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Published January 23, 2012, 01:11 PM

Bracing for dairy product sales growth

LA QUINTA, Calif. — Dairy product sales will grow faster than other foods in developing countries in the coming years, and PepsiCo Inc. intends to be a part of that growth, a key PepsiCo executive told members of the International Dairy Foods Association Jan. 15 at the 2012 Dairy Forum in La Quinta, Calif.

By: Jerry Hagstrom, Agweek

LA QUINTA, Calif. — Dairy product sales will grow faster than other foods in developing countries in the coming years, and PepsiCo Inc. intends to be a part of that growth, a key PepsiCo executive told members of the International Dairy Foods Association Jan. 15 at the 2012 Dairy Forum in La Quinta, Calif. IDFA members make most of the nation’s cheese, ice cream, yogurt and other processed dairy products.

Dairy product sales will grow more than bakery products or chilled processed food in developing countries through 2020, said Sam Lteif, general manager of the PepsiCo Global Nutrition Group. Milk’s calcium and protein are so valuable for human beings that it is “the first food we consume,” he 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 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. 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 PepsiCo’s healthier food portfolio to $30 billion in revenue by 2020.

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

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.

Perishable product

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 with 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,” and 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 used 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 health-wise,” 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.

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