM THE 2012 DAIRY FORUM

By JERRY HAGSTROM

LA QUINTA, Calif. — Dairy product sales will grow faster than other foods in developing countries in the coming years, a key PepsiCo Inc. executive said here this week, while other experts said success in markets such as India and China will require more sensitivity to other countries’ consumer and business cultures.

See related story on market opportunities and challenges

Sam Ltief
Sam Ltief
Dairy product sales will grow more than bakery products or chilled processed food in the developing countries through 2020, Sam Lteif, general manager of the PepsiCo Global Nutrition Group, told members of the International Dairy Foods Association on Sunday. IDFA members make most of the nation’s cheese, ice cream, yogurt and other processed dairy products. (See chart below)

Milk’s calcium and protein are so valuable for human beings that it is “the first food we consume,” Lteif said, yet “benefits the elderly by helping with problems of bone density.” Consumer acceptance in both developed and developing countries will depend on innovation and convenience, he added.

Lteif's appearance at the annual Dairy Forum was notable on two accounts.

First, it appeared to be part of PepsiCo’s strategy to position itself as a company that produces more than soda pop and snacks of questionable nutritional value. Lteif's boss, Mehmood Khan, is PepsiCo’s chief scientist and CEO of the Chicago-based Global Nutrition Group, which is tasked to more than double Pepsi’s healthier food portfolio to $30 billion in revenue by 2020.

Attendees representing more traditional dairy companies said they were interested in Lteif's points, but see PepsiCo as both a potential customer for ingredients and a competitor in finished products.
Connie Tipton

Connie Tipton
Second, Lteif's appearance was part of an overall theme at this year's Dairy Forum to educate dairy processors about exporting, IDFA CEO Connie Tipton said in an interview.

Because fluid milk is perishable, dairy traditionally has been a domestic industry, and only about 15 percent of U.S. dairy products are exported, a low figure compared to many other agricultural sectors. Dairy processors and farmers grew wary of international markets after melamine in Chinese domestic dairy products led to a reduction in consumption and decreasing interest in dairy imports in other markets, but export sales have recovered.

Tipton noted that there are many opportunities for exports of ice cream, cheese and other processed foods. "There is an opportunity for U.S. dairy to serve the world," she said. "That changes the dynamics of our policy entirely. It's not your father's dairy industry." Tipton added that in recent years U.S. exports have soared while imports have dropped to the development of the finer, artisanal cheese market in the United States.

Lteif, acknowledging that many of the experienced executives in the audience might be wondering what he and his company know about dairy, pointed out that PepsiCo, with 19 different brands is “more than a can of pop,” uses cheese and sour cream in many of the dips it sells, and has bought the biggest dairy company in Russia.

“We’ve leveraged dairy ingredients with savory and sweet flavors,” he said.

Lteif said PepsiCo wants to combine dairy ingredients with grains and fruits and vegetables with its branding, while doing research and development to bring more products to consumers around the world.

“Dairy is a key element of future growth for PepsiCo,” Lteif said, adding that in markets where dairy products are not use so much, the company “wants to make [them] a staple, not a treat.”

In the United States, Lteif said, PepsiCo’s research shows that women with children are so busy from 6 to 7:30 a.m., performing at least 22 tasks before they leave for work, that they often skip breakfast, saying they will find something to eat after they leave the house. “That gets them into trouble healthwise,” Lteif said.

Lteif noted that PepsiCo is testing drinkable oats in Mexico, has worked with the Indian government on a snack bar for adolescent girls who lack protein, and that the United States is still way behind Europe in yogurt consumption.

In sub-Saharan Africa, he said, the big issue is providing safe, drinkable milk. In China, he added, PepsiCo has added oats to congee, the Chinese gruel used as breakfast cereal, to make it “more instant” to prepare.

Projected Market Revenue Growth 200 8-2020 (in billions)
2012_0117_MarketRevenue
SOURCE: Euromonitor — Note: Figures projected to 2020 assuming linear growth from 2013